Might regulation have prevented Sam Bankman-Fried’s legal verdict?

Sam Bankman-Fried was found guilty of all seven counts of fraud and conspiracy to commit fraud within the late hours of Nov. 2. The jury delivered its verdict in lower than 10 minutes after almost 4 hours of deliberation, leaving his mother and father to fall silent within the crowded courtroom on the Southern District Courtroom of New York. 

Over the course of his prolonged trial, my ideas saved returning to: How did you come to be right here? Might all of this hurt have been prevented? What can we do to keep away from the subsequent FTX?

Some say that present monetary laws might have prevented the collapse of FTX. Having to adjust to regulatory necessities, Bankman-Fried would by no means have been in a position to commingle and embezzle buyer funds.

FTX used Alameda Analysis as a “fee processor,” as described by Bankman-Fried’s protection. One among Alameda’s subsidiaries, Northern Dimension, acquired deposits from FTX prospects for the reason that change was based. With none company management, the businesses commingled funds.

Commingling of funds might not essentially contain fraudulent intent, however can nonetheless be problematic as a result of lack of transparency and accountability. Actually, it’s a “soiled phrase” in securities legislation, an legal professional observing Bankman-Fried’s trial defined.

Embezzlement, alternatively, usually entails intentional and fraudulent actions and happens when one in charge of funds makes use of the capital for private acquire or unauthorized functions. Bankman-Fried, based on prosecutors, used billions of {dollars} in enterprise capital investments, actual property acquisitions, and political donations for private acquire. None of those funds belonged to him.

With out company controls, his protection couldn’t show that the $8 billion lacking from shoppers was not the results of the market downturn as a substitute of misappropriation of funds.

Bankman-Fried had excessive ambitions. He dreamed of being the President of america. He thought rising FTX can be the one option to cowl the billion-dollar gap on its stability sheet, nevertheless it was too late for FTX. As Warren Buffett properly said: “You solely discover out who’s swimming bare when the tide goes out.”

Ultimately, Bankman-Fried was caught not for crypto fraud however for conventional fraud. Theoretically, regulatory guardrails might have prevented him from commingling and embezzling funds, however the legislation gained’t stop somebody who believes they’re uncatchable from doing incorrect.

This text is for normal info functions and isn’t supposed to be and shouldn’t be taken as authorized or funding recommendation. The views, ideas, and opinions expressed listed here are the writer’s alone and don’t essentially mirror or characterize the views and opinions of Cointelegraph.