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OPINION

Sideways: SBF faces sentence of death by metaphor

FTX founder Sam Bankman-Fried faces the full wrath of US authorities, as rival agencies compete to make the most hyperbolic charges against the former crypto exchange head. Death by metaphor could be his provisional sentence.

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SBF is escorted out of the magistrate court building after his arrest in Nassau. Photo: Reuters

Sam Bankman-Fried (SBF) was arrested in the Bahamas on Monday and by Tuesday rival US authorities were engaged in a race to deliver the most exaggerated portrayal of his conduct before the collapse of crypto exchange FTX.

Securities and Exchange Commission chairman Gary Gensler established an early lead with some metaphor-heavy accusations.

"We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto," Gensler said.

SEC enforcement head Gurbir Grewal made a valiant attempt to buff his boss’s house of cards metaphor: "FTX operated behind a veneer of legitimacy. But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent.”

Thesaurus

The Department of Justice’s Southern District of New York has a well-deserved reputation for attempting to intimidate with charges that can bring lengthy prison sentences and it did not disappoint with its criminal case against SBF, which is the most serious threat he faces.

Rather than testing the limits of a metaphor, the Southern District chose to deploy the awful majesty of the thesaurus and unleashed waves of synonyms to overwhelm the hapless defendant.

Its charges included the allegation that SBF and others “known and unknown, wilfully and knowingly did combine, conspire, confederate, and agree together and with each other to commit wire fraud.”

Almost identical language was used in charges that SBF committed commodities and securities fraud, money laundering and breaches of campaign finance laws, with notes that the alleged crimes took place in the Southern District “and elsewhere”.

The CFTC risks being accused of credulousness in its dealings with SBF, by contrast, which is not a good look for a regulator

The Commodity Futures Trading Commission (CFTC) may sense that its bid to carve out a role as the main US regulator of cryptocurrencies is doomed, which could explain the terse announcement of its own charges against SBF.

Established derivatives exchanges led by CME Group fought a successful rearguard action against proposals for clearing reform that were made by SBF and now seem no more plausible than his other daydreams about the future of finance.

The CFTC risks being accused of credulousness in its dealings with SBF, by contrast, which is not a good look for a regulator. CFTC chairman Rostin Behnam recently admitted to a Senate committee that he and his officials met with SBF 10 times over a 14-month period to discuss clearing proposals.

The tone of these meetings is recorded in tweets that SBF posted at the time enthusing about how excited he was to be working with the CFTC on “innovating in the US crypto derivatives space”.

Cosy

Evidence of a cosy relationship with SBF is also turning into a problem for Maxine Waters, the politician who chairs the financial services committee in the House of Representatives.

SBF had agreed to testify at a hearing Waters scheduled for Tuesday December 13, but this appearance was derailed by his arrest and the various announcements of legal charges.

Waters issued a peevish statement about this attempt to steal her spotlight.

“Although Mr Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr Bankman-Fried about the actions that have harmed over one million people, and wiped out the hard-earned life savings of so many,” she said. "The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity."

The public does have the opportunity to view photos of SBF with his arm round Waters at a conference, however.

The core charges against SBF about misuse of customer funds and deception are simple and will be hard to refute. His lawyers can nevertheless be expected to match US authorities in the hyperbole stakes, and SBF’s extensive contacts with public figures may be useful for the purposes of misdirection.