The Public Can RICO Sam Bankman-Fried
A pathroute no-one seems to be considering
Disclaimer: This does not constitute legal advice, consult with a legal professional.
Whilst the actions of Sam Bankman-Fried, owner of crypto outfit FTX and trader with proxy shell company Alameda Research, have been endlessly publicly reported upon by the media, a simple recap for anyone not up to speed:
FTX issued (worthless) crypto tokens called FTTs in exchange for dollars which they then held the dollars for, doing spot trades on differentials in crypto prices between countries (mainly the US and Japan). Essentially like a complex crypto investment scheme.
Except it wasn’t. FTX incorporated in the Bahamas to make their finances non-transparent, stolen millions of dollars worth of customers’ cash, spent it on themselves, played a juggling act with Alameda Research to play ‘hide the embezzlement’. Alameda Research was owned by Sam Bankman-Fried’s girlfriend, Caroline Ellison.
Sam printed out even more FTTs to try to buy resources with, then tried to buy out a slew of other failing crypto firms to prop up his own assets, and kept billions of dollars of accounting supposedly in disorganised Excel spreadsheets which, given you can easily hire an accountant to do it properly, seems clearly intentional.
Sam Bankman-Fried is trying to play this off as just some clumsy accident. Like he clumsily accidentally incorporated explicitly into the Bahamas, that he clumsily just accidentally spent all the customers money accidentally on himself, that he accidentally printed more FTTs to accidentally cover this up. We guess he’ll also accidentally find himself in jail and accidentally drop the soap too. Accidentally, of course.
Purposes Of RICO
One of the few features of American law that are particularly enjoyable is RICO (“Racketeering Influenced and Corrupt Organizations”), which had the forethought of permitting (and even encouraging) private prosecution.
The designers of the law had the common sense to realise that some forms of corruption are so extensive they involve the government, and thus require granting citizens the freedom to commit their duty unimpeded by law. RICO grants this right of private prosecution without government interference.
The UK has a similar — fundamental — right in that British citizens can bring their own private prosecutions for criminal cases. It isn’t as enjoyable as RICO, however, as the UK government can take over private prosecutions at any time, and thus is rife with CPS (Crown Prosecution Service) corruption taking over and folding down any prosecutions of corrupt police officers and members of government. It is a ‘nice in theory’ law. RICO, for contrast, has teeth.
Teeth Much Needed To Deal With Corruption
None more so in the case of Sam Bankman-Fried, who, despite numerous illegal and unethical financial activities, has not been arrested by any of the US government officials who have financially benefitted to the tune of tens of millions from his donations.
There’s a term for that in law: bribery. And when finances influence the outcome of prosecution cases, it becomes a perversion of the course of justice. Oddly, the public seem to be limpwristedly crying out for the government to do something — anything — to Sam Bankman-Fried. But this is actually one of the rare cases where the public have the ability to do something themselves.
How Does It Qualify For RICO?
In order for something to qualify as RICO, there must be at least two predicate offences committed within the last ten years. Here are a handful of some of the likely relevant predicates (although not exhaustive and not guaranteed):
Child sexual abuse
Bank fraud
Bankruptcy fraud
Bribery
Counterfeiting
Distribution of controlled substances
Embezzlement
Extortion
Gambling
Human trafficking (incl. slavery, involuntary labour, indebted servitude, etc)
Mail fraud
Money laundering
Wire fraud
Witness tampering
What Possible Predicate Offences Are There?
Now, people might think what Sam Bankman-Fried is doing is potentially fraud. However, using funds that were entrusted to you to keep safe, for your own personal wants and greed, is actually called embezzlement. This is especially true in the case of trust funds and holdings. FTX knew they were embezzling customer funds.
There’s another item on the list, mentioned moments before — bribery. Paying off government officials with donations in order for them to soft-touch you and not press charges. But even if you think that is contentious, there’s a few others.
Wire fraud involves any attempt to intentionally commit fraud using electronic communications. So, if FTX made a fraudulent claim on their website that they’d keep your funds secure, which induced people to part with their money over the false assurances of safety and security, but instead spent them for their own ends (embezzlement), then they will have committed wire fraud.
Another possibility is money laundering, in which a criminal attempts to obscure or hide their illegal activities by moving and exchanging money around. Given FTX did ‘trades’ with Alameda Research in order to cover up the embezzlement, it could be strongly argued this is a form of money laundering.
RICO covers electronic counterfeits, in the sense of fake, worthless goods. You could also argue the issuing of worthless tokens — including additional, new ones — as part of the fraud and embezzlement is a type of counterfeiting — offering a worthless IOU manufactured in order to facilitate the financial exchange of fraud.
There were also instances of poker — illegal gambling — and reports of drug use — distribution of controlled substances. The sexual abuse aspect is implied. In terms of the indebted labour, there may be odds workers were not properly or fully remunerated for their work or time, which tends to go with the territory of fraud and the shortfall of funds.
Extradition Of Jurisdiction
You’d likely agree that FTX are at least likely to be guilty of two of the predicate offences by examination alone. Whilst some are stronger than others in evidence, it would be sufficient enough to lay the groundwork for subpeona of actions.
Naturally, some would try to point out how Sam is holed up in the Bahamas and therefore not subject to US law. However, the US has extradition treaties agreed with a great many countries (including even Russia), and none more so than the Bahamas, whose treaty was signed in 1990.
This means, if you could prove to a judge that Sam had engaged in a majority of his work within the US — which you could do hypothetically by pointing to the fact the website was in English, it traded in United States dollars, bought out American crypto currencies and even bought the rights to name an American stadium — it would likely be sufficient grounds to justify an extradition request for trial within the US.
Extradition isn’t simply for people who already are guilty, but also for people who are very likely to face a trial within the US. A prime example is the unethical case of Julian Assange, who hasn’t actually been convicted of any crime and is contesting extradition within the UK.
Will The Public Use RICO?
It is hard to say. As of late the public have been very rhetorical, but rarely ever practically action oriented in aggressing legally, always trying to outsource work to third parties, such as government officials or loud-mouthed political pundits who consistently let them down.
One cannot help but be reminded of Martin Seligman’s learned helplessness experiment, where a dog never tries to escape electric shocks despite having a clear path, as psychologically it thinks it is unable to escape and therefore never bothers trying or testing the hypothesis, even with a clear and open path so evidentally before it. Instead the dog just verbally whines.
In this case, it is very likely Sam Bankman-Fried has annoyed a number of rich people with deep pockets who, even knowing they won’t get the funds back, seek some form of legal retribution for the damaage Sam has done, either financially or reputationally, to them.
Alternatively, a number of States who didn’t get the cash bribes might opt to break rank from the Federal government and chew out Sam for the extent of the embezzlement of Americans’ funds under RICO.
Either way, The Daily Beagle thinks Sam Bankman-Fried is just a little overconfident in his parading around, acting the fool, and he may very well get his legal comeuppance at the hands of RICO.
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You didn't mention SBF's 49? million donation to Biden and the Democratic Party.