Well most fraud trials involve a person stealing directly from their company.
Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.
That way he could honestly say he personally has no money left.
That atleast makes it harder for FTX to claw back that money.
One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.
I wonder how SBF's lawyers have done thier diligence in this case and satisified themselves that this wont' get them into trouble with the state bar.
Aren't tax free gifts capped at $14,000.00 per year?
Edit: Er, I guess it's $16,000.00 without needing to report it, and then anything above that can be offset against a $12 ish million lifetime exclusion.
>That atleast makes it harder for FTX to claw back that money.
The 'Madoff Recovery Initiative' was incredibly aggressive in going after all of Madoff's family and acquaintances. SBF's family and acquaintances are going to be fighting lawsuits for years and will lose millions.
>> Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.
I am pretty sure it's the source of the money that matters more (legal vs. illegal) than whether the accounting tricks are legally sound.
What you're saying sounds like "at least he wasn't a complete numb-nuts", but that's not much of an "at least" in this scenario.
I am pretty sure the courts will be looking for an "at least he wasn't stealing from his customers".
> One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.
I don't think this is true in the US. Lawyers do not have any obligations under the Bank Secrecy Act or laws that would require this and there are other things like the text below that would make prosecuting a lawyer for this very difficult,
> (1)the term “monetary transaction” means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term *does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution;*
> Because the Department firmly believes that attorneys representing clients in criminal matters must not be hampered in their ability to effectively and ethically represent their clients within the bounds of the law, the Department, as a matter of policy, will not prosecute attorneys under § 1957 based upon the receipt of property constituting bona fide fees for the legitimate representation in a criminal matter, except if (1) *there is proof beyond a reasonable doubt that the attorney had actual knowledge of the illegal origin of the specific property received (prosecution is not permitted if the only proof of knowledge is evidence of willful blindness);* and (2) such evidence does not consist of (a) confidential communications made by the client preliminary to and with regard to undertaking representation in the criminal matter; or (b) confidential communications made during the course of representation in the criminal matter; or (c) other information obtained by the attorney during the course of the representation and in furtherance of the obligation to effectively represent the client.
“I’ll give my ill gotten gains to someone who technically wasn’t involved (until they accepted my money)” couldn’t possibly be a new trick. (Hypothetically that is, if SBF actually did a crime; I’m not following the case).
> One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.
If that's true, it seems a bit ridiculous. SBF is pleading not guilty. Are his lawyers supposed to do their own little investigation to figure out whether their client is actually guilty?
> Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.
Isn't this worse for him in the long run if he's found guilty though? Words like "structuring", "posturing", "evasion" come to mind...
> (in December, their $1.8 million Palo Alto home was used to secure a $250 million bail package after Bankman-Fried was released on a personal recognizance bond.
Their Palo Alto home is worth only $1.8M? Do they live in a 1BR/0.5BA shed?
edit: Apparently the assessed value (for property taxes) is $1.8M. But realtor sites estimate it at $3.1M, and it was apparently renting for $12,000/month back in 2013. Still cheaper than I thought for a 4-br home on Stanford's Dish
The house is on Stanford land and so does can only be sold to Stanford faculty or staff. In fact, it's technically not even owned, it is leased from the university.
This changes the pool of potential buyers, and therefore the market is quite different than the normal Palo Alto market.
My GUESS is that since he's being prosecuted for fraud, et al, they can't say these were illegally obtained (innocent until proven guilty) and therefore they can't seize the funds yet.
And if the lawyers are in on it, they're over billing and keeping building an escrow fund that would go back to one of them at the end.
Prosecutors might not be able to immediately seize assets, however if they have evidence that those assets were obtained through criminal activity then they can ask the court to freeze the assets pending the outcome of a criminal trial.
> And if the lawyers are in on it, they're over billing and keeping building an escrow fund that would go back to one of them at the end.
The ones in charge of the bankruptcy are also bleeding the customers and investors dry. They charged $700 million in the Madoff case. There are $10 bn missing here. It's not unthinkable they'll steal 10% of that.
They are vermins, just as scummy as SBF. But it's legal.
There's an interesting ethical dilemma and it must apply to lots of cases.
It seems obvious that nobody should benefit from the results of their crime.* But if the accused is innocent until convicted, shouldn't it be OK to spend the ill gotten gains on their defense? After all, if they win the gains were legitimate, and by induction they were legit until conviction.
How is this circle squared in practice?
* this principle is more easily stated than enforced. Some places don't allow convicted criminals to earn any money from writing a book about their crimes (this rule seems reasonable) but where does it end? Apparently Bernie Madoff got respect in prison for the magnitude of his theft. That was a benefit of sorts...
This is basically what civil forfeiture is designed for (although it's being severely abused). The cops arrest you and seize all assets that are suspected of being used in or obtained by the suspected crime.
This has been heavily abused in California and elsewhere [1][2] to seize assets from marijuana dispensaries or "suspected drug criminals". Cops seize product and money, never file charges, and then let the business owners fight for months/years to get their property back (often times with the seized product having long since expired), despite no charges having been filed.
IMO it's an egregious violation of the 4th amendment and it's maddening that more isn't being done to stop the practice.
How does the law work? If you nab a pile of money from your customers and give it to your family, and then get sued, what happens? If you lose, does the court reverse all the transactions and give it to the creditors? Or can you just have your parents give you money to live off when you're out of jail? Surely not?
FTX creditors will presumably sue SBF's parents in US civil court and claim fraudulent conveyance. The plaintiffs will certainly ask the court to freeze those assets and not allow them to be squandered on criminal trial defense, but who knows whether the court would approve such a motion.
I believe the creditors would have to challenge the gift as a "fraudulent transfer", based on the idea that at the time the giver knew they were open to a huge liability from having taken the money in the first place. And then another similar step to go after the money that went to the attorneys.
And in this case the "creditor" would be the FTX bankruptcy estate, led by whomever has been appointed the receiver. Theoretically they should be working for creditors of FTX, but can obviously have their own motivations of expediency, not wanting to rock the boat by suing another firm, etc.
You always hear RICO get thrown around in these sorts of things, which allegedly allows the government to seize anything obtained as part of a criminal enterprise, but I'd need a lawyer to weigh in and determine whether that's actually true and whether RICO would apply to this case.
It takes time to investigate the transfers and prove they were fraud proceeds before possibly clawing them back...as the investigation lingers, prosecutors will likely ask SBF's dad to return that money.
As far as I understand the law, not being an actual lawyer, this is the "rationale" behind asset seizure: prevent a criminal from funding his or her defense with the proceeds of criminal activity. Obviously in the poster-child case, they haven't been convicted of anything yet.
I'm not defending asset seizure: it's become a way for the government to steal assets without trial. But SBF cleverly made it what lawyers like to call a "close legal question" by funneling the money to his father as a gift.
Forbes has carved a uniquely slimely niche for itself. (These days I almost look at a Forbes promotion of a startup as a negative signal.) At the bottom of that article there are "more from Forbes" stories on the (now) 'bad bad' Sam. Search for Forbes articles from before the reveal for "more from Forbes" stories which I guess they didn't have room to link to in the bottom.
(Naturally pointing out Forbes' role in pimping Sam Bankman-Fried in no way is supporting the 'wunderkind' or his & co.'s fraud.)
Here are 2 questions I have about this whole FTX saga:
1. How is it that a supposed $250 million bond was secured with (according to news articles) significantly less value than that in assets? How does that work? The collateral seems to be his parents' house, a few hundred thousand in cash assets and little else beyond that. Huh? So what makes this a $250 million bond?
2. The government can (and routinely does) seize assets without the owner being convicted of anything. Hell, they do it when the owner never gets even charged with anything. To me, this is a clear 4A violation and should be unconstitutional but the 4A holds no sway over current judicial politics so here we are.
In this case we have clear evidence of fraud. Pretty much anything SBF touched with FTX or Alameda money can quite reasonably be presumed to be the proceeds of crime. Why on Earth in this case is the government not seizing, well, everything?
Bear in mind that the legal standard for this is quite broad. If you buy a $1 million home with $100,000 of fruad proceeds and $900,000 of your own money, those fraud proceeds taint the entire asset, not just the portion directly tied to fraud. As such, any money given by SBF to anyone poisons pretty much every asset the gift-receiver owns. The government would be well within its right to seize or at least freeze pretty much everything.
So how have SBF's parents escaped the government's seizure net?
If you think about it, it's the equivalent of robbing a bank and then using those stolen funds to pay for your bond and lawyer. The government wouldn't stand for that in the case of armed robbery. Why are they here?
This guy just won't quit. It's a circle firing squad of a mess. Even the cynic in me, who from the beginning of this affair thought he would never go to prison, is starting to gain hope that he actually will..
On his staff page he's described as a "leading scholar in the field of tax law". Maybe he was the one that got FTX on QuickBooks after having been paid for 11 months there.
[+] [-] chollida1|2 years ago|reply
Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.
That way he could honestly say he personally has no money left.
That atleast makes it harder for FTX to claw back that money.
One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.
I wonder how SBF's lawyers have done thier diligence in this case and satisified themselves that this wont' get them into trouble with the state bar.
[+] [-] blockwriter|2 years ago|reply
Edit: Er, I guess it's $16,000.00 without needing to report it, and then anything above that can be offset against a $12 ish million lifetime exclusion.
https://money.usnews.com/money/personal-finance/taxes/articl...
[+] [-] macspoofing|2 years ago|reply
The 'Madoff Recovery Initiative' was incredibly aggressive in going after all of Madoff's family and acquaintances. SBF's family and acquaintances are going to be fighting lawsuits for years and will lose millions.
[+] [-] cik2e|2 years ago|reply
I am pretty sure it's the source of the money that matters more (legal vs. illegal) than whether the accounting tricks are legally sound.
What you're saying sounds like "at least he wasn't a complete numb-nuts", but that's not much of an "at least" in this scenario.
I am pretty sure the courts will be looking for an "at least he wasn't stealing from his customers".
At least, that's the sane hope.
[+] [-] from|2 years ago|reply
I don't think this is true in the US. Lawyers do not have any obligations under the Bank Secrecy Act or laws that would require this and there are other things like the text below that would make prosecuting a lawyer for this very difficult,
https://www.law.cornell.edu/uscode/text/18/1957
> (1)the term “monetary transaction” means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term *does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution;*
https://www.justice.gov/jm/jm-9-105000-money-laundering
> Because the Department firmly believes that attorneys representing clients in criminal matters must not be hampered in their ability to effectively and ethically represent their clients within the bounds of the law, the Department, as a matter of policy, will not prosecute attorneys under § 1957 based upon the receipt of property constituting bona fide fees for the legitimate representation in a criminal matter, except if (1) *there is proof beyond a reasonable doubt that the attorney had actual knowledge of the illegal origin of the specific property received (prosecution is not permitted if the only proof of knowledge is evidence of willful blindness);* and (2) such evidence does not consist of (a) confidential communications made by the client preliminary to and with regard to undertaking representation in the criminal matter; or (b) confidential communications made during the course of representation in the criminal matter; or (c) other information obtained by the attorney during the course of the representation and in furtherance of the obligation to effectively represent the client.
[+] [-] bee_rider|2 years ago|reply
[+] [-] olalonde|2 years ago|reply
If that's true, it seems a bit ridiculous. SBF is pleading not guilty. Are his lawyers supposed to do their own little investigation to figure out whether their client is actually guilty?
[+] [-] pengaru|2 years ago|reply
Isn't this worse for him in the long run if he's found guilty though? Words like "structuring", "posturing", "evasion" come to mind...
[+] [-] jasondigitized|2 years ago|reply
[+] [-] HopenHeyHi|2 years ago|reply
[+] [-] jonathankoren|2 years ago|reply
[+] [-] danso|2 years ago|reply
> (in December, their $1.8 million Palo Alto home was used to secure a $250 million bail package after Bankman-Fried was released on a personal recognizance bond.
Their Palo Alto home is worth only $1.8M? Do they live in a 1BR/0.5BA shed?
edit: Apparently the assessed value (for property taxes) is $1.8M. But realtor sites estimate it at $3.1M, and it was apparently renting for $12,000/month back in 2013. Still cheaper than I thought for a 4-br home on Stanford's Dish
https://sfstandard.com/business/inside-sam-bankman-frieds-pa...
[+] [-] jibe|2 years ago|reply
[+] [-] compiler-guy|2 years ago|reply
This changes the pool of potential buyers, and therefore the market is quite different than the normal Palo Alto market.
[+] [-] ralph84|2 years ago|reply
[+] [-] unknown|2 years ago|reply
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[+] [-] dragonwriter|2 years ago|reply
[+] [-] caseysoftware|2 years ago|reply
My GUESS is that since he's being prosecuted for fraud, et al, they can't say these were illegally obtained (innocent until proven guilty) and therefore they can't seize the funds yet.
And if the lawyers are in on it, they're over billing and keeping building an escrow fund that would go back to one of them at the end.
The scumminess is rather impressive.
[+] [-] nradov|2 years ago|reply
[+] [-] TacticalCoder|2 years ago|reply
The ones in charge of the bankruptcy are also bleeding the customers and investors dry. They charged $700 million in the Madoff case. There are $10 bn missing here. It's not unthinkable they'll steal 10% of that.
They are vermins, just as scummy as SBF. But it's legal.
[+] [-] hgsgm|2 years ago|reply
[+] [-] gumby|2 years ago|reply
It seems obvious that nobody should benefit from the results of their crime.* But if the accused is innocent until convicted, shouldn't it be OK to spend the ill gotten gains on their defense? After all, if they win the gains were legitimate, and by induction they were legit until conviction.
How is this circle squared in practice?
* this principle is more easily stated than enforced. Some places don't allow convicted criminals to earn any money from writing a book about their crimes (this rule seems reasonable) but where does it end? Apparently Bernie Madoff got respect in prison for the magnitude of his theft. That was a benefit of sorts...
[+] [-] njovin|2 years ago|reply
This has been heavily abused in California and elsewhere [1][2] to seize assets from marijuana dispensaries or "suspected drug criminals". Cops seize product and money, never file charges, and then let the business owners fight for months/years to get their property back (often times with the seized product having long since expired), despite no charges having been filed.
IMO it's an egregious violation of the 4th amendment and it's maddening that more isn't being done to stop the practice.
[1] https://reason.com/2022/02/04/a-california-sheriff-remains-f... [2] https://www.newyorker.com/magazine/2013/08/12/taken
[+] [-] unknown|2 years ago|reply
[deleted]
[+] [-] lordnacho|2 years ago|reply
[+] [-] nradov|2 years ago|reply
[+] [-] mindslight|2 years ago|reply
And in this case the "creditor" would be the FTX bankruptcy estate, led by whomever has been appointed the receiver. Theoretically they should be working for creditors of FTX, but can obviously have their own motivations of expediency, not wanting to rock the boat by suing another firm, etc.
[+] [-] kibwen|2 years ago|reply
[+] [-] boeingUH60|2 years ago|reply
[+] [-] AlbertCory|2 years ago|reply
I'm not defending asset seizure: it's become a way for the government to steal assets without trial. But SBF cleverly made it what lawyers like to call a "close legal question" by funneling the money to his father as a gift.
[+] [-] dwighttk|2 years ago|reply
[+] [-] eternalban|2 years ago|reply
(Naturally pointing out Forbes' role in pimping Sam Bankman-Fried in no way is supporting the 'wunderkind' or his & co.'s fraud.)
[+] [-] jmyeet|2 years ago|reply
1. How is it that a supposed $250 million bond was secured with (according to news articles) significantly less value than that in assets? How does that work? The collateral seems to be his parents' house, a few hundred thousand in cash assets and little else beyond that. Huh? So what makes this a $250 million bond?
2. The government can (and routinely does) seize assets without the owner being convicted of anything. Hell, they do it when the owner never gets even charged with anything. To me, this is a clear 4A violation and should be unconstitutional but the 4A holds no sway over current judicial politics so here we are.
In this case we have clear evidence of fraud. Pretty much anything SBF touched with FTX or Alameda money can quite reasonably be presumed to be the proceeds of crime. Why on Earth in this case is the government not seizing, well, everything?
Bear in mind that the legal standard for this is quite broad. If you buy a $1 million home with $100,000 of fruad proceeds and $900,000 of your own money, those fraud proceeds taint the entire asset, not just the portion directly tied to fraud. As such, any money given by SBF to anyone poisons pretty much every asset the gift-receiver owns. The government would be well within its right to seize or at least freeze pretty much everything.
So how have SBF's parents escaped the government's seizure net?
If you think about it, it's the equivalent of robbing a bank and then using those stolen funds to pay for your bond and lawyer. The government wouldn't stand for that in the case of armed robbery. Why are they here?
[+] [-] Overtonwindow|2 years ago|reply
[+] [-] jayess|2 years ago|reply
[+] [-] shapefrog|2 years ago|reply
[+] [-] AlexandrB|2 years ago|reply
[+] [-] indigodaddy|2 years ago|reply
[+] [-] djbusby|2 years ago|reply
[+] [-] fullstop|2 years ago|reply
Maybe I've just met a bad batch.
[+] [-] skeeter2020|2 years ago|reply
[+] [-] unknown|2 years ago|reply
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[+] [-] mahart|2 years ago|reply
[+] [-] watwut|2 years ago|reply
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