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The FTX co-founder may be able to face one less charge relating to his alleged mismanagement of the cryptocurrency exchange.

United States prosecutors have signaled they will drop a charge against FTX co-founder Sam Bankman-Fried, which had alleged he conspired to make unlawful campaign contributions.

In a July 26 letter to District Court Judge Lewis Kaplan, U.S. Attorney Damian Williams said the government was informed by The Bahamas that it did not agree to extradite Bankman-Fried on the charge and prosecutors would not carry it forward to trial.

"The Bahamas did not intend to extradite the defendant on the campaign contributions count," Williams wrote in the letter. "In keeping with its treaty obligations to The Bahamas, the Government does not intend to proceed to trial on the campaign contributions count."

*Excerpt of William's letter submitted to the court providing an update on the charge. Source: CourtListener*

Bankman-Fried previously contested the charge saying it was made after his extradition from The Bahamas and was not part of the original agreement.

The government split the charge, alongside others, into a separate trial slated to take place in March 2024. Bankman-Fried also faces a criminal trial in October.

After the charge is dropped the former FTX chief will face 12 charges which include allegations of fraud and fraud conspiracy, money laundering and bribing Chinese officials.

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This is a developing story, and further information will be added as it becomes available.

‘Agent of an anti-crypto agenda’ — Community slams Gensler over Kraken crackdown

February 10, 2023 Coin Telegraph

Adam Cochran

SEC's recent charges against crypto exchange Kraken over its staking program have sent tremors through the crypto industry.

Members of the crypto community seem outraged over the recent charges laid against crypto exchange Kraken in relation to its staking-as-a-service program in the United States.

On Feb. 9, the United States Securities Exchange Commission (SEC) announced it had settled charges with Kraken over “failing to register the offer and sale of their crypto asset staking-as-a-service program,” which it claims is qualified as securities under its purview.

Kraken agreed to settle the charges by paying $30 million in fines and to immediately cease offering staking services to U.S. retail investors, though they will continue to be offered offshore.

The move appears to have attracted the ire of not only the general crypto community but also of investors, politicians and industry executives.

Cinneamhain Ventures partner and Ethereum bull, Adam Cochran, called out SEC chief Gary Gensler, describing him as “an agent of an anti-crypto agenda” rather than a regulator, and questioning why the same standards weren’t applied to Sam Bankman-Fried and FTX:

2/2

Gensler is not a regulator. He is an agent of an anti-crypto agenda, who only aims to wield his power as cudgel for those he doesn't agree with.

So the big question then, is why didn't FTX get this treatment?

Whose pocket is he in?
— Adam Cochran (adamscochran.eth) (@adamscochran) February 9, 2023

In a Feb. 9 statement shared on Twitter, Kristin Smith, CEO of the Blockchain Association, argued that the situation at hand is a textbook example why Congress — not the SEC — should be working with industry players to forge appropriate legislation:

The following statement is attributed to @KMSmithDC in response to today's settlement between the SEC and Kraken:https://t.co/32KysvKfz0 pic.twitter.com/8vkWZXB6a2
— Blockchain Association (@BlockchainAssn) February 9, 2023

U.S. Congressman Tom Emmer — who has long been a critic of Gary Gensler — reiterated the importance of staking in the crypto ecosystem.

In a Feb. 9 Twitter post, the lawmaker explained that staking services will play an important role in “building the next generation of the internet” and argued that the “purgatory strategy” will hurt “everyday Americans the most,” as they may soon be forced to fetch such services offshore.

Meanwhile, Ryan Sean Adams, the founder of the Ethereum show Bankless, suggested to his 220,800 Twitter followers on Feb. 9 that the SEC could have taken other measures rather than charging Kraken out of the blue:

You could have:

- Mandated proof-of-reserves
- Required staking transparency
- Supported decentralized staking

Instead, we just got another gary g. ban hammer to the head. And we have no confidence you won't come for decentralized staking next.

You're driving it all offshore.
— RYAN SΞAN ADAMS - rsa.eth (@RyanSAdams) February 9, 2023

Other members of the community questioned how Kraken could possibly have registered with the securities regulator, as there was “no clear path” to approve crypto staking.

Others suggested it could impact Ethereum’s consensus layer, given Kraken is the fourth-largest validator on Ethereum, according to on-chain metrics platform Nansen.

However, not all were against the SEC’s decision. Prominent Bitcoin bull Michael Saylor — who has long considered ETH and other proof-of-stake cryptocurrencies to be securities — agreed with Gensler’s analysis that retail investors “lose control” of their tokens when they’re delegated to external staking service providers:

"Not your keys ... " - @GaryGensler. The @SECGov understands the importance of self-custody. https://t.co/oxPkFeJ77k
— Michael Saylor⚡️ (@saylor) February 9, 2023

Meanwhile, attorney and chief policy officer of the Blockchain Association, Jake Chervinsky, noted that such “settlements are not law” and that Kraken’s decision to settle was likely an economic decision rather than a legal one:

Settlements are not law. They're a decision that the economics of settling are better than fighting, no more.

The SEC thinks staking-as-a-service is a security. Kraken didn't admit or deny either way.

It may be a tough question, but the SEC hasn't answered it either way today.
— Jake Chervinsky (@jchervinsky) February 9, 2023

The debate comes as the SEC’s charge towards enforcing action against staking service providers prompted Coinbase CEO Brian Armstrong to say that “regulation by enforcement” would be a “terrible path” for U.S. innovators, as they’ll be forced to push more of their services offshore.

Maybe it WAS illegal: Mango Markets exploiter arrested on fraud charges

December 28, 2022 Coin Telegraph

Arrest

The Mango Markets exploiter previously called his attack on the crypto exchange “legal open market actions.”

The crypto trader behind the $110 million exploit of decentralized exchange Mango Markets has been arrested in Puerto Rico — and charged with market manipulation and fraud.

According to a previously sealed complaint filed with the Southern District of New York made public on Dec. 27, the Federal Bureau of Investigation (FBI) pinned Avraham Eisenberg with one count of “commodities fraud” and one count of “commodities manipulation” in relation to his exploit of Mango Markets.

Eisenberg’s Oct. 11 exploit of Mango Markets worked by manipulating the value of the platform’s native token MNGO, artificially inflating its price relative to USD Coin (USDC).

Eisenberg and his team then took out “massive loans” against its inflated collateral, which drained Mango’s treasury of around $110 million worth of various cryptocurrencies.

A day later on Oct. 12, Mango entered into negotiations with Eisenberg for the return of the funds.

On Oct. 15, Eisenberg publicly fessed up to exploiting the crypto exchange, stating at the time he was involved in a team that “operated a highly profitable trading strategy” and said that he believed all his actions were “legal open market actions.”

The FBI in its recent complaint stated the actions by Eisenberg constitute both fraud and market manipulation, as he “willfully and knowingly” engaged in a scheme involving the “intentional and artificial manipulation” of the price of perpetual futures on Mango Markets.

This ultimately allowed him to drain $110 million worth of cryptocurrencies — most of which came from the deposits of other Mango Markets investors.

“Due to [Eisenberg’s] withdrawals, other investors with deposits on Mango Markets lost much, or all, of those deposits,” explained FBI special agent Brandon Racz in the Dec. 23 complaint.

Racz said Eisenberg may have known his actions were illegal as well, as the day after the Mango Markets exploit, Eisenberg flew from the United States to Israel.

“Based on the timing of the flight, the travel appears to have been an effort to avoid apprehension by law enforcement in the immediate aftermath of the Market Manipulation Scheme,” he said.

Eisenberg was arrested on Dec. 26 in Puerto Rico, according to a filing from the United States Attorney Southern District of New York.

In November, Eisenberg tried his luck again, this time on Decentralized Finance (DeFi) protocol Aave, taking out a loan of 40 million CRV tokens from Aave and betting on a drop in price through a series of sophisticated short sales.

However, the plan ultimately didn’t succeed as the price actually rose during the attack, resulting in losses due to the significant short position.

SEC charges 11 individuals over $300M crypto ‘pyramid scheme’

August 2, 2022 Coin Telegraph

SEC charges 11 individuals over 0M crypto ‘pyramid scheme’

Carolyn Welshhans

SEC has filed a lawsuit in the U.S. District Court against the founders and promoters of Forsage who allegedly fueled a $300 million “textbook pyramid and Ponzi scheme”

The Securities and Exchange Commission (SEC) has charged 11 individuals for their alleged role in the creation of a "fraudulent crypto pyramid scheme" platform Forsage.

The charges were laid in a United States District Court in Illinois on August 1, with the SEC alleging that the founders and promoters of the platform used the “fraudulent crypto pyramid and Ponzi scheme” to raise more than $300 million from “millions of retail investors worldwide.”

The SEC complaint states that Forsage was modeled such that investors would be financially rewarded by recruiting new investors to the platform in a "typical Ponzi structure," which spanned multiple countries including the United States and Russia.

According to the SEC, a Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. These schemes often solicit new investors by promising to invest funds in opportunities that generate high returns for little risk.

In the court document, the SEC stated that:

“It [the Forsage platform] did not sell or purport to sell any actual, consumable product to bona fide retail customers during the relevant time period and had no apparent source of revenue other than funds received from investors. The primary way for investors to make money from Forsage was to recruit others into the scheme.”

According to the SEC, Forsage’s alleged Ponzi scheme works by firstly enabling new investors to set up a crypto-asset wallet and purchase “slots” from Forsage’s smart contracts.

Those slots would give them the right to earn compensation from others whom they recruited into the scheme, referred to as “downlines”, and also from the community of Forsage investors in the form of profit sharing, referred to as “spillovers”.

Carolyn Welshhans, Acting Chief of the SEC’s Crypto Assets and Cyber Unit called Forsage a “fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors."

She also added that decentralized technologies cannot act as an escape route for illegal conduct:

"Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains."

In addition to the four founders, who include Vladimir Okhotnikov, Jane Doe aka Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov, the SEC’s complaint also included seven promoters, three of which were in a U.S.-based promotional group called the “Crypto Crusaders”.

All 11 individuals have been charged with violating “Unregistered Offers and Sales of Securities” under Section 5 A & C and “Fraud” under Section 17(a) (1 & 3) of the US Securities Act. The defendants have also been charged with “Fraud” under Section 10 B-C of the US Exchange Act.

These efforts enabled the Ponzi structure to capture the massive scale that it achieved from retail investors buying into the model over the last two years, said Welshhans.

In September 2020, Forsage was subject to cease-and-desist orders from the Philippines SEC. In March 2021, the platform also received cease and desist orders from the Montana Commissioner of Securities and Insurance.

Forsage’s YouTube channel shows that their platform was promoted as little as ten days ago. The platform’s Twitter account also appears active.

Cointelegraph reached out to Forsage to provide a comment on the matter but did not receive an immediate response.

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Two more charged with teaching North Koreans to evade US sanctions with crypto

April 27, 2022 Coin Telegraph

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Two EU citizens have been indicted for violating U.S. sanctions on North Korea when they jointly planned a crypto conference there.

Two European citizens have been charged by a United States district court in connection to a blockchain and cryptocurrency conference in North Korea which violated U.S. sanctions back in 2019.

According to the U.S. Department of Justice, the court documents allege that Alejandro Cao De Benos, a citizen of Spain, and Christopher Emms, a citizen of the United Kingdom conspired to violate U.S. sanctions on North Korea when they jointly planned and organized the 2019 Pyongyang Blockchain and Cryptocurrency Conference.

The pair allegedly worked with former Ethereum developer Virgil Griffith to provide instruction on how the DPRK could use blockchain and cryptocurrency technology to launder money and evade sanctions. Later, the three continued to provide additional cryptocurrency and blockchain services to the sanctioned nation by seeking to help them build cryptocurrency infrastructure and equipment.

Griffith is well known in the cryptocurrency space for his extensive work on the Ethereum cryptocurrency platform during its early years. He was arrested by the Federal Bureau of Investigation (FBI) in November 2019 for his connection to the conference, and pleaded guilty in September last year for violating the International Emergency Economic Powers Act (IEEPA)

On April 12, he was sentenced to 63 months in prison and slapped with a $100,000 fine.

The indictment also alleges that Cao De Benos and Emms recruited Griffith to speak at the DPRK conference and arranged his travel to the DPRK in 2019 for this purpose. It also alleges that Cao De Benos coordinated with the DPRK government for Griffith’s participation to the conference.

The pair have been charged with one count of conspiring to violate U.S. sanctions in violation to the IEEPA, which carries a maximum penalty of 20 years prison.

In an accompanying statement published by the U.S. Department of Justice, the FBI issued a stark warning to any persons or companies thinking of circumventing U.S. sanctions against a foreign government.

Acting Assistant Director Bradley S. Benavides of the FBI’s Counterintelligence Division said:

Those contemplating evading U.S. sanctions against a foreign government should know the FBI and its partners will aggressively investigate these cases.

The indictment comes at an interesting time, after the U.S. Treasury’s Office of Foreign Assets Control (OFAC) recently announced it will be targeting entities and individuals involved in attempts to evade sanctions imposed by the United States and its international partners on Russia.

Last week, the U.S. Treasury Department announced it had named a Russia-based crypto mining services provider BitRiver AG and several subsidiaries as firms facilitating the evasion of sanctions.

“The United States is committed to ensuring that no asset, no matter how complex, becomes a mechanism for the Putin regime to offset the impact of sanctions.”

On Friday, OFAC announced it had sanctioned three Ethereum addresses allegedly linked the North Korean linked theft of more than $600 million in crypto from nonfungible token game Axie Infinity’s Ronin sidechain in March.

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