Sam Bankman-Fried seeks expert to counter testimony from DOJ witnesses

October 24, 2023 Coin Telegraph

Former FTX CEO Sam Bankman-Fried intends to call on a financial expert to rebuff testimonies from Caroline Ellison, Gary Wang, Nishad Singh and Adam Yedidia.

Sam Bankman-Fried’s lawyers are planning to put forward an expert witness to counter testimony from former Alameda Research CEO Caroline Ellison and other witnesses about the extent of financial ties between FTX and the trading firm.

In an Oct. 23 letter to New York District Judge Lewis Kaplan, Bankman-Fried’s attorneys said Joseph Pimbley from litigation consulting firm PF2 Securities would testify on behalf of the former FTX CEO.

The letter lays out that Pimbley will testify — based on FTX database information — that Alameda’s line of credit with FTX “fluctuated between approximately $1 billion and $3 billion” between October 2021 and September 2022 and decreased in June 2022 which has the goal of establishing a definitive timeline for the line of credit.

Pimbley will also testify that the majority of balances for non-FTX and non-Alameda users are in U.S. dollars, Bitcoin (BTC), Ether (ETH) and Tether (USDT) and over 75% of non-FTX and Alameda user balances “arise from accounts that have spot margin enabled, spot margin lending enabled, or show futures activity” — which could provide context to testimony made by former FTX executives.

*Highlighted excerpt of the letter on testimony Pimbley will counter regarding FTX customer trading. Source: CourtListener*

The testimony is also set to rebuff a testimony by Ellison, FTX co-founder Gary Wang, former FTX engineering director Nishad Singh and former FTX employee Adam Yedidia regarding Alameda’s line of credit and FTX customer use of margin trading.

Dr. Pimbley is set to counter Ellison’s testimony that Alameda had “an essentially unlimited line of credit on FTX” and Wang’s testimony that the firm had borrowed “around $3 billion” from the credit line.

Pimbley’s 54-page disclosure details various charts, spreadsheet excerpts, diagrams, and database queries pulled from FTX’s Amazon Web Services database that relate to FTX’s line of credit with Alameda between October 2021 and November 2022.

Pimbley is being remunerated at a rate of $720 an hour plus expenses for his work but said he has “no financial interest in the outcome of this case.”

He was one of seven expert witnesses earlier put forward by Bankman-Fried’s legal team, which Judge Kaplan barred from testifying but allowed future testimony if they were to respond to government witness testimony and clarify their claims.

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Elon Musk hits at SEC, DOJ amid suit to force testimony in Twitter probe

October 6, 2023 Coin Telegraph

60 Minutes

Elon Musk claims the SEC and DOJ are abusing their regulatory powers for personal and political gain to receive punitive action.

Elon Musk has called for a “comprehensive overhaul” of the United States Securities and Exchange Commission hours after the regulator sued Musk alleging he failed to testify in its probe relating to his $44 billion Twitter (now X) purchase last October.

The SEC is investigating if Musk’s purchase triggered securities laws and an Oct. 5 filing by the regulator in a California District Court seeks to compel Musk to comply with an earlier SEC subpoena.

In an X post the same day Musk suggested the SEC — along with the U.S. Department of Justice — should instead be the ones probed.

“A comprehensive overhaul of these agencies is sorely needed, along with a commission to take punitive action against those individuals who have abused their regulatory power for personal and political gain.”

“Can’t wait for this to happen,” Musk added, in response to a post outlining the various actions the U.S. government has taken against Elon Musk-led companies.

A comprehensive overhaul of these agencies is sorely needed, along with a commission to take punitive action against those individuals who have abused their regulatory power for personal and political gain.

Can’t wait for this to happen.
— Elon Musk (@elonmusk) October 5, 2023

Asked by an X user if such a probe would ever happen, Musk responded: “I estimate the probability at 100%.”

The SEC said it subpoenaed Musk in May 2023 and required him to provide testimony at the regulator’s San Francisco office on Sept. 15, which Musk initially agreed to, the filing reads.

Two days prior, Musk “abruptly” notified the SEC he wouldn’t make an appearance and made several “spurious objections,” the SEC said.

The regulator said it tried to negotiate an alternative time and place for Musk’s testimony in “good faith” but its efforts were met with Musk’s “blanket refusal.”

The SEC also claimed Musk’s objections lacked legal merit.

“None of Musk’s objections has any legal validity, and he has no justifiable excuse for his non-compliance with the SEC’s subpoena.”

X is among the most popular social media platforms for the cryptocurrency community with one heated topic of discussion being the SEC’s regulatory approach to the crypto industry.

Musk has been looking to integrate cryptocurrency payments on X in recent months having obtained a currency transmitter license from Rhode Island’s regulator in late August.

Musk has taken shots at the SEC in the past, previously making his stance on the regulator clear in a December 2018 interview with 60 Minutes:

“I do not respect the SEC. I do not respect them.”

“I have no respect for the SEC''

Elon Musk

pic.twitter.com/a46zuKXb1X
— Tesla Owners Silicon Valley (@teslaownersSV) October 5, 2023

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5 lowlights of Gary Gensler’s evasive testimony before Congress

September 28, 2023 Coin Telegraph

Andy Barr

The United States Securities and Exchange Commission chief was asked whether the purchase of Pokemon trading cards is a security transaction and whether Bitcoin is a commodity.

Blamed for “kneecapping” the U.S. capital markets and slammed for dodging questions around Bitcoin and Pokemon cards, Gary Gensler appears to have had one hell of a grilling from Congress this week.

On Sept. 27, the United States Securities and Exchange Commission chief again found himself in front of lawmakers in a scheduled hearing to discuss his agency’s oversight of the markets.

Here are some of the highlights and lowlights of the hearing.

“You are the Tonya Harding of securities regulations.”

One of the more colorful analogies came from United States Representative Andy Barr, who accused Gensler of “kneecapping” the U.S. capital markets with regulatory red tape.

Barr referred to an old testimony from Gensler, where Gensler argued that the U.S. is the largest, most sophisticated and innovative capital market in the world and that it shouldn’t be taken for granted as “even gold medalists must keep training.”

“With all due respect Mr. Chairman, if the U.S. capital markets are a gold medalist, you are the Tonya Harding of securities regulations,” said Barr.

“You are kneecapping the U.S. capital markets with the avalanche of red tape coming out of your Commission.”

Barr is presumably referring to a scandal where U.S. ice skater Tonya Harding hired an assailant to attack her rival, Nancy Kerrigan, in the lead-up to the 1994 United States Figure Skating Championships and the Winter Olympics. Kerrigan ended up not competing in the U.S. championships.

Mr. Barr to Gensler:

“If the US capital markets are a gold medalist, you are the Tonya Harding of securities regulation because you are kneecapping the US capital markets…”

pic.twitter.com/D9VOxtXAGC
— John Dickens (@johnLdickens) September 27, 2023

“I wish the Biden administration would say you're fired.”

Meanwhile, U.S. Representative Warren Davidson also ripped into Gensler, saying he hoped that the Biden administration would fire him.

“I wish the Biden administration would say you're fired,” said Davidson.

Davidson accused Gensler of pushing a “woke” political and social agenda and abusing his role as the SEC’s Chair.

Gary Gensler’s tenure at the SEC highlights two key problems.

1) @GaryGensler problem
2) @SECGov structural problem

That’s why I introduced the SEC Stabilization Act to #FireGaryGensler and restructure the SEC. pic.twitter.com/Ud3giejKfZ
— Warren Davidson (@WarrenDavidson) September 27, 2023

The U.S. representative added that he hopes the SEC Stabilization Act he introduced with U.S. Representative Tom Emmer could make that happen.

“You’re making the case for this bill [SEC Stabilization Act] every day you’re acting as the Chairman,” he concluded.

Gensler wasn’t given the chance to respond.

Gensler reiterates Bitcoin isn’t a security

Asked by U.S. House Committee on Financial Services chair Patrick McHenry whether Bitcoin is a security, Gensler eventually relented, stating that Bitcoin didn’t meet the Howey Test.

“It does not meet the Howey test which is the law of the land,” Gensler said, implying that Bitcoin isn't a security.

McHenry then suggested Bitcoin must be a commodity, which Gensler avoided answering, saying the test for that is outside the scope of U.S. securities laws.

Gary Gensler says that #Bitcoin is NOT a security, but he refuses to say that it’s a commodity.

He’s running out of time. When a powerhouse like BlackRock asks for a Bitcoin ETF you MUST deliver. pic.twitter.com/yhKcMzfzx6
— The ₿itcoin Therapist (@TheBTCTherapist) September 27, 2023

Henry also suggested Gensler tried to “choke off the digital asset ecosystem” and refused to be transparent with Congress about the SEC’s connections with FTX and its former CEO Sam Bankman-Fried.

Gensler also wasn’t given the chance to respond to the claims made by McHenry.

Are Pokemon trading cards securities? It depends.

U.S. Representative Ritchie Torres used his time to quiz Gensler about his interpretation of what constitutes an investment contract.

Torres put Gensler to the test by asking whether purchasing a physical Pokemon trading card constitutes a securities transaction.

I cross-examined @SECGov Chair Gary Gensler about the term 'investment contract', which is key to determining his authority over crypto.

Gensler struggled to answer basic questions like whether an investment contract requires a contract. His evasions are deafening and damning. pic.twitter.com/EJcZEHiKGL
— Rep. Ritchie Torres (@RepRitchie) September 27, 2023

“Suppose I was to purchase a Pokemon card. Would doing so constitute a security transaction?”

Gensler responded — “I don’t know what the context is” — before eventually concluding it isn’t a security if it is purchased in a store. Torres then asked:

“If I were to purchase a tokenized Pokemon card on a digital exchange via a blockchain, is that a security transaction?”

“I’d have to know more,” replied Gensler.

Gensler then explained that it’s when the investing public can anticipate profits based upon the efforts of others — that’s the core of the Howey Test. Representative Torres called Gensler's "evasions" as "deafening and damning."

A sign of defiance

Meanwhile, among the back-and-forth cross-examinations between Gensler and U.S. Representatives, eagle-eyed observers noticed a Coinbase “Stand With Crypto” logo behind the SEC Chair.

BREAKING: Coinbase Stand with Crypto logo displayed at Gary Gensler hearing pic.twitter.com/IAwqyDEQea
— Miss Teen Crypto (@missteencrypto) September 27, 2023

The Coinbase-led initiative is a 14-month-long campaign that launched in August. It aims to push for cryptocurrency legislation in the U.S.

Coinbase also ran a “Stand with Crypto Day,” which took place in Washington, D.C. on Sept. 27 to advocate for better cryptocurrency innovation and policy.

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Senators slam bank execs for blaming collapses on crypto, pocketing millions

May 17, 2023 Coin Telegraph

Coin Telegraph

Senator Lummis noted that Signature Bank’s Scott Shay mentioned digital assets 10 times in his testimony about the bank’s collapse.

A former Signature Bank executive has been slammed for seemingly trying to place the blame for his bank’s collapse on crypto while purportedly being able to pocket millions in bonuses and stock options.

During a Senate Banking Committee hearing on May 16, United States Senator Cynthia Lummis lashed out at Scott Shay, the former chairman of the now-defunct bank, in relation to his prepared statement on what led to his bank's collapse.

In his testimony, Shay noted the bank began accepting deposits from businesses in the digital asset sector in 2018 and then “significantly” reduced its digital asset deposits in 2022 as the industry experienced volatility.

He said his bank was seized by regulators after “a bank with strong ties to the digital asset sector” fell, which then led to $16 billion being withdrawn from Signature.

“It looks like there has been a lot of deflection of blame onto those particular depositors that deal in digital assets and onto regulators, but you haven’t accepted any blame yourself,” Lummis said.

Shay, however, denied pointing the finger at digital assets during the Senate hearing.

“You use the term 10 times during your testimony,” responded Lummis.

'Keeping millions'

During another part of the hearing, Senator Elizabeth Warren blasted Silicon Valley Bank (SVB) CEO Gregory Pecker and Signature Bank’s Shay for allegedly “keeping millions after recklessly crashing banks.”

“Right now, the law says that people like Mr. Becker and Mr. Shay [...] can pay themselves tens of millions of dollars in bonuses and stock options, and when the banks blow up, Mr. Becker and Mr. Shay get to keep all the money. And that is just plain wrong.”

“If we don't fix it, every CEO for these multibillion-dollar banks will keep right on loading up on risks and blowing up banks, and everybody else is going to have to pay for it.”

Warren noted that she is working within a bipartisan group in the Banking Committee to introduce a bill that can claw back “these crazy paychecks.”

Cointelegraph contacted Shay and Becker for comment but did not receive an immediate response.

In April, Adrienne Harris, superintendent of the New York Department of Financial Services (NYDFS) reportedly said it was “ludicrous” that one could blame crypto for Signature Banks collapse.

During a Chainalysis Links conference in New York City, she said the events leading up to the failure of Signature were instead a “new-fashioned bank run.”

The NYDFS took control of Signature Bank on March 12, claiming it was protecting the U.S. economy from “system risk.” The bank was the latest failure following the collapse of the crypto-friendly Silvergate Bank and SVB.

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Video of SEC chair praising Algorand resurfaces after recently deeming it a security

April 18, 2023 Coin Telegraph

Adam Cochran

Members of the crypto community have called out the SEC Chairman for “shilling” Algorand.

A four-year-old video of United States Securities an Exchange Commission (SEC) chair Gary Genser giving praise to smart contract platform Algorand (ALGO) is circulating on Twitter following the SEC declaring ALGO is an unregistered security.

In the video, Gensler referred to Algorand as a “great technology” while he was contemplating whether a “high performance” smart contract network would be capable of integrating an Uber or Lyft-like application on its platform.

ALGO is one of six tokens that Gensler claimed was an unregistered security in the SEC’s lawsuit against crypto trading platform Bittrex on April 17 that took issue with the Algorand Foundation's initial coin offering (ICO) of ALGO in June 2019.

Cryptocurrency researcher Mason Versluis was one of the first to highlight the video in an April 17 tweet criticizing Gensler for “shilling” ALGO, with others calling out the SEC chair for his apparent hypocrisy.

Gary Gensler was SHILLING $ALGO and now he’s trying to call it a security.

This dude is all over the place, and he’s gotta go ➡️ pic.twitter.com/JmpL9xAZhq
— MASON VERSLUIS (@MasonVersluis) April 17, 2023

Gensler’s praise of Algorand was heard by an audience at a Massachusetts Institute of Technology (MIT) “Fintech Beyond Crisis” conference held on April 25, 2019.

Gensler worked as a Professor of Global Economics and Management at MIT prior to becoming the SEC’s chair, he acknowledged former MIT colleague and Algorand founder Silvio Micali in the speech — who appeared to be in the crowd.

The video sparked Cinneamhain Ventures partner Adam Cochran to question the long-standing advice from Gensler for crypto firms to register with the regulator.

6/18

Surely if there is a path to register, a world renown MIT professor who personally knows the Chairman of the SEC can figure it out, or pick up the phone and call the Chairman...
— Adam Cochran (adamscochran.eth) (@adamscochran) April 17, 2023

"Surely if there is a path to register, a world renown MIT professor who personally knows the Chairman of the SEC can figure it out," Cochran tweeted on April 17.

Fox Business reporter Eleanor Terrett expects Gensler to be questioned over his Algorand comments in his upcoming testimony before the U.S. House Committee on Financial Services on April 18.

Other critics choose to mock the situation at hand, highlighting the price decline of ALGO which has seen a 93.8% decline since its launch according to CoinGecko data.

If you bought $100 of Algorand when Gensler told you they could build Uber on it you would now have $5
— db (@tier10k) April 17, 2023

It should be noted that ALGO didn't hit the market until late June 2019, two months after Gensler's speech.

Gensler stated in an April 17 tweet that it has been an “honor” to work at the SEC over the last two years and chose to highlight the 1,500 enforcement actions the regulator has undertaken since he's been at the helm.

Serving at the @SECGov for two years has been an honor.

We’ve filed 1,500 enforcement actions & overseen tens of thousands of registrants.

We’ve proposed rules to make our markets more efficient, competitive, transparent, resilient—and worthy of the public’s trust.

More
— Gary Gensler (@GaryGensler) April 17, 2023

Gensler was sworn into office as SEC chair on April 17, 2021, after U.S. President Joe Biden’s nomination of Gensler was confirmed by the Senate on April 14, 2021.

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