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Apologies if this is the wrong group for this question. I did not post it in the the law group because rather than the legal argument I am interested in the investigation and the prosecution, if I understood correctly crime prosecution is heavily politicised in the US.

The FTX scandal is something too big to be the work of a single person. There must be a big network of accomplices behind. However as of now there is only one person on trial.

Why was nobody else prosecuted? Did the prosecutors say something about it?

xyldke
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FluidCode
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  • It will always be difficult to prove individual guilt. Typically the head of an organization is accused because he/she takes responsibility for all stuff that took place in the organization, I guess. See for a similar example Dieselgate where the company was fined (impossible here FTX is bankrupt) and some executives (3-4) were accused and the court cases are still running (in revision). – NoDataDumpNoContribution Oct 05 '23 at 11:13
  • @NoDataDumpNoContribution It cannot be a scam orchestrated only within FTX there must be complicity also among the managers of the venture fund managers who praised the company for years and there must be complicity by the financial controllers. By the way I am considering another interesting example. The Madhoff scandal. – FluidCode Oct 05 '23 at 11:22
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    Worth mentioning that Caroline Ellison & Gary Wang were also charged, but are not on trial because they pled guilty? – CDJB Oct 05 '23 at 11:27
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    Maybe you imagine something like the Enron scandal trials with dozens of convictions? But that also took many years. It might still come here with FTX. – NoDataDumpNoContribution Oct 05 '23 at 11:50
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    @CDJB Yes it is worth mentioning them. However they are closed associates, it does not say anything about the wider circle that was necessary to keep the scam going. Remember that FTX was so much overvalued by the financial world that Forbes estimated Bankman Fried wealth at $22.5 Billion. – FluidCode Oct 05 '23 at 11:59
  • This question is not about politics, at least until such point as political figure or regulations are involved. Regulations which, btw, were intended to be absent from crypto, that was a feature, not a bug. A feature which is thankfully getting rolled back. Attempts to frame this as a general conspiracy, outside of SBX and his plea-bargaining co-accused are not on target for this site, IMHO. Gullibility, greed and stupidity are a long standing features of many actors in financial circles but are not per se political in nature. – Italian Philosophers 4 Monica Oct 05 '23 at 15:48
  • @ItalianPhilosophers4Monica Gullibility and stupidity are the most common excuses used to hide malice. Especially in politics. – FluidCode Oct 05 '23 at 15:50
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    Unlike civil cases, criminal cases don't have to be brought against all responsible parties in one go, and often aren't. Here, three people were charged. Also, prosecutors aren't just supposed to throw s--t at the wall and see what sticks. You need a very solid case to justify bringing a criminal case. – ohwilleke Oct 05 '23 at 21:22
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    "... if I understood correctly crime prosecution is heavily politicised in the US." It isn't sufficiently politicised to prevent prosecutions of fraud and money laundering on this scale. FTX had attempted to obtain political support via campaign contributions, but once a case could be made for violation of campaign finance laws, the politicians who'd received the money went very quiet on the subject. – John Dallman Oct 05 '23 at 21:53

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Not sure what kind of answer you expect here. Fairly broad conspiracies in the financial world exist sometimes, see the famous LIBOR case that involved bankers talking to each other in order to "fix" rates etc.

But far more it's the case that there are bunch of gullible "experts" near the center of some bubble (be it a bubble based on some core fraud), experts who could only be convicted under some Soviet-like law standards ("undermining the national economy" and the like), which aren't part of the Western law codes. If you want some example of the latter (I mean gullible experts):

The Swiss bank Union Bancaire Privée explained that because of Madoff's huge volume as a broker-dealer, the bank believed he had a perceived edge on the market because his trades were timed well, suggesting they believed he was front running.

And from one of the related articles:

In April 2010, Judge Thomas Griesa, of the U.S. District Court for the Southern District of New York dismissed a lawsuit by Tremont Group investors against Tremont's auditor, KPMG, which charged that KPMG had failed to discover the fraud in its audits of Tremont and was therefore liable to the investor. Judge Griesa held that KPMG could not be sued, because there was no intent to deceive. He wrote: "Merely alleging that the auditor had access to the information by which it could have discovered the fraud is not sufficient."

I'm also reminded here that in the Enron scandal, their auditor [company] went out of business. As for conviction of said auditor, it was unanimously overturned by SCOTUS...

Rehnquist's opinion also expressed grave skepticism at the government's definition of "corrupt persuasion" – persuasion with an improper purpose even without knowing an act is unlawful. "Only persons conscious of wrongdoing can be said to 'knowingly corruptly persuade'", he wrote.

I personally don't know a lot about the FTX case to comment in detail on that. But from what I read it's [allegedly] much closer to a Madoff type of swindle than something else. I.e. one guy who moved his customers' money to his own accounts, or at least to some accounts they didn't agree to beforehand ("Alameda Research").

According to FT's summary (of last year):

The business [FTX] was run more like a feudal court than a modern company, according to the employees. Decision-making and knowledge of the company’s affairs was restricted to Bankman-Fried and a handful of close friends in their late 20s, many of whom lived together in a luxury penthouse in the Bahamas. Loyalty was prioritised above all else.

The initial verdict from John Ray III, the veteran insolvency professional brought in to run the business, was devastating. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” said Ray, who previously helped wind down Enron, the failed energy group.

But hey, FTX was a company nominally based in Bahamas after all. Yeah, it is more questionable why Silvergate, a US bank, was allowed to have FTX as its main customer with little to no questions asked about the soundness of that. But the US is well known for not regulating smaller banks much.

the gods from engineering
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    "Gullible experts?" SEC regulators, banking regulators, financial accounting firms, venture fund experts who did the due diligence. All of them gullible experts? Not credible. – FluidCode Oct 05 '23 at 14:14
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    The issue is the venture fund experts didn't do due diligence. They simply saw the money made with crypto by other firms, and jumped on board out of fear of missing out. For the regulators, keep in mind crypto is both completely unregulated, (the SEC is currently trying to establish the ability to regulate it), and the main headquarters of the company weren't on US soil, further limiting ability to regulate. – kenod Oct 05 '23 at 14:26
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    @kenod: that sounds like an answer in itself. I personally don't know a lot about the FTX case to comment. But from what I read it's [allegedly] much closer to a Madoff type of swindle than something else. I.e. one guy who moved his customer's money to his own accounts, or at least to some accounts they didn't agree to beforehand ("Alameda Research"). – the gods from engineering Oct 05 '23 at 14:31
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    Looking to write one, but need to find proper phrasing and sources. But yeah, hiding something like this doesn't actually require many people, especially if your bookkeeping, communication and structure is such a mess as FTX was. – kenod Oct 05 '23 at 14:35
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    @kenod I read on the media the story that the venture funds invested into the company without making due diligence. If it was done by mistake or on purpose should be part of the criminal investigation. We cannot take for granted lame excuses published on the media. – FluidCode Oct 05 '23 at 14:37
  • I'd say less mistake and more gross incompetence. That said, it should also be noted that at that point crypto and tech companies were seen as massive money makers, so venture capital firms tended to use somewhat of a shotgun approach to funding, with the idea that most would fail, but the few successes would give massive profits, so it was better to get in early and fund more duds than wait to do due diligence and get left behind. – kenod Oct 05 '23 at 14:41
  • @FluidCode: as I read in FT, it was crypto venture funds which mostly invested in FTX. Alas, anyone with a smartphone can get on board these nowadays. (As well as "meme stocks", I might add.) – the gods from engineering Oct 05 '23 at 15:12