Freaky fast

Gm, everyone. Life comes at you fast in crypto, and apparently the US government has taken notice. So today? We’re taking a look at how the US government was able to put together a case against SBF so quickly.

—Vincent

SBF Struck By DOJ Lightning

Here’s the thing about white collar crime: It takes a while to prosecute.

For example, it took more than two years for prosecutors to build a case against Enron executives after the company’s collapse. So why was the Department of Justice able to move so quickly against Sam Bankman-Fried, arresting him about a month after FTX declared bankruptcy?

Let's explore the reasons.

Reason No. 1: It seems that despite the massive scale of SBF’s fraud, it wasn’t a particularly sophisticated scheme.

“Enron was a very different company,” FTX’s new CEO John Ray III told Congress. “Crimes that were committed there were highly orchestrated financial machinations by highly sophisticated people to keep transactions off balance sheets.”

FTX on the other hand wasn’t trying to keep anything off the books—a huge part of its scheme was revealed by one look at Alameda’s balance sheet.

Reason No. 2: Regulators have gotten smarter. What we mean:

• Having an experienced fixer-upper at the helm of a post-bankruptcy FTX—new CEO Ray oversaw the winding down of Enron—helped prosecutors to bring charges against FTX’s former leader.

• The DOJ’s crypto team has also been following complex cases that came out of the Silk Road bust for years.

Reason No. 3: SBF’s media blitz probably incriminated him. After the bankruptcy, SBF granted interviews to dozens of journalists and crypto personalities. During this so-called apology tour, SBF publicly admitted details about how power at FTX was consolidated in the hands of a few executives who all lived together in the Bahamas.

Reason No. 4: While it's not known for speed, the DOJ has some experience moving quickly against white collar criminals, argued former federal prosecutors who now teach at NYU. Consider the DOJ’s charges against one of the largest US cable companies, Adelphia Communications Corp., only a month after the company filed for bankruptcy.

Because SBF posed a significant flight risk and was in a country that had an extradition treaty with the US, officials put the pedal to the proverbial metal.

Reason No. 5: The government kept things simple in its indictment of SBF.

“Although this is an extremely high profile case, the SDNY indictment is a no-nonsense, no-frills document,” wrote Jaimie Nawaday, a former federal prosecutor in the civil and criminal divisions of the Southern District of New York.

“There are no novel or creative theories here that could come under attack on an eventual appeal. The government is already facing a course correction on its expansive wire fraud theories based on two of its criminal cases pending before the Supreme Court, so what we see here is a return to classic theories of fraud.”

Looking ahead: The DOJ also said it isn’t done bringing charges. This likely means that the US has plans to go after other executives involved in the FTX empire. But Alameda CEO Caroline Ellison and former FTX executives Gary Wang and Nishad Singh wisely kept quiet and lawyered up.

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And that’s what you need on your radar today in crypto. Reply and let us know what charges you think are coming next. See you on Tuesday!