US DOJ outlines stance on FTX deregulation

Against the backdrop of the start of the trial of FTX founder Sam Bankman-Fried, the U.S. Department of Justice issued a statement regarding his charitable and political donations, as well as regulation of the crypto industry.

Prosecutors rejected the defence’s arguments that FTX was not regulated in the United States, but complied with all applicable rules in the Bahamas—the jurisdiction of its registration.

They also rejected arguments that there were no provisions explicitly prohibiting crypto exchanges from using client deposits.

“The alleged absence of clearly applicable laws or regulations has no bearing on whether substantial violations were committed,” the prosecutors said.

According to law enforcement, the defendant violated industry-wide rules and unlawfully appropriated funds entrusted by users for his own use.

“The existence or absence of regulation has no bearing on the evidence of fraud charges,” the letter states.

The DOJ also noted that references to law-abiding behaviour in other spheres such as paying taxes or obeying traffic laws cannot serve as proof of innocence in deceiving investors.

Law enforcement did not object to presenting information about Bankman-Fried’s charitable donations during the trial. However, they insist that such testimony be given with the court’s approval to avoid misleading the jurors.

Regarding financial support for political campaigns by FTX and its CEO, prosecutors backed the court’s decision to deny a defence witness. They argued that the expert should have shown that such practice is legal. The DOJ does not intend to appeal this, but intends to prove that the funds were illegally used for these purposes.

As reported on the eve of the hearings, ForkLog has gathered the latest news from both the defence and the prosecution.