Why The SBF Indictment Could Be The Biggest Legal Story of the Year

Keith
4 min readDec 14, 2022

It’s been a big year for legal stories, and next year portends to be a bigger one. With this year nearly over we have seen the fall of Roe v. Wade, and the political earthquakes resulting. We have seen hundreds of trials and convictions related to January 6th, to include trials for mass sedition resulting in the first multiple convictions for that crime in decades. The resort home of the former President of the United States was subject to a search warrant with hundreds of stolen highly classified documents found. A special counsel has been appointed to investigate and potentially prosecute the former President for that, and potentially charge him and scores of other high level figures around him, for election related crimes.

The arrest of a young crypto-entrepreneur on sweeping fraud charges may seem weak compared to all that, but hear me out. The ramifications on our political system could be as broad as the Special Counsel’s investigation. This case may upend the balance of power in Congress, to include Democrats control of the Senate.

Sam Bankman-Fried (SBF) is a 30 year old who used crypto-currency investment to amass a vast fortune in a couple of years, who then lost that fortune in a couple of months. At one point earlier this year his net worth was estimated to be $26 billion. He is now regarded as insolvent, bankrupt.

On Monday, December 12, he was arrested at his home in the Bahamas. Yesterday the DOJ released an eight count indictment charging him with wide ranging criminal fraud. A parallel civil complaint filed by the SEC details the financial fraud allegations.

Basically Bankman-Fried created two companies. The first, FTX, was a crypto-trading company that he assured investors operated under rigorous and sound financial/ethical rules to protect investors from loss. Amongst these assurances was that investors money was kept in the safely invested confines of FTX. In that Bankman-Fried lied. He created another company called Alameda Research that was a much more speculative cypto-hedge fund that invested in high risk ventures, engaged in lavish real estate purchases, and (the important part) made large political donations. Bankman-Fried had Alameda “borrow” so much from FTX that when Alameda went bankrupt so did FTX. Investors in FTX lost basically everything.

The criminal complaint against Sam Bankman-Fried presents eight counts of alleged crimes including an array of financial fraud and money laundering charges. However, it is the 8th count, presented on page 10, that while arguably the most minor charge against him could be the most impactful on American politics.

That charge is for conspiracies to defraud the United States in violation 18 U.S.C. § 371. While Bankman-Fried is the only person charged so far, a conspiracy obviously requires other people. The indictment describes those as yet unnamed coconspirators as “others known and unknown” to the grand jury.

I have described what is meant by a conspiracy to defraud the United States elsewhere. I have also noted that a federal judge has already determined that it is “more likely than not” that Trump himself violated this statute. A conspiracy to defraud the United States does not require a conspiracy to cause financial loss to the government. It requires only a conspiracy to interfere with a legitimate government function. In this case the indictment alleges that Sam Bankman-Fried, along with others known and unknown, engaged in a conspiracy to frustrate campaign finance law. In the words of the indictment:

“the defendant, and others known and unknown, would and did defraud the United States, and an agency thereof, by impairing, obstructing, and defeating the lawful functions of a department and agency of the United States through deceitful and dishonest means, to wit, the Federal Election Commission’s function to administer federal law concerning source and amount restrictions in federal elections, including the prohibitions applicable to corporate contributions and conduit contributions.”

To summarize, Sam Bankman-Fried conspired with others to violate campaign finance law. Those others, naturally, include those receiving the illegal donations. How many that turns out to be, and who it turns out to be, may well turn Congress on its head.

Sam Bankman-Fried is a young man, in very big trouble, charged with very serious crimes that could put him in prison for a very long time. He will likely seek to reduce that time as much as he can. He will likely strike a plea agreement that requires him to fully cooperate with the investigation. The ramifications of that could be staggering.

All those politician recipients of illegal donations who are currently in the “others unknown” category will become known, and potential targets themselves.

Republicans obviously feel that will mostly shake out against Democrats, and they might. Bankman-Fried’s history is basically as a liberal, Berkley, nerd. Fox News and the Wall Street Journal disclosed $40 million in donations from SBF that was mostly to Democrats.

Or it may be more equal. Bankman-Fried stated in an interview that he gave a roughly equal amount to Republicans. In his press conference announcing SBF’s arrest, Southern District of New York Attorney General Damian Williams emphasized that the donations went to “both Democrats and Republicans.” Williams stated these “dirty money” donations were “used in service of Bankman-Fried’s desire to buy bipartisan influence and impact the direction of public policy in Washington.”

Williams also urged any others involved in wrong doing to “come see us before we come see you.”

I believe a desperate Sam Bankman-Fried will likely flip and that his cooperation will expose all his coconspirators. Coconspirators that will include members of Congress of all political stripes. It could include dozens of members of Congress. Depending on how it falls out the investigation could threaten Democrats narrow lead in the Senate, and/or Republicans narrow lead in the House.

That is why I suggest it may be the biggest legal story of the year.

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Keith

Retired lawyer & Army vet in The Villages of Florida. Lifelong: Republican (pre-Trump), Constitution buff, science nerd & dog lover. Twitter: @KeithDB80