3 - 5 minute read
Sam Bankman-Fried (SBF), former CEO of crypto exchange FTX, has seen District Judge Ronnie Abrams step down from his ongoing legal proceedings due to a potential conflict of interest. In a filing on December 23, Judge Abrams revealed that her husband, Greg Andres, is a partner at law firm Davis Polk & Wardwell, which advised FTX in 2021. Abrams also stated that the firm represented parties that may be adverse to FTX and SBF in other legal proceedings, though she clarified that Andres had no involvement in these representations. In order to avoid any possible conflict, or the appearance of one, Judge Abrams has removed herself from the case.
The legal proceedings around SBF arose following the collapse of FTX in November 2022, which sparked a crisis of confidence in the crypto industry and raised concerns about the safety of customer funds. Rumors of problems at the exchange circulated after rival Binance refused to bail it out, citing “corporate due diligence” and reports of “mishandled customer funds.” This led to a run on FTX, with investors trying to withdraw their money, which in turn resulted in the company’s insolvency and bankruptcy filing. It was later revealed that at least $8 billion of customers’ money had disappeared.
Funny how SBF is able to post the $250M bail not long after saying he only had $100k.— Benjamin Cowen (@intocryptoverse) December 22, 2022
So he probably is using stolen customer deposits to stay out of jail.
In response to the collapse of FTX, the US Justice Department launched an investigation, leading to former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang pleading guilty to federal fraud charges related to the exchange’s collapse. The US Securities and Exchange Commission (SEC) has also charged Ellison and Wang for their roles in a “multiyear scheme to defraud equity investors in FTX,” and is investigating other potential securities law violations in relation to the company.
SBF was arrested and extradited to the US in December 2022, where he was charged with conspiracy to commit securities fraud, wire fraud, and money laundering. In a December 22 hearing, SBF was released on a $250 million bail bond based on a written promise to appear for future court appearances and not engage in illegal activity. The bail raised questions, as SBF had previously claimed to possess less than $100,000 amid bankruptcy filings. Despite this, the personal recognizance bail allowed SBF to leave prison without making any actual payment, with the bail being approved against a collateral property owned by his parents, a relative, and a family friend.
The withdrawal of Judge Abrams from the SBF-FTX case removes any potential conflict of interest, as Andres continues to work as a partner at Davis Polk & Wardwell, the law firm that advised FTX in 2021. It remains to be seen how the case will proceed without Judge Abrams’ involvement.