Can you explain what makes this so clear?
2. BBG news article recently speculated some hot-shot lawyers have begun representing Caroline.
Maybe the Alameda execs are trying to say they just made irresponsible gambles (like a shitty Wall St investor) but SBF is the one who secretly covered the massive losses with FTX customer assets without telling the public and was responsible for the "dual accounting" issue where deposits were counted twice. Among all the other things that they did wrong.
Or maybe there was a more direct/overt conspiracy at play they both took part in and she snitched first.
The good news is we'll probably find out sooner than expected if the extradition gets challenged in court. We'll see exactly how altruistic SBF really is soon.
Maybe part of the urgency was also the planned congressional testimony.
Citation needed? I'm not a lawyer, but it seems plausible to me that SBF's public admissions of crimes, plus the full records of his company, are sufficient.
But this, like most of the thread, is all speculation. We’ll find out more in due course.
Bankruptcy procedings. Subpoenas. The standard ways the FBI gets records from regular companies run by people who aren't criminals and don't want to become one (the current CEO is a regular business person).
But either way, these things take more time than what has passed thus far. I’m not saying that a case couldn’t have been made without an internal informant — just that it happening so quickly makes me suspect that someone (who was high up) flipped.
They can be, but they don’t have to be, and the current management doesn’t seem interested in protecting SBF or the others formerly responsible for running the FTX network of companies.
I’m sure he was more truthful in private signal or telegram chats amongst executives
It probably reflects the inherent risk-aversion that comes with a gov lawyer job.
A more balanced tolerance to risk is often missing from much of gov policy making. Probably has a lot to do with people who care more about highly visible and immediate prosecutions to satisfy the public > balanced long-term justice. Politics selects for that. You see the same thing happen on social media where emotions reign king.
there are long term benefits to encouraging conspirators to defect early and often, even if you don't strictly require them in a given case.
I think it's often less about convenience and more about prosecutor's political antennas. Who wants to see the guy dead in jail, and who would be most upset at you if that happened.
Here’s the crazy thing. Maybe they pierce the veil and say the two companies acted as one, but hedge funds fail all the time. The fraud was SBF using FTX to prop up Alameda…
“Piercing the veil” is a term of art for holding shareholders accountable for corporate liabilities notwithstanding the civil liability shield usually provided by the corporate form.
Holding coconspirators accountable for their role in a criminal conspiracy doesn’t have a special name because it is routine rather than exceptional.
Piercing the veil broadly refers to removing limited liability protections because the individuals behaved in such a way (criminally) that they have forfeited their protections.
The most common people held to limited liability protections are shareholders in limited liability corporations (LLCs)
A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud, unless they committed gross negligence in allowing the fraud to continue.
To your point, there is not a snappy term for that specific phenomenon, because it is so rare, but piercing the veil 100% applies here because it refers to the “veil of limited liability”.
There is no “limited liability” for criminal sanction to which the term applies. There are criminal immunities, but finding something to be within an exception to one is not called “piercing the veil” in any context.
> A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud
“People other the person committing a wrong are not liable for the wrong” is not generally a “form of limited liability”; it is the basic rule of initial liability. An exception to that is respondeat superior in which a principle is responsible for his agents liability in a broad range of circumstances, and corporate limited liability is an exception to that, since the corporation could otherwise be seen as an agent for its shareholders.
Finding that someone committed a wrong related to a third-party wrong that makes them vicariously liable for that third-party wrong is not generally called “piercing the veil”.
And that’s all in civil liability, which is the only domain where “piercing the veil” applies at all.
> To your point, there is not a snappy term for that specific phenomenon, because it is so rare
No, again, charging co-conspirators in a criminal conspiracy, regardless of their other business relations to each other, isn’t “rare”, has nothing to do with “gross negligence”; it doesn’t have (another) snappy name because its central to the point of the crime of conspiracy.
Huh? My dude, she didn’t work for FTX.
If you’re saying that she in fact did (and was therefore a co-conspirator), then we agree that FTX was a sham corporation that acted on behalf of Alameda, but then why are we here?
Oh yeah, because you wanted to sound smart without fully understanding a situation; I guess I already knew that.
You're supposed to count everything twice in corresponding accounts. That's double-entry accounting.
The badly labeled @fiat account ... ? I am still in awe over that 11yo's soda stand spreadsheet.
But you have to look at the larger picture: The Federal prosectuion conviction rate is 95%. The Federal government is very good at getting prosectuions in cases they choose to prosecute. They tend to plea out cases that are riskier. A key tactic in doing this is they get one or more cooperating witnesses. That witness gets a better deal in exchange for their testimony that pretty much turns the case into a lock.
It's classic Prisoner's Dilemma. The first to take the deal is always the best off. Lawyers know it so if their clients are at risk, they'll tend to push their clients to be the one to take it. Ellison will most likely have direct knowlege of the situation and will be able to produce evidence such as emails and texts.
Importantly, she's not the main guy. It's SBF who opened up custodial assets to be used in that way (or so it seems). That's the primary offence here. It's a bit like how in a murder case the cooperating witness might be a driver or a witness but unlikely to be the actual shooter. They may get embroiled in a felony murder conviction otherwise thanks to the US-specific pecularity (and some, including myself, would call a miscarriage of justice) of felony murder but that's another story.
So Ellison fits the profile of an ideal cooperating witness, there's supporting circumstancial evidence and the fact that Federal prosecutors indicted SBF so quickly further suggests a cooperating witness with firsthand khowledge or they'd otherwise be mired in subpoenas for communications, conducting interviews and otherwise building a case.
A criminal indictment represents the end of the investigation, not the beginning. SDNY has already built their case to their satisfaction. People seem to think an arrest happens and the investigation continues. That's not how Federal prosecutions works.
SBF’s situation is different in that the game ends as soon as someone defects.
That's why underlings have strong incentives to defect, and defect quickly. (Defection is also rarely an option for the person at the top of the pyramid.)
Caroline's option to save Caroline regardless of what Sam does by testifying looks a lot better.
Consider the payoff matrix in this example, somewhat analogous to the case we're describing:
- Both defect -> both go to prison for life
- One defects, one cooperates -> the cooperating one goes to prison for life; the defector gets some minor punishment and otherwise goes free.
- Both cooperate -> both go free for a moment, spend some months or maybe even a few years living in fear, then with 95% chance go to prison for life. That's because the whole deal is about saving work for the Feds, but they will put in that work if needed, and come back with bullet-proof case.
There's hardly anything they can do to meaningfully increase their chances of surviving the "both cooperate" option, so the two prisoners will both try to defect.
This isn't necessarily the case. The Feds convict on 95% of the cases they decide to prosecute. Which means that they decide not to prosecute marginal cases.
It could be the case that there just isn't enough evidence to bury them.
But even if not, then have the prisoners multiply that 95% by whatever they believe is the chance Feds will eventually prosecute. Is it 50/50? That just gives them 52% chance of avoiding spending rest of their lives in prison, which is still not a good bet.
(Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.)
There is a third factor here, whether the prisoners can disappear before Feds go after them - I assumed they effectively can't, and/or it comes with sacrifices so big that it's not much different than prison.
Crucially, these particular prisoners have a very good idea of whether the Feds have enough evidence to go to trial (assuming the Feds get everything, which is probably prudent to assume). Especially with the advice of good council, which they apparently can afford.
> Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.
Which is mitigated by the advice of council. Of course, there is a chance that they are influenced too far in the opposite direction - their layers may be banking on raking in fees from going to trial.
That's the kicker though, and it's the lever the dilemma orchestrators (here, the Feds) have to force a result: smooth out any real-life considerations by making the payoff matrix more extreme. If the cost of failure is life in prison, "slightly increase" and "won't always work" isn't gonna cut it - they can practically guarantee the prisoners will make a specific choice.
https://www.amazon.com/Chickenshit-Club-Department-Prosecute...
That's oversimplified, especially when dealing with wide ranging investigations into complex issues, as the many indictments (including successive, either superceding or in different districts or, in some cases, both) indictments of the same party in the course of, for an obvious recent example, the Mueller investigation attest.
She was staying completely silent since the moment FTX collapsed while he was spilling the beans everywhere. She obviously cut a deal while he was parading on social media for god knows what reason instead of shutting his mouth. SBF is a complete moron who didn't understand how the party was already over for him, I put it on his upbringing given the kind of ideology his scholar parents preach at university, especially the bits about personal responsibility...
Matt Levine:
> “Sam Bankman-Fried Should Shut Up, Bernie Madoff’s Lawyer Says,” (...) perhaps it is one more case of us watching in real time as crypto re-learns the lessons of traditional finance. Maybe in six months all the busted crypto leaders will be saying “oh wow we should not have given all those interviews.”