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Comment by chollida1 | Hacker News Reader

Well most fraud trials involve a person stealing directly from their company.

Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.

That way he could honestly say he personally has no money left.

That atleast makes it harder for FTX to claw back that money.

One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.

I wonder how SBF's lawyers have done thier diligence in this case and satisified themselves that this wont' get them into trouble with the state bar.

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Aren't tax free gifts capped at $14,000.00 per year?

Edit: Er, I guess it's $16,000.00 without needing to report it, and then anything above that can be offset against a $12 ish million lifetime exclusion.

https://money.usnews.com/money/personal-finance/taxes/articl...

The gift tax thing seems like a distraction. He would have needed to file a gift tax return for giving $10 million, but no taxes would be due. But he could just as easily have given $100 million, filed the return, and paid a large gift tax—he had plenty of cash floating around back then.

I guess what I’m saying is, it wasn’t a way to hide the gift, because it still triggered the need for a gift tax return filing.

Yeah that's how I read it. He gave [possibly ill-gotten] money to his parents. If tax was involved, then the treasury might need to give that fraction back to the bankruptcy trustee. If not, great, then it's just the family that needs to disclose to the trustee.

You need to report a gift over $14k but you don't owe until much higher limits. Same as how people who make very little money have to report income even if it's lower than the lowest tax bracket.

Also, as a reminder, the gifter pays the tax and not the person who received the gift. If someone gifts you an illiquid asset, you aren't forced to go into debt to pay a tax. But the gifter has to figure things out on their end.

This is correct. The tax thresholds are of the order of 12mm

What does the gifter pay tax on? -$14k?

Gifts larger than 14k essentially count against your eventual estate tax exclusion.

If you give away $12.06 million on the day before you die (which would be tax-free), then the entirety of your estate is taxed at 40% (both 2022 numbers). If you die without having made any gifts exceeding $14k, then the first $12.06 million of your estate is not taxed at all, and the remainder is taxed at 40%

Not investing or financial advice. If your estate will incur said tax, be giving up to your annual exclusion till death.

The exclusion amount is also per recipient.

It's sort of how you handle assisted living costs. Everything's cheaper if you've distributed your assets beforehand.

It's also why means-testing an end of life program that only looks back X number of years is inevitably not actually testing means.

Every rich person has a guy who will tell them how to avoid it legally. Every poor person never had any money in the first place. It only ever hits middle class and upper-low class people who saved money for some of their life and were never told that they had to disburse their assets at X-1 years before they planned to need care and get hit with a huge penalty to their assistance when they inevitably have to move some of their cash around to pay for some of their expensive care.

If you don't want rich people getting public funds for things, you have to be able to look beyond their money games, which is hard, expensive, often purposely sandbagged, and not usually successful.

So just tax them their whole life instead, and let them get back some of what they put in with every other person.

I would go a step further and call for an end to all means testing for anything government funded.

I am relatively poor and this will help me because even though I am poor I still have to prove I am poor which is burdensome.

This isn't an income or gains tax. Not all taxes are about money gained. For example, sales tax when you pay $100 isn't negative $8, it's $8.

When gifting large amounts of money, the IRS gets more money on top (so, if you're super rich, don't gift ALL off your money, and leave some aside for tax season).

It says so in the article, but here's some corroboration

https://www.schwab.com/learn/story/estate-tax-and-lifetime-g...

EDIT: read a little further, guess the 11-12 million exemption only lasts until 2025, so if you can use, do it fast.

if the gift isn’t cash Alameda can determine the value of the gift mor or less.

>That atleast makes it harder for FTX to claw back that money.

The 'Madoff Recovery Initiative' was incredibly aggressive in going after all of Madoff's family and acquaintances. SBF's family and acquaintances are going to be fighting lawsuits for years and will lose millions.

>and will lose millions.

millions they arguably shouldn't have had in the first place, since they were proceeds of crime.

>> Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.

I am pretty sure it's the source of the money that matters more (legal vs. illegal) than whether the accounting tricks are legally sound.

What you're saying sounds like "at least he wasn't a complete numb-nuts", but that's not much of an "at least" in this scenario.

I am pretty sure the courts will be looking for an "at least he wasn't stealing from his customers".

At least, that's the sane hope.

Also if the father is “in on it”, then this would also lead to an additional conspiracy charge that adds him to the cabal.

> One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.

I don't think this is true in the US. Lawyers do not have any obligations under the Bank Secrecy Act or laws that would require this and there are other things like the text below that would make prosecuting a lawyer for this very difficult,

https://www.law.cornell.edu/uscode/text/18/1957

> (1)the term “monetary transaction” means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term *does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution;*

https://www.justice.gov/jm/jm-9-105000-money-laundering

> Because the Department firmly believes that attorneys representing clients in criminal matters must not be hampered in their ability to effectively and ethically represent their clients within the bounds of the law, the Department, as a matter of policy, will not prosecute attorneys under § 1957 based upon the receipt of property constituting bona fide fees for the legitimate representation in a criminal matter, except if (1) *there is proof beyond a reasonable doubt that the attorney had actual knowledge of the illegal origin of the specific property received (prosecution is not permitted if the only proof of knowledge is evidence of willful blindness);* and (2) such evidence does not consist of (a) confidential communications made by the client preliminary to and with regard to undertaking representation in the criminal matter; or (b) confidential communications made during the course of representation in the criminal matter; or (c) other information obtained by the attorney during the course of the representation and in furtherance of the obligation to effectively represent the client.

I appreciate your response and this is what I also countered with, though not as nicely cited:)

this is a good response

https://www.moneylaunderingnews.com/2018/09/use-of-tainted-a...

Turns out its not black and white as people expect

- lawyers fees can be clawed back due to asset forfeiture.

> Federal forfeiture laws, on the other hand, pose a different kind of risk for lawyers — one that the Safe Harbor Provision does not protect against. Forfeiture laws are premised, in part, on the notion that tainted assets belong to the government as of the date the underlying offense was committed

- while its true that courts have decided that taking all of a persons money so they can't pay for their defense has been ruled illegal by the courts the amount of money that lawyers think the client has can be significantly reduced by the courts. So if SBF has say $20M now, the courts can claw back 75% of that leaving the client with far less to pay than the lawyers originally though.

Or put another way, you are entitled to a defense, you are not entitled to have unlimited funds to pay for your defense.

Also given that the money is coming from SBF' dad( a third party) and not SBF this seems to be relevant.

> Moreover, the Fourth Circuit has held in a divided decision that the Safe Harbor Provision does not apply in instances whereupon an attorney “receives and deposits” tainted funds from a third-party payer.

Yes that's true, in fact they can freeze some of your untainted money pending trial in order to preserve it for forfeiture. I just don't think the lawyer would get in trouble for it and in the worst case would have to give back some of the money. If you read the Blair decision it is way different than this case because he was laundering money on behalf of his narcotics trafficking clients through real estate.

“I’ll give my ill gotten gains to someone who technically wasn’t involved (until they accepted my money)” couldn’t possibly be a new trick. (Hypothetically that is, if SBF actually did a crime; I’m not following the case).

> One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.

If that's true, it seems a bit ridiculous. SBF is pleading not guilty. Are his lawyers supposed to do their own little investigation to figure out whether their client is actually guilty?

> Are his lawyers supposed to do their own little investigation to figure out whether their client is actually guilty?

Umm, yes? Not because of the money thing, but in order to do their job properly.

I'd think that if they were doing their job properly, it would be pretty clear pretty quickly whether or not their client is guilty. And whether or not their client is guilty is important for them to know, because it will definitely affect how they proceed with defending their client.

Well as I had it explained to me.

Run the following thought experiment.

You are a lawyer. Your client is accused of robbing a bank. The bank has the serial numbers of the bills taken. Your client pays you in cash and the serial numbers match the stolen ones.

if you agree that you are being paid by the proceeds of a crime, then congrats you agree with the law and now all you are figuring out is where the line is.

Turns out its somewhere between a forensic audit of your client and 100% certainty that you're being paid with stolen funds.

The government or prosecution claiming the funds you're being paid with are from the proceeds of crime is well within the ethical and legal bounds that lawyers are held to.

Like many issues when it comes to professionals, there is often a burden on the professional to make sure they are acting ethically. Engineers can't build a building to a clients spec if it would be dangerous. Doctors have a duty of care to not harm a patient even if the patient wants to be harmed and lawyers have a duty of care to know the origins of the funds paying them.

That's one of the burdens of being a professional

Courts are more than happy to adjudicate if there is a gray area.

Also if that doesn't convince you then remember, people can be forced to hand back assets that were stolen even if the owner had no way of knowing ti was stolen. The lawyers don't want to spend all that time defending SBF and be paid with stolen funds, just to have the courts come and tell them to pay back the money as it never belonged to SBF at all.

It's in their own best interests to know and vet where the money came from.

In the sense of whether their client has committed the underlying acts they are accused of, yes, this is something a lawyer would definitely want to know, and try to find out, as it effects what legal defenses can actually work vs. are likely to be swiftly rebutted.

(I realize there a much broader claims being made in this thread, like about where the payment money is bad and what obligations that prompts. I'm not attempting to address issues such as those, just the narrower topic above.)

> Are his lawyers supposed to do their own little investigation to figure out whether their client is actually guilty?

Actually yes, they are supposed to do that. Not because of money, but as they are preparing the defense.

That's besides the point though. Consider the legal principle of "innocent until proven guilty" - a fundamental pillar of the justice system. It is not the job of a lawyer to determine whether a defendant is guilty or innocent; they are only responsible for presenting evidence and arguments to support their client's case. Ultimately, it is the judge or jury who must decide whether to convict or acquit. The whole process is designed to determine guilt. Requiring a lawyer to know whether their client is guilty in advance amounts to asking them to predict the outcome of that process, to foresee the future.

PS: I am not trying to defend SBF here and I hope that that any money linked to Alameda/FTX, including the money he sent to friends and family, is clawed back. But that's a separate issue.

> Consider the legal principle of "innocent until proven guilty" - a fundamental pillar of the justice system.

It's "innocent until proven guilty in a court of law". Not necessarily in your lawyer's office.

> Requiring a lawyer to know whether their client is guilty in advance amounts to asking them to predict the outcome of that process, to foresee the future.

No, that's a different thing. Requiring a lawyer to know the facts is not requiring the lawyer to know how the court will rule in the case.

They can form an opinion on whether their client is guilty. But they can't know whether they are correct until the verdict.

Well, sure they can, unless you mean "guilty" in the sense of a court finding them guilty rather than in the sense that they actually committed the crime.

>Consider the legal principle of "innocent until proven guilty" - a fundamental pillar of the justice system.

Let's not put the cart before the horse. It's the law firms obligations to make sure they aren't participating in a crime, it has nothing to do with assuming someone's guilt.

So tell me: if the lawyers get paid by SBF, are they participating in a crime? Doesn't the answer depend on whether SBF is guilty or not?

If they're knowingly being paid from the proceeds of a crime then yes, they're participating in the crime.

That's different from "has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime" though. If their client claims they're innocent, would they be clear because they don't know that their client is guilty?

No, because "knowingly" isn't an element.

If he's convicted, yeah. Based on the facts, they are getting paid by money he stole himself and directed to his family.

the issue might be not the lawyers getting into trouble necessarily but for those fees to be confiscated. Why would you as a lawyer sign up to do all this work when there is a chance your fees will evaporate?

Indeed. If that's what OP meant, it makes a lot more sense.

Sorry, do you think ignorance is an excuse for a crime? I don't believe there is an intent requirement, so their mental state at the time of receiving the money is of no consequence.

Yes, it ought to be. Otherwise, you would be taking a big gamble anytime you accepted money from strangers. It would be quite impractical. Also, it goes beyond mere ignorance, it's unknowable. SBF's lawyers will find out whether he is guilty on the day that the verdict is pronounced.

>Yes, it ought to be.

Lol, since when? Oh, your honor, I didn't know murder was BAD!

> Otherwise, you would be taking a big gamble anytime you accepted money from strangers.

Really? Hasn't been an issue for me at all. Are you sure it's that big of a gamble? Maybe you should think about the kind of people you are accepting money from?

> It would be quite impractical.

As I said, hasn't been a problem for me. And I'm an attorney too! I get paid!

> Also, it goes beyond mere ignorance, it's unknowable. SBF's lawyers will find out whether he is guilty on the day that the verdict is pronounced.

This is literally the opposite of what you described. They are lawyers with expertise in this exact kind of crime and they are well aware of the risk presented by taking money from him. They know he stole money. They know he stole money and saved it for himself.

I was not talking about murder, I was talking about receiving money. It has to be the least enforced law ever... Because the chances of breaking that law as a phone company, or as a taxi driver are close to 100%.

It's a bit sad that you are an attorney and don't seem to believe in due process. If his lawyers "know" that he is guilty, I hope for his sake that he finds lawyers that don't "know" it, given that he is pleading not guilty.

>I was not talking about murder, I was talking about receiving money.

Well, when should it be an excuse? You didn't really seem to offer any bounds, and I put it as "a crime".

>It has to be the least enforced law ever... Because the chances of breaking that law as a phone company, or as a taxi driver are close to 100%.

I don't think the law is really targeting taxi companies or phone companies. It's targeting people who abet criminals by taking their money in exchange for services or goods.

>It's a bit sad that you are an attorney and don't seem to believe in due process.

It's not a surprise that you think that considering you clearly have no idea what due process is.

>If his lawyers "know" that he is guilty, I hope for his sake that he finds lawyers that don't "know" it, given that he is pleading not guilty.

Geez, I can't state it enough for you, huh? "Knowledge" is not an element of the crime. So everytime you say they "know" something, it's completely irrelevant to the issue and only reflects your willful misunderstanding of this entire conversation.

> Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.

Isn't this worse for him in the long run if he's found guilty though? Words like "structuring", "posturing", "evasion" come to mind...

> Words like "structuring"

As much as I want to see that scammer and his family rot in jail , as much as I find "structuring" totally unfair.

If you set the limit to, say "$1 K / day" and then someone does "$1 K / day, everyday", it's not doing anything wrong. Instead of inventing the concept of "structuring", instead write the actual limits more clearly: "$1 K / day, $10 K / year max" (for example). Then it's clear that the limit is $1 K / day max and that you can only do it up to 10 times a year.

For otherwise it's just one of the oh-so-many arbitrary rules invented so that even honest people may be, unknowingly, doing something illegal.

Laws against structuring makes me think of this: "The more numerous the laws, the more corrupt the state".

The state should make the law clear or go fuck itself.

I’m sure Stanford considers this ethical behavior by his father.

Ah, The Floor Is Lava defense.

Stealing money then gifting to yourself via a trusted straw man? Now that's effective altruism!

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