The arrest of former FTX CEO Sam Bankman-Fried (SBF) has provided U.S. government regulators with a way to “send a message” to the crypto industry, said a former prosecutor for the U.S. Justice Department’s Securities and Commodities Fraud unit.
Renato Mariotti told CoinDesk TV’s “First Mover” that Bankman-Fried’s media tour after the crypto exchange's failure may have contributed to his downfall, according to Mariotti. SBF was arrested in the Bahamas on Monday after the U.S. charged him with, among other things, wire fraud, conspiracy to commit money laundering and campaign finance violations.
“From the DOJ’s perspective, SBF was spreading misinformation and was creating a lack of confidence in the regulators to police the market,” he said about Bankman-Fried’s string of media appearances.
Mariotti, who is now a partner at international law firm Bryan Cave Leighton Paisner, added there was “speculation that regulators were going to let him off” without facing prosecution, in part because of his political ties to lawmakers. SBF had donated upwards of $40 million to various political campaigns, including $5.2 million to Joe Biden’s successful U.S. presidential campaign in 2020.
But with the collapse of FTX, Bankman-Fried, who faces eight criminal charges, has “definitely” soured crypto’s reputation. Now, “there’s definitely an energy in federal law enforcement right now in going after crypto,” Mariotti said.
Mariotti said it is likely Bankman-Fried will be used as an example for why the digital asset industry needs more oversight. He said it is unlikely there will be any crypto-friendly regulation in the immediate future. Instead, he said, the industry may find itself facing “a lot of enforcement actions” in the short term, particularly from the Securities and Exchange Commission (SEC).
“The [Biden] administration believes that the digital asset space is unregulated and thinks that [crypto firms] can get away with anything,” Mariotti said. That is why federal regulators are “eager to plant a flag and send a message.”
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