Jan 8, 2024

Bryan Cave Leighton Paisner LLP partner Renato Mariotti joins First Mover to discuss his outlook on the U.S. Securities and Exchange Commission's (SEC) approach to crypto regulation in 2024.

Video transcript

We're gonna keep the convo on crypto crime going near the end of 2023. The industry watched closely as Sam Bateman freed faced multiple charges related to fraud in a New York court. Sam was found guilty on all charges and is awaiting sentencing. Recently, we learned that he won't face a second trial that was scheduled for this year on charges related to conspiracy to bribe foreign officials. Joining us. Now to discuss what this all means as Brian Cave, Leighton pays their L LP partner Renato Marotti Renato. Happy New Year. It's such a pleasure to see you on the screen again. Great to see you. All right. Let's talk about this SPF news. Everyone was talking about it at the end of last year. Now we hear that that second trial, he was scheduled to be a part of prosecutors won't be moving forward. What's happening here. Uh All this happening is that prosecutors won so handily that they don't need a second trial. So in the United States and Federal Court, if prosecutors get a conviction on any felony count, they can present all evidence to the judge of all crimes, whether charged convicted acquitted, dismissed. And then the judge can consider all of that when crafting the sentence. It may sound unfair. But even though SPF was not convicted of those additional crimes, the judge can consider all of that evidence anyway. And so realistically, the sentence is exactly the same as it would be if they went to a second trial. So, uh essentially the government won so handily that they're uh that they don't even need the second trial to get the sentence that they want. Renato before we dig deeper into this. I know you've given us um a prediction on how many years you think Sam Bakeman Fried will spend behind bars. But it's the beginning of the year we got to re up that conversation. Uh Sam's facing sentencing in March, I believe. How many years do you think? Do you think he's gonna get, I wouldn't be surprised if the, if the digits start in two like a 20 plus years, 20 to 25 years, I think that's a, that would be a very hefty sentence for anyone. Uh And, but I think it's a, it's a reasonable sentence given the extent of the fraud. So definitely, um they will not be taking it easy on Sam Baker freed. The judge was not happy with his shenanigans while he was out on. You know, we talk about crypto crime so often on the show, a bunch of very high profile uh trials that are coming up this year. But I want to broaden, uh, the conversation out a little bit and talk about why, why this matters. Of course, it matters to you. It is your profession over here. We cover the news but what should folks be taking away from these trials as we talk about them? Sure. Like we talk about, uh, a lot of trials. There'll be, you know, a Celsius trial coming up, uh, in the upcoming year, but at the end of the day, um and I think everyone watching this knows that criminals and crypto crime, that's a very small fraction of this industry. And there's a lot of legitimate players out there. You know, the ripple case was a case that for example, there's a lot of focus this year because the SEC actually lost uh in a high profile case. Um And I think what a lot of people are wondering is what does this mean? Does this mean that the SEC is going to roll out some regulation? Does this mean we're finally gonna get a regulatory framework in the United States for crypto? Uh And the answer I think is no, I mean, the SEC um did dismiss uh some of the cases but they're appealing. Um And they are trying to move forward, they've continued their aggressive approach. I think we're gonna see more uh what people call regulation by enforcement for the SEC where they're fighting in court, not criminal cases, but civil cases against companies like a legitimate companies that are actually interested in being compliant and trying to figure out what regulatory uh, framework would be. And so unfortunately, I think we still have gonna, we're gonna have uncertainty in 2024 and that may not clear up for some time. Well, I mean, now I just feel like I'm left with more uncertainty. Renato what, how should people be looking at, uh, what's going on with the sec moving forward? I mean, just from a legal perspective, what would you tell your friends around the dinner table when they're asking about all of the ins and outs of this industry? Sure. And I, and I'll tell you, I tell my clients the same thing which is, there are a lot of foreign jurisdictions, uh the UK and others that are adopting um, crypto frameworks that are really rational that are uh from their legislative bodies, whether it's parliament or some other body, the United States. We don't have that yet. It may be that Congress comes together. I do hear from some folks in the industry that they're optimistic. Uh I'm never optimistic about the two parties that Congress agree on anything. Uh They have trouble even keeping the government open. Um, if that happens. Great. Uh, but until that happens, I really think, uh, we're gonna have to see what happens in the election of 2024 before we can, um, you know, see a change in direction from the SEC. I really don't think Chairman Gensler, um he has a different approach, there is some daylight between the SEC and CFTC. And as I've pointed out, uh publicly, the CFT CS chair has actually come out and he's trying to portray his agency as the leader uh in, in this space and trying to position itself differently. But without a word from Congress, I really don't see the SEC uh being convinced of that and until the SEC takes a different view, uh we're all re you know, in the same boat in the, in this industry. It's interesting you bring up the CFTC versus SEC battle for oversight of this industry. Where do you think that might land? Do you think the two agencies can work together? I know that was suggested in a few of the draft bills that were drawn up last year, you know, they do work together occasionally but you also see differences, right? You know, look at their different approach to its Binance, the SCFTC cut a deal, the DOJ cut a deal. SEC did not. Um And I, I really think that going forward, you know, the SEC is kind of acting um out of step with uh the CFTC. Um they're acting in a manner that I think is creating a lot of uncertainty in the industry and that's really um an issue that cannot be resolved. The CFTC doesn't have the authority to tell the SEC like to sit down or, or, you know, let's work together, they don't have the authority to force them to do anything. So I really think until Chairman Genzler and the SEC have a different approach, um we're kind of stuck although the CFTC is notably sending public signals that they disagree and they're taking a different approach which might position the CFTC and legislation um to be the uh uh you know, regulatory body that ultimately oversees this space. I wanna look forward to 2024. Like I said, everyone was talking about Sam Bateman Fried last year. Some say that the conversation is gonna switch over to Alex Misys who is set for his criminal trial in September of this year. What do you think is gonna happen there? Yeah, I think it's gonna be another difficult case for the defendant. You know, I, I heard Jen a lot of people telling me, oh, the prosecutors are taking it easy. He had Sand Bakeman freed. I think we 2023 proved that that did not. Uh that was not the case. I mean, the guy who had his bond revoked and we, you know, was charged with lots of felonies and convicted and he's gonna spend a lot of time in prison. I, I really see the exact same fate. Uh Here, you know, Celsius, the, the entity was not ultimately prosecuted. They ended up cooperating with prosecutors and threw it, threw him under the bus appears rightfully so based on the allegations, obviously he's still presumed innocent. Uh, but, uh, it really looks like a very, very difficult case for him to win. Renato Sam didn't really make it easy for prosecutors, did he? Not at all? Uh, not at all. You know, most people when they're, when they're, uh, charged with felonies, they keep their mouth shut, they obey the conditions of release. They realize that I might lose this trial. This judge is gonna sentence me. Uh Samba MRE didn't obey the judge's orders, didn't come, you know, comply with the bond conditions. Uh was out there blasting the prosecutor spreading a lot of disinformation, uh creating shenanigans even during the, the middle of the trial just did everything possible to make life difficult for the prosecutors, but also to ultimately increase his sentence at the end of the day. Renato. Thank you so much for joining the very 1st 1st mover episode of 2024. It's always a pleasure having you on and hear your perspective. Wow. I'm honored. Thank you. That was Brian Cave Leighton Paisner L LP partner Renato Marotti.

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