News from the SEC on FTX’s crypto failure

Important news emerged from the SEC over the weekend regarding the failure of crypto exchange FTX. 

The issue specifically concerns the role of Sam Bankman-Fried’s parents in the management of the exchange, and was taken up by former SEC official John Reed Stark.

Crypto news FTX: allegations against SBF’s parents and the SEC

In a tweet published Saturday, Reed Stark makes heavy accusations against Sam Bankman-Fried’s parents. 

He called them criminal beneficiaries of their son’s failed management of the exchange, but also profiteers, conspirators and facilitators (i.e., accomplices). 

It should be noted that John Reed Stark is currently only a lawyer and university law professor, although he was formerly the head of the SEC’s Office of Internet Enforcement. He is therefore a true expert on such matters, and is not a person involved in this matter. 

After recalling that he has worked for nearly 20 years as an SEC lawyer, 11 of which he headed the very office that dealt with Internet enforcement, he says he still cannot understand why the U.S. Department of Justice (DoJ) and the SEC itself have not added SBF’s parents to the list of defendants in this matter. 

Between the lines he seems to want to accuse the U.S. government and the agency itself of being too soft on Joseph Bankman and Barbara Fried, perhaps because they are Democrat-led. 

SBF is known to have distributed several billion dollars of FTX users’ funds as donations to Democratic politicians. It should not be forgotten that there are presidential elections in the US next year. 

The charges against the SEC and DoJ

Reed Stark in fact also makes other accusations against the SEC and DoJ. 

He claims that over the years there has been an extraordinary lack of DoJ prosecutions in the crypto field, against nearly 200 SEC actions. 

He calls the SEC “merely a civil enforcement agency,” suggesting that until the DoJ intervenes, crypto fraudsters will continue to view the risks associated with SEC actions as a mere operating cost to be budgeted for. 

He therefore calls on the DoJ to wake up and take action, specifically against Sam Bankman-Fried’s parents. 

The position of SBF’s parents

Indeed, not only have Joseph Bankman and Barbara Fried always defended their son, but they have also been accused of playing some kind of role in SBF’s fraudulent activity. 

The allegation they are accused of is that they helped him set up both Alameda Research and FTX, although that is yet to be proven. 

They are also accused of having received several tens of millions of dollars from their son from FTX accounts, and thus probably from the exchange’s customer funds, but that too is yet to be proven. 

They certainly risk facing prosecution as well, as well as their son of course, but apparently not from the Justice Department. 

Although it is not yet certain that the DoJ will actually decide not to take action against them, it has always been thought that current U.S. policy turns out to be excessively soft on this matter. 

Then again, the Bankman-Fried family’s ties to the Democrats are obvious, since, for example, Joseph Bankman supported Democratic Senator Elizabeth Warren, and Barbara Fried is the co-founder of the Mind the Gap political organization that explicitly sides with the Democratic Party. 

It must be said, however, that the SEC, whose current chairman Gary Gensler was appointed by current Democratic President Joe Biden, never seems to have been particularly soft on cryptocurrencies, and the FTX case. 

The trial

The trial against SBF however has not yet begun, and at this point it actually seems possible that it will end up involving Joseph Bankman and Barbara Fried as well. 

The case therefore could drag on for a long time yet, not least because both Joseph Bankman and Barbara Fried are university law professors. 

It is very likely that they will defend themselves with teeth, and they will also defend their son, despite the blatant violations he has been responsible for. 

This means that if a Republican president wins the election next year, they could lose in 2025 many of the support they still perhaps enjoy from Democratic Party insiders in U.S. institutions such as DoJ and SEC.