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FTX’s Sam Bankman-Fried Could Be Planning to Blame Lawyers Who Helped Launch Firm in Criminal Case




The defense motion claims that law firm Fenwick & West advised him, FTX and Alameda on at least four matters pertaining to the fraud case.
By Reuters | Updated: 1 June 2023

Indicted FTX founder Sam Bankman-Fried seems to be gearing up to blame the lawyers who helped him establish the crypto exchange.

That’s the subtext of a motion filed on Tuesday by his lawyers at Cohen & Gresser, who are defending Bankman-Fried against federal charges of fraud, conspiracy and bribery. They’re asking for access to documents from Fenwick & West, the Silicon Valley law firm that represented FTX and sister hedge fund Alameda Research from the companies’ inception through their collapse in November 2022.

Fenwick & West did not respond to my email queries. The firm has not yet filed a response to a civil suit by FTX customers who named Fenwick as a defendant.

Bankman-Fried has pleaded not guilty to the charges. The defense motion claims that Fenwick & West advised him, FTX and Alameda on at least four matters at the heart of the Manhattan federal court indictment against the onetime crypto billionaire.

The California law firm, for instance, allegedly provided counsel to FTX on the creation of shell companies that opened accounts at Silvergate Bank to receive deposits from FTX customers, according to Tuesday’s motion. Those shell company bank accounts are a critical element of the government’s bank fraud conspiracy charge.

Fenwick & West also allegedly advised FTX that it was not required to register with the U.S. government as a money transmitting business, according to the new motion. Prosecutors have charged Bankman-Fried with conspiring to violate wire transfer laws by failing to register but his lawyers said in the new motion that Fenwick’s alleged advice “directly contradicts the government’s theory.”

Bankman-Fried’s filing similarly contends that Fenwick & West reviewed internal agreements in which Alameda loaned money to Bankman-Fried and other FTX executives. The government alleges that the loans were an illegal misappropriation of customer deposits as part of a scheme to violate federal campaign finance laws. Bankman-Fried’s new motion argues that Fenwick & West’s legal advice on the tax consequences of the loans might rebut the government’s contention that the loans were improper.

Finally, the motion asserts that it was Fenwick that instructed Bankman-Fried to communicate with other FTX and Alameda executives via Signal and other ephemeral messaging apps. That alleged advice would undercut the government’s claim that Bankman-Fried directed his colleagues to use Signal and other encrypted communication apps to hide evidence of his crimes.

Bankman-Fried’s lawyers acknowledged in the motion that their assertions about Fenwick & West are based on a very limited set of documents.

The filing does not specifically invoke the words “advice of counsel” to refute government claims that Bankman-Fried acted with criminal intent. But Bankman-Fried’s lawyers seem to be headed in that direction, telling US District Judge Lewis Kaplan of Manhattan that they need to know more about Fenwick’s work for FTX and Alameda to determine if the law firm’s documents exonerate their client.

Those documents could help Bankman-Fried later argue at trial that he was following advice from FTX’s lawyers.

Tuesday’s filing asks Kaplan to order the government to turn over evidence from Fenwick & West or to authorize Bankman-Fried to subpoena documents from the law firm.

The firm would almost certainly rather not turn over client files to Bankman-Fried. Among other reasons, Fenwick & West has been named as a defendant in a sweeping class action by FTX customers. The plaintiffs’ lawyer who filed that case, Kerry Miller of Fishman Haygood, told me on Wednesday that he plans to monitor the Bankman-Fried criminal case for any Fenwick & West documents that might boost the class allegations.

Bankman-Fried’s lawyers from Cohen & Gresser declined comment on the new motion through a spokesperson. The Manhattan U.S. Attorney’s office also declined to comment.

Attorney-client privilege is often a complication for white-collar defendants who want to blame their companies’ lawyers for providing bad advice. Companies – rather than individual executives or outside law firms — control the right to insist that communications with their counsel remain confidential. Companies are typically reluctant to waive privilege for fear that their lawyers’ documents might be used in other cases.

Bankman-Fried’s new motion said his lawyers are in negotiations with FTX’s new counsel about whether the company intends to assert attorney client privilege over relevant Fenwick & West documents. (The motion did not name FTX’s new law firm but it is Sullivan & Cromwell.) Defense counsel also said that Fenwick & West told them it would not turn over any documents without FTX’s permission.

The motion floats two theories for why Bankman-Fried is entitled to access to certain Fenwick & West communications even if FTX claims privilege. Bankman-Fried said the law firm represented him personally in addition to serving as counsel to FTX and Alameda. That assertion seems to hint that Bankman-Fried will claim that he can personally waive privilege over some Fenwick & West communications.

Defense lawyers also argued that FTX, which is in Chapter 11 bankruptcy, has already waived its privilege over certain documents by turning them over to prosecutors. If that’s correct, said former federal prosecutor Harry Sandick of Patterson Belknap Webb & Tyler, it will be easier for Bankman-Fried to obtain Fenwick’s communications.

“It’s hard to see why the defense should be denied access,” Sandick said.

If Bankman-Fried’s lawyers believe that Fenwick documents can help them refute the government’s evidence of criminal intent, Sandick said, they will eventually have to make a strategic decision about how to get the law firm’s communications in front of a jury.

The documents must be introduced through a witness – presumably Bankman-Fried himself or a Fenwick & West lawyer. The strongest defense case, Sandick said, would probably feature testimony from a Fenwick & West witness to bolster testimony from Bankman-Fried about his reliance on advice from FTX lawyers. But contradictory testimony from a law firm witness could undermine Bankman-Fried’s advice-of-counsel defense.

That’s a concern for another day. Right now, Sandick said, Bankman-Fried’s lawyers just want to know whether Fenwick & West’s files will help their client.

“It’s an understandable motion,” he said. “They’re saying, ‘Let’s see what the documents say, then we’ll decide how to use them.’”

© Thomson Reuters 2023


Crypto Reporting Framework Discussed During G20, Decision Taken on Swift Implementation




The leaders of 20 nations have reaffirmed the commitment to continue cooperation towards sustainable and modern international tax system.
By Press Trust of India | Updated: 9 September 2023

The G-20 leaders on Saturday decided on swift implementation of the reporting framework for crypto assets, saying a significant number of member nations want information exchange on such non-financial assets to start by 2027.

The Crypto Asset Reporting Framework (CARF) or template is being developed to make sure that such non-financial assets are not used by tax evaders to conceal their unaccounted wealth.

“We call for the swift implementation of the CryptoAsset Reporting Framework (“CARF”) and amendments to the CRS. We ask the Global Forum on Transparency and Exchange of Information for Tax Purposes to identify an appropriate and coordinated timeline to commence exchanges by relevant jurisdictions,” said the G20 Leaders’ declaration, which was adopted by consensus.

The leaders of 20 developing and developed nations have reaffirmed the commitment to continue cooperation towards a globally fair, sustainable and modern international tax system appropriate to the needs of the 21st century.

“We remain committed to the swift implementation of the two-pillar international tax package. Significant progress has been made on Pillar One including the delivery of a text of a Multilateral Convention (MLC), and work on Amount B (framework for simplified and streamlined application of the arm’s length principle to in-country baseline marketing and distribution activities) as well as the completion of the work on the development of the Subject to Tax Rule (STTR) under Pillar Two,” the declaration said.

Briefing reporters after the summit, Finance Minister Nirmala Sitharaman said the G20 countries have made substantial progress on the two-pillar solution.

“Work has happened on exchange of information on immovable property transactions between countries. There is a launch of the pilot programme of the South Asia academy for tax and financial crime investigation in collaboration with the OECD,” Sitharaman said.

Under the global tax deal, about 140 countries, including India, have agreed to an overhaul of global tax norms to ensure that multinationals pay taxes wherever they operate and at a minimum of 15 percent rate. However, some vexed issues still need to be ironed out before its implementation.

The G20 countries called on the OECD to develop an inclusive framework to swiftly resolve the few pending issues relating to the MLC (multilateral convention) with a view to preparing the MLC for signature in the second half of 2023 and completing the work on Amount B by the end of 2023.

“We welcome the steps taken by various countries to implement the Global Anti-Base Erosion (GloBE) Rules as a common approach. We recognise the need for coordinated efforts towards capacity building to implement the two-pillar international tax package effectively and, in particular, welcome a plan for additional support and technical assistance for developing countries,” the declaration said.

The G20 countries also took note of the OECD report on ‘Enhancing International Tax Transparency on Real Estate’ and the ‘Global Forum Report on Facilitating the Use of Tax-Treaty-Exchanged Information for Non-Tax Purposes’.

The OECD has suggested automatic exchange with regard to information on real estate assets among countries and the setting up of digitalised ownership registers accessible to designated relevant government agencies on a real-time basis amid concerns over investments in foreign real estate being used to “shelter undeclared assets”.

The report noted that there has been a significant increase in foreign-owned real estate assets over the past decade, and a lot of funds have been shifted from financial assets to buying foreign real assets.

The Global Forum report also called for countries to adopt a ‘whole-of-government’ approach to address the challenge of illicit financial flows through the sharing of information from tax authorities to non-tax agencies, like financial intelligence units, anti-corruption agencies, customs authorities and public prosecutors.

India had been pressing for expanding the scope of common reporting standard (CRS) at the G20 to include non-financial assets like real estate properties, under the automatic exchange of information (AEOI) among OECD countries.

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IMF-FSB, Regulators Set Out Roadmap to Coordinate Global Cooperation on Crypto Asset Regulation




The IMF states that benefits of crypto assets like cheaper and faster cross-border payments, and increased financial inclusion are yet to materialise.
By Reuters | Updated: 8 September 2023

Global financial regulators and the International Monetary Fund on Thursday set out a roadmap to coordinate measures that stop crypto assets from undermining macroeconomic and financial stability. Such risks are exacerbated by noncompliance with existing laws in some instances, the G20’s risk watchdog, the Financial Stability Board, and the IMF said in a paper.

Many of the claimed benefits from crypto assets, such as cheaper and faster cross-border payments, and increased financial inclusion, have yet to materialise, it added.

“Widespread adoption of crypto-assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources available for financing the real economy, and threaten global financial stability,” the paper said.

The paper sets out timelines for members of the IMF and G20 to implement recent recommendations to regulate crypto from the Financial Stability Board and IOSCO, a global group of securities regulators.

It marks a further evolution in regulatory thinking after several years of seeing little threat from the sector, with attitudes hardening after the collapse of the crypto exchange FTX last November, which rattled markets and left investors nursing losses.

“A comprehensive policy and regulatory response for crypto-assets is necessary to address the risks of crypto-assets to macroeconomic and financial stability,” said the paper, which will be presented to G20 leaders at a summit this month in New Delhi.

The European Union has approved the world’s first comprehensive set of rules for crypto assets, but there is a patchier approach elsewhere to a borderless sector where fraud and manipulation are “prevalent”.

Other elements include governments avoiding large deficits which can lead to inflation that dents fiat currencies and encourages substitutes such as cryptoassets, the paper said.

The tax treatment of crypto assets should also be spelled out, along with how existing laws apply to the sector.

© Thomson Reuters 2023

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Cathie Wood’s Ark Invest and 21Shares File for First Spot-Ether ETF in the US: Details




Ark Invest could be the first to list a fund in the US to directly invest in Ethereum.
By Reuters | Updated: 7 September 2023

Cathie Wood’s Ark Invest and crypto investment firm 21Shares are seeking regulatory approval to set up an exchange-traded fund (ETF) that would directly hold ether, according to a filing with the US Securities and Exchange Commission (SEC) on Wednesday.

It is the first attempt to list a fund in the US that would directly invest in ether, the second-largest cryptocurrency by market capitalization.

In a boost to the crypto sector, the US District of Columbia Court of Appeals last month passed a landmark ruling that the SEC was wrong to reject an application from crypto asset manager Grayscale Investments to list an ETF that tracks the price of bitcoin.

The case has been closely watched by the cryptocurrency and asset management industries, which have been trying for years to convince the SEC to approve a spot bitcoin ETF.

Cboe Global Markets earlier this year filed a proposal with the US SEC to list and trade shares of a spot bitcoin ETF by Ark Invest and 21Shares on the Cboe BZX exchange. The SEC, however, delayed a decision on whether to approve it.

The regulator has in recent years rejected dozens of applications for spot bitcoin ETFs, citing inadequate levels of trading surveillance that could leave the underlying spot market subject to fraud and manipulation.

© Thomson Reuters 2023

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Talks Underway for Global Framework on Crypto Rules, Says FM Nirmala Sitharaman




India's G20 presidency has put on the table key issues related to regulation of crypto assets, the minister said.
By Reuters | Updated: 6 September 2023

Discussions are underway on a global framework to regulate crypto assets, India’s finance minister said on Tuesday, adding that cryptocurrencies could not be regulated efficiently without the cooperation of all countries.

“India’s (G20) presidency has put on the table key issues related to regulating or understanding that there should be a framework for handling issues related to crypto assets,” Nirmala Sitharaman said at an event in the financial capital of Mumbai.

“Active discussions are happening.”

Back in March, the Indian government said that its money laundering laws would apply to trade in cryptocurrencies.

The exchange between virtual digital assets and fiat currencies, the exchange between one or more forms of virtual digital assets, and the transfer of digital assets will be covered under money laundering laws, the notification released at the time said.

India is yet to finalise legislation and regulations surrounding cryptocurrencies even as the country’s central bank has cautioned against their use multiple times. The Reserve Bank of India has said that cryptocurrencies should be banned as they are akin to a Ponzi scheme.

G20 president India’s push to regulate cryptocurrencies gained support from both the International Monetary Fund and the United States in February.

India had said it wanted a collective global effort to deal with problems posed by cryptocurrencies such as bitcoin, and the finance ministry had said it had held a seminar for G20 member states to discuss how to come up with a common framework.

In February, Sitharaman and US Treasury Secretary Janet Yellen had discussed strengthening multilateral development banks, global debt vulnerabilities, and crypto assets on the sidelines of the G20 finance chiefs meeting.

© Thomson Reuters 2023

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SBI Introduces UPI Interoperability With eRupee CBDC for Seamless Transactions




The feature is accessible via the 'eRupee by SBI' application.
By ANI | Updated: 4 September 2023

The State Bank of India (SBI) has announced the implementation of Unified Payments Interface (UPI) interoperability with the Digital Rupee, also called as Central Bank Digital Currency (CBDC).

With this move, SBI aims to deliver convenience and accessibility to its customers. This feature, accessible through the ‘eRupee by SBI’ application will empower users to effortlessly scan any merchant UPI QR code for transactions.

SBI was among the first few banks to participate in the RBI’s retail digital e-rupee project.

Unified Payments Interface (UPI) is India’s mobile-based fast payment system, which facilitates customers to make round-the-clock payments instantly, using a Virtual Payment Address (VPA) created by the customer. UPI payment system has become hugely popular for retail digital payments in India, and its adoption is increasing at a rapid pace.

“The seamless integration of CBDC with UPI marks a significant leap for the bank, enhancing the acceptance and utilization of digital currencies in everyday transactions,” said SBI in a release. “Bank feels that this integration will be a game changer for the digital currency ecosystem.”

“By bridging the gap between CBDC and the extensively used UPI platform, SBI aims to revolutionize payments made in India. With this move in the realm of digital payments, the future of CBDC integration appears promising,” it added.

The digital rupee, also called as Central Bank Digital Currency (CBDC), was launched by the Reserve Bank of India on a pilot basis on December 1, 2022. In the Union Budget 2022-23, Finance Minister Nirmala Sitharaman announced about rolling out of the digital currency called Central Bank Digital Currency (CBDC).

CBDCs are an electronic form of a sovereign currency. As is the case with cash, it will not earn any interest but can be converted to other forms of money, like deposits with banks.

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Terrorists Using Cryptocurrency, Metaverse; Need Global Cooperation on Cybercrime: PM Modi




The Prime Minister said cybercrimes can have social and geopolitical implications.
By Press Trust of India | Updated: 4 September 2023

Terrorist organisations are using technology for radicalisation and capitalising on emerging digital avenues such as the dark net, metaverse and cryptocurrency platforms, Prime Minister Narendra Modi has said while seeking global cooperation to deal with cybercrimes.

In an exclusive interview with PTI, he said the World Bank has estimated that cyber-attacks could have caused losses of around $5.2 trillion (roughly Rs. 4,30,00,000 crore) to the world during 2019-2023, but their impact goes beyond just financial aspects into activities that are deeply worrying.

He said these can have social and geopolitical implications.

“Cyber terrorism, online radicalisation, use of networked platforms to move funds from money laundering to drugs and terrorism – are just the tip of the iceberg,” he said.

Modi said cyberspace has introduced an entirely new dimension to the battle against illicit financial activities and terrorism.

“Terrorist organisations are using technology for radicalisation, moving money from money laundering and drugs into terror funding, and capitalising on emerging digital avenues such as the dark net, metaverse, and cryptocurrency platforms to fulfil their nefarious aims,” he said.

Stressing the need for taking the cyber threats very seriously, the prime minister said one angle of their adverse impact is the financial losses they cause.

Further, he said, cyber-attacks can also have implications for the social fabric of nations.

PM Modi said the spread of ‘deep fakes’ can cause chaos and loss of credibility of news sources. He said fake news and ‘deep fakes’ can be used to fuel social unrest.

“So, it is of concern to every group, every nation, and every family. That is why we have taken this up as a priority,” he said.

The prime minister noted that India hosted a G20 Conference on Crime and Security in the Age of NFTs (Non-Fungible Tokens), Artificial Intelligence and Metaverse in July in Gurugram.

During this conference, he said, concern was expressed over malicious cyber activities contrary to established norms, principles and rules of cyberspace and international law.

Modi said it was stressed that coordination on prevention and mitigation strategies is needed and emphasis was placed on the need to achieve a comprehensive international convention on countering the use of ICTs (Information and Communications Technologies) for criminal purposes.

He said there may be many domains in which global cooperation is desirable but in the domain of cyber security, global cooperation is not only desirable but is inevitable.

“Because the threat dynamics are distributed – handlers are somewhere, assets are somewhere else, they are speaking through servers hosted in a third place, and their funding could come from a completely different region. Unless all the nations in the chain cooperate, very little is possible,” he said.

Speaking at the G20 conference in July, Union Home Minister Amit Shah had warned the global community about security challenges that have evolved from “dynamite to metaverse” and “hawala to cryptocurrency” and asked G20 member countries to rise above conventional boundaries and share information on a real-time basis to check all crimes in the cyberspace.

Shah had underlined the threats emanating from cyber criminals using darknet, metaverse, deepfakes, ransomware and toolkit-based misinformation campaigns and strategic targeting of critical information and financial systems.

According to the data given in Parliament on December 13, 2022, over 16 lakh cybercrime incidents had been reported in India in the three-year period beginning 2019 following which more than 32,000 FIRs were registered.

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