Tag: Justice Department

DOJ is Investigating Sam Bankman-Fried Connections: FTX Opposes

FTX opposes new bankruptcy investigations at it probes Sam Bankman-Fried connections.
FTX opposes new bankruptcy investigations at it probes Sam Bankman-Fried connections.

(Reuters) FTX has objected to a U.S. Department of Justice request for an independent investigation into the once-prominent crypto exchange’s collapse, saying it is already conducting a wide-ranging probe that includes family members of FTX founder Sam Bankman-Fried.

FTX said in a court filing in Wilmington, Delaware, late on Wednesday that the DOJ’s proposed review would only add cost and delay to its bankruptcy case.

FTX acknowledged “fraud, dishonesty, incompetence, misconduct, mismanagement, and irregularity” in its past conduct, but said that its previous wrongdoing is already being probed by the company’s new management, its creditors and law enforcement agencies.

As part of its own investigation, FTX asked U.S. Bankruptcy Judge John Dorsey, who is overseeing its Chapter 11 proceedings, to help it secure documents from Bankman-Fried, members of his family and other insiders with information about FTX transactions that used “misappropriated and stolen” funds.

These transactions, it said, include a $16.7 million Bahamian real estate purchase under the name of Bankman-Fried’s parents, Joseph Bankman and Barbara Fried.

FTX is also seeking information about political donations connected to Bankman-Fried, asking wide-ranging questions about Mind the Gap, a political action committee founded by Barbara Fried, and Guarding Against Pandemics, an advocacy organization founded by Sam Bankman-Fried and his brother, Gabriel Bankman-Fried.

FTX said Guarding Against Pandemics’ multimillion-dollar Washington, D.C., headquarters was purchased with misappropriated funds.

A spokesperson for Mind the Gap said it did not receive direct contributions from Sam Bankman-Fried, although Bankman-Fried made donations to some political causes it recommended to its donor network.

Related: Citadel to Launch Crypto Exchange After FTX Collapse

FTX Bankruptcy Update Today

DOJ probes Sam Bankman-Fried connections | Latest FTX bankruptcy update 2023.
DOJ probes Sam Bankman-Fried connections | Latest FTX bankruptcy update 2023.

FTX, once among the world’s top crypto exchanges, shook the sector in November by filing for bankruptcy, leaving an estimated 9 million customers and other investors facing total losses in the billions of dollars.

The U.S. Department of Justice’s bankruptcy watchdog has called for an independent investigation into its collapse, a request that received backing from a bipartisan group of U.S. senators.

FTX’s new CEO, John Ray, who worked with court-appointed examiners while leading Enron Corp and Residential Capital through bankruptcy, is prepared to testify that examiners in those two cases cost a combined $150 million and provided “minimal” benefits to creditors, FTX said.

FTX’s official committee of creditors joined the company in opposing the appointment of an examiner.

FTX also on Wednesday night filed a new list of creditors in bankruptcy court, which included financial watchdogs and government agencies from the United States, Japan and Switzerland, as well as companies including Airbnb Inc and crypto giant Binance.

Sam Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his crypto-focused hedge fund, has pleaded not guilty to fraud charges. He is scheduled to face trial in October.

Related: Sam Bankman-Fried on AMC Tokenized Shares Before Arrest

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DOJ Attempts to Weed Out Crime with 75% Reduction in Fines

Market News: DOJ Offers 75% Reduction in Fines to Companies that Admit Crime.
Market News: DOJ Offers 75% Reduction in Fines to Companies that Admit Crime.

[Bloomberg] The Justice Department will recommend as much as a 75% reduction in fines for companies that voluntarily report wrongdoing to the government and fully cooperate with investigations.

Even companies that don’t voluntarily disclose wrongdoing but still fully cooperate with investigations could still get a 50% reduction off the low end of the guidelines for fines, the head of the department’s criminal division said Tuesday.

“The policy is sending an undeniable message: come forward, cooperate, and remediate,” Assistant Attorney General Kenneth Polite said in a speech at Georgetown University Law Center.

Polite made it clear that cooperators seeking declination will be held to a higher standard than your average or even gold-standard cooperator — the cooperation must be “truly extraordinary.” 

The Justice Department will distinguish extraordinary cooperation by assessing the immediacy, consistency, degree, and impact of the cooperation.

Prosecutors will expect companies to cooperate immediately, consistently tell the truth, and hand over evidence that the DOJ otherwise would not be likely to obtain, such as quick access to electronic device images, audio/video recordings, trial testimony, and other kinds of cooperation that “produces results.”

The policy also covers corporations conducting business internationally, as the changes will apply to all corporate matters handled by the Criminal Division, including all Foreign Corrupt Practices Act (FCPA) cases nationwide.

Notably, the new policy is the third in a trilogy of Department of Justice memoranda addressing the prosecution of corporate misconduct and setting forth revised policies concerning the effect of cooperation by companies that have engaged in wrongdoing.

Years of Ongoing Investigations

The new policy was announced to further Deputy Attorney General Lisa Monaco’s October 2021 memorandum directing the creation of a Corporate Crime Advisory Group within the Department to recommend guidance concerning, in part, the nature of a company’s dealings with the government required to receive cooperation credit in resolving company misconduct, and to consider revisions and reforms to the Department’s approach to corporate crime prosecution.

The new policy also follows less than five months after the issuance of a memorandum further clarifying the Department of Justice’s policy against seeking a guilty plea where a corporation has voluntarily self-disclosed, fully cooperated, and timely and properly remediated the conduct at issue in the absence of aggravating factors and directing all department components, including the 93 U.S. Attorney’s Offices across the country, to review its policies on corporate voluntary self-disclosure and ensure it has a publicly available written policy.

At the same time, the September 2022 memorandum emphasized DOJ’s commitment to “strong corporate criminal enforcement.”

Polite likely had these pronouncements in mind as he concluded his speech. He entreated corporations to “come forward, cooperate, and remediate,” and to join the Department of Justice as allies in the fight against crime.12 But he also warned: “Failing to take these steps, a company runs the risk of increasing its criminal exposure and monetary penalties.”

Related Article: Citadel Under Investigation by DOJ

Source(s): Bloomberg.

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“King of Block Trades” Is Being Targeted by the DOJ

DOJ Targeting King of Block Trades
DOJ Probe Update: DOJ Targets King of Block Trades CaaS Capital Management Hedge Fund

King of Block Trades, CaaS is now one of the hedge funds being investigated by the DOJ.

The last hedge fund we heard was being investigated was Citadel, which was confirmed by Bloomberg.

Since then, we’ve had no update until now.

And we’re going to bring you up to date with the market news.

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Welcome to Franknez.com – hedge funds are lining up one by one in a massive investigation being conducted by the DOJ. Here’s the latest update.

Let’s dive right into it!

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Who is the “King of Block Trades”?

Wall Street

The King of Block Trades is the name dubbed to the hedge fund CaaS by Bloomberg.

So, then who is CaaS?

CaaS (Capital as a Service) is a New York-based hedge fund with over $650 million in assets under management.

Block trading is when financial institutions sell one another a ton of stock through negotiations rather than through an electronic venue.

While block trading is not illegal, market activity proves the misuse of this strategy could be at large.

Morgan Stanley and Goldman Sachs are two of the biggest banks currently being investigated for connections to block trading and colluding with hedge funds.

CaaS managed to establish close ties with Morgan Stanley only two years of opening.

Prospective investors say CaaS has boasted to them of quickly becoming one of the biggest U.S. funds dedicated to block trading, getting a first look at deals and gaining entry to virtually every IPO in the country, Bloomberg.

The firm saw a 76% return its first year in business.

Now the hedge fund is one of many being scrutinized in a sweeping U.S. probe into how Wall Street firms handle large orders.

Banks make extra fees from block trading

Morgan Stanley

Morgan Stanley can earn extra fees helping hedge funds cash out, offering shares to investment firms with desks handling blocks, as well as specialized shops such as CaaS, deemed the King of Block Trade.

Market participants say that some traders have been known to bet against shares after getting calls from these bankers.

This prompts the question of whether the trade acted on non-public information, also known as insider trading.

The financial system has a variety of rings where everyone involved has to benefit, even if it causes system risk to the market.

This is what regulators are looking into.

A little more background on CaaS

CaaS

CaaS was founded in May of 2019 by Frank Fu.

Born in Shanghai, he came to the U.S. where he earned a bachelor’s degree in research and engineering, and a master’s in financial engineering.

He later landed at Susquehanna International Group, where he spent two years trading options.

Some of you might recall Susquehanna is one of the top 10 financial institutions shorting AMC Entertainment.

He then moved to hedge fund Laurion Capital Management.

Looking for additional ways to make money, he started wading into block trades around 2012.

Within a few years, he established himself as one of the top rainmakers at the firm and a key player in providing liquidity to banks.

The King of Block Trades has told prospective investors they had ties to about 30 banks. 

When Goldman Sachs, Morgan Stanley, and Credit Suisse were forced to sell billions of dollars of shares from the Archegos incident, Fu was there to buy.

 A regulatory filing showed CaaS scooped up more than $440 million of the stocks that Archegos had been betting on.

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DOJ launches an expansive criminal investigation

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