USA v. Samuel Bankman-Fried Court Filing, retrieved on March 15, 2024 is part of . You can jump to any part in this filing . This part is 31 of 33. HackerNoon’s Legal PDF Series here II. The Court Should Order Forfeiture The Court should impose the proposed forfeiture money judgment. This number is derived as follows: First, the Court should direct the forfeiture of $8,000,000,000, which is a conservative estimate of the proceeds of the defendant’s wire fraud and conspiracy to commit wire fraud on FTX’s customers, and the property involved in his conspiracy to launder the proceeds of that wire fraud. As funds that the defendant obtained through false statements and promises, and then misappropriated, they are plainly “proceeds” pursuant to 18 U.S.C. § 981(a)(1)(C). See Bonventre, 646 F. App’x at 90 (calculating forfeiture based on “an amount representing the total client investment”); United States v. Kenner, 443 F. Supp. 3d 354, 378 (E.D.N.Y. 2020) (defining proceeds forfeiture as amount “received . . . as a result of the fraud.”). The total of $8 billion also represents property involved in the defendant’s money laundering. The reason FTX had such a deficit was that the defendant and his co-conspirators had agreed to launder those funds to and through Alameda. Second, the Court should direct the forfeiture of $1,300,000,000, which represents the proceeds of the defendant’s wire fraud and conspiracy to commit wire fraud on Alameda’s lenders. This sum represents the amount that Alameda owed lenders to whom it had defrauded by making false statements about its balance sheet, calculated as of the date of the bankruptcy filing. (GX1014). Third, the Court should direct the forfeiture of $1,720,000,000, which represents the proceeds of the defendant’s securities fraud. This sum is the amount FTX raised from investors in exchange for equity on fraudulent pretenses. (GX-26 (listing the total amounts invested in the Series B, B-1, and C round investments in FTX.com)). The defendant, however, asserts that he owes no forfeiture because “customers and creditors will receive a return of their funds via the bankruptcy.” (Def. Mem. at 88). This argument is factually unsupported and legally wrong. Starting with the facts, as discussed above, it is far from certain that FTX customers and lenders will be made whole, and the bankruptcy will almost certainly not cover losses by FTX’s equity investors (the victims of the conspiracy to commit security fraud), which were approximately $1.72 billion. As a matter of law, there is no basis for reducing the forfeiture judgment based on repayment to victims in bankruptcy. For money laundering based forfeiture under 18 U.S.C. § 982(a)(1), there is no suggestion in the forfeiture statutes that repayment to victims could reduce the judgment. Indeed, Section 982(a)(1) contemplates the opposite, since it is based on the “property involved” in the money laundering. See United States v. Elfgeeh, 515 F.3d 100, 139 (2d Cir. 2008) (for money transmitting offense, which similarly applies Section 982(a)(1) for forfeiture, affirming judgment for total amount transmitted even though there are no victims); United States v. Waked Hatum, 969 F.3d 1156, 1164 (11th Cir. 2020) (in money laundering case where victims suffered no loss, affirming forfeiture judgment of total sum of laundered money, because “the government’s interest in the [laundered property] vests ‘the moment’ such property is laundered”). The same is true for wire fraud based forfeiture. While the defendant asserts that the proper measure of forfeiture here is the net proceeds under Section 981(a)(2)(B), rather than gross proceeds under Section 981(a)(2)(A), (Def. Mem. at 87-88), he is wrong. As the trial record showed, the defendant embezzled billions of dollars of FTX customer funds, and induced investors to part with money based on false statements. That is “inherently unlawful” conduct and therefore the gross proceeds rule under Section 981(a)(2)(A) applies. See United States v. Bodouva, 853 F.3d 76, 80 (2d Cir. 2017) (Section 981(a)(2)(A) applies to embezzlement); Milton, 2024 WL 779210, at *5 (selling securities for which prices have been inflated by “misleading statements” is “more analogous to cases involving Ponzi schemes” and thus Section 981(a)(2)(A) applies). And under Section 981(a)(2)(A), the law is clear: “there is no statutory authorization for an offset” even for payments to victims. Bodouva, 853 F.3d at 80. The single case cited by the defendant for the proposition that return of funds through bankruptcy should offset victim losses is a decade-old, distinguishable decision from the Northern District of Illinois. See United States v. Hollnagel, No. 10 Cr. 195, 2013 WL 5348317 (N.D. Ill. Sept. 24, 2013). There, the district court reduced a forfeiture judgment to zero because the “[d]efendants returned the investors’ investments over time” before their arrests. Id. at *4. Not only did the defendant not return the $8 billion he stole before his arrest, but the Second Circuit has explicitly rejected the reasoning of Hollnagel, under Section 981(a)(2)(B). United States v. Shkreli, 779 F. App’x 38 (2d Cir. 2019) (summary order). In Shkreli, the Court held that because “‘forfeiture is gain based’, not based on the losses (or gains) to victims,” a defendant should be required to forfeit “the total amount invested by investors” even if investors were paid back by the defendant during the scheme. Id. at 42 (citing Torres, 703 F.3d at 203). The defendant next asserts that “none of the accounts identified for forfeiture were for [his] personal benefit,” “were not profits ‘enjoyed’ by [him], but rather maintained on behalf of the companies,” and therefore are not subject to forfeiture. (Def. Mem. at 88). This is legally and factually wrong. While the word “enjoyed” is found in Hollnagel, the law is clear that the Government can forfeit corporate assets based on a defendant’s crimes when those assets were maintained through and on behalf of a company the defendant “extensively controls” or “dominates,” such that “money paid to the corporation was effectively” under the defendant’s control. United States v. Peters, 732 F.3d 93, 103-04 (2d Cir. 2013) (forfeiture proceeding under Section 982); United States v. Tartaglione, 15 Cr. 491, 2018 WL 1740532, at *21 (E.D. Pa. Apr. 11, 2018) (same for Section 981), aff’d, 815 F. App’x 648 (3d Cir. 2020). The trial evidence of course established the defendant’s control and dominance of FTX, Alameda, and its affiliated entities. Finally, the defendant asserts that the Court should order no forfeiture because he “no longer has custody of the accounts identified for forfeiture in the PSR” since the Government seized the accounts. (Def. Mem. at 88). This is utterly meritless—there is no authority even suggesting that the Government’s seizure of assets traceable or involved in a defendant’s crimes somehow precludes the Government from seeking forfeiture of the defendant’s interest in those assets. Indeed, the forfeiture laws expressly authorize seizure as part of the forfeiture process. In order for the Government to effect forfeiture of the specific property described in the preliminary order of forfeiture, the Court must first order forfeiture of the defendant’s interests in that specific property. United States v. Daugerdas, 892 F.3d 545, 549 (2d Cir. 2018) (“At stage one of [forfeiture process], before entering a preliminary order of forfeiture, the court is directed to adjudicate the government’s interest vis-à-vis the defendant”). Only once the Court has forfeited the defendant’s rights in the property can the Court move on to “stage two,” by “resolv[ing] any third-party petitioner’s interests vis-à-vis the defendant.” Id. If no third-party has a cognizable interest in the property superior to the defendant’s, then the specific property can be finally forfeited to the Government. In the preliminary order of forfeiture, the Government lists specific property beyond that listed in the forfeiture allegations in the S6 Indictment and the bill of particulars. (Dkt. 314).[14] That specific property is all forfeitable as proceeds of the defendant’s wire frauds or as property involved in money laundering. The property listed in Ex. A(1) is another account in the name of Emergent Fidelity Technologies, which was seized at the same time and pursuant to the same legal authority as the property listed in the S6 Indictment ¶¶ 38(a), (b), 40(a), (b). Ex. A(2)-(255) are the specific forms of cryptocurrency maintained in the Binance accounts described in S6 Indictment ¶¶ 38(h), (i), (j), 40(h), (i), (j). Ex. A(258) is a bank account in the name of the defendant and another FTX employee, which received transfers from the account at Silvergate Bank in the name of Alameda ending in -4456, which as described in Government Exhibit 1050 accepted customer fiat deposits. The Government also seeks to forfeit the defendant’s interests in certain contributions traceable to his criminal conduct that he, Salame, and Singh made to political candidates and committees, during the relevant period. Beginning in March 2023, the Government, working with the United States Marshals Service and the FBI, sent letters to those candidates and committees who the Government had identified had received donations from the defendant, Salame, and Singh, requesting return of the donations as forfeitable property, and because the donations were illegal. As of today, 251 candidates and committees have returned $3,348,957.23. [15] The Preliminary Order of Forfeiture lists the identified campaigns, including those that have returned funds to the Government, in Ex. A(259) to (261). As evidenced at trial, the defendant’s interests in the political donations are forfeitable because the donations were made using the proceeds of the defendant’s wire fraud on customers and were themselves manifestation of his money laundering. (GX-1039; 1044; 1088; 1089; 1090). Continue Reading . Here [14] The airplanes listed at Ex. A(256) and (257) are the property listed in the bill of particulars. [15] The Government is also coordinating with the FTX Debtors, so that the estate retrieves some of the political contributions. In some circumstances, a political candidate or committee has sought to or did return funds to the estate rather than the Government. As of today, the Government understands that the estate has received $281,356 from 8 candidates and committees. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on March 15, 2024, from is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. storage.courtlistener

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