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According to The Wall Street Journal, which cited unnamed people familiar with the situation, federal prosecutors are examining the collapse of the cryptocurrency exchange FTX, which was formerly led by major Democratic contributor Sam Bankman-Fried.

Bankman-Fried and FTX are already being investigated by the SEC and the DOJ in connection with allegations that FTX transferred billions of dollars in customer assets to Alameda Research, a trading firm co-founded by Bankman-Fried. While the crypto market remains mostly unregulated, the unauthorized use of customer assets has exposed FTX, Bankman-Fried, and Alameda to fraud laws and American embezzlement, forcing the Manhattan United States’ attorney’s office to launch an investigation, according to the WSJ.

“What this will come down to is whether there were purposeful deception to persuade depositors or investors to part with their funds,” former Manhattan federal prosecutor Samson Enzer told the Wall Street Journal. “Were there misleading claims made, and the person that made them knew they were untrue and made them with the goal to deceive the investor?”

US attorneys would need to prove jurisdiction over the Bahamas-based FTX, especially because Bankman-Fried lived in the Bahamas. However, because FTX had an American subsidiary, FTX US, and Bankman-Fried had strong contacts with American regulators, prosecutors may be able to establish jurisdiction based on the fact that components of an alleged plan occurred on U.S. territory.

“The venue burden is not particularly significant,” Enzer told the WSH. “The government would claim that a single email would enough if it traveled via New York.”

On November 11, Alameda, FTX, and FTX US all filed for Chapter 11 bankruptcy in the United States.

According to Bloomberg, the Commodities Future Trading Commission (CFTC) is also looking into the crypto exchange and the former billionaire. Bankman-Fried contributed hundreds of thousands of dollars to congressional candidates on the Senate and House Agriculture Committees, which oversee the CTFC.

Additionally, he contributed over $27 million to the Democrat-aligned Protect Our Future PAC, which took $1 million of that money and spent it on Ohio Democratic Rep. Shontel Brown, a member of the House Agriculture Committee. Republican Sen. John Boozman and Republican Brad Finstad, were both recipients of contributions from American Dream Federal Action, a political action committee established by FTX Exec Ryan Salame.

Author: Blake Ambrose

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