The cryptocurrency industry is a young and rapidly growing one fraught with legal and economic risks. These risks can be exploited by ill-intentioned parties to fill their pockets and fund their lavish lifestyles. One such party is the disgraced founder of FTX, Sam Bankman-Fried (commonly called “SBF”), former darling of Silicon Valley and Wall Street. The FTX exchange was hailed as the gold standard for cryptocurrency, but a series of events led to a bank run and exposed the fraudulent scheme behind-the-scenes. Matt Stankiewicz joins Michael Volkov to discuss the legal ramifications of the fall of FTX and SBF.

Matt Stankiewicz is Partner at the Volkov Law Group, specializing in anti-bribery & corruption controls and compliance programs. Recently, he was responsible for conducting a global anti-corruption compliance audit and testing of Fortune 100 medical device company's activities in ten countries. 

Some ideas you’ll hear them explore are:

• Having well over 100 subsidiaries across the globe, FTX was the go-to cryptocurrency exchange, even allowing users to trade various derivative products. At its height, the peak daily trading volume on FTX was over $20 billion. 
• As it turned out, FTX was closely linked to a crypto trading firm called Alameda Research, founded by SBF, who owned 90% of it when it collapsed. It was a crypto hedge fund, Matt comments. 
• Alameda used FTX to do all their trading and investments, and enjoyed special privileges that were not revealed to the public or to investors. One such privilege was  exemption from FTX’s risk management software that required users to use some of their assets as collateral if they were trading on margin.
• Lack of regulatory clarity is a major risk in the cryptocurrency industry. This lack of clarity creates opportunities for fraud, as well as challenges for companies trying to comply with regulations. 
• Companies that adopt strong ethics and compliance programs can mitigate the risks of cryptocurrency and be more successful than those who do not.
• One of the biggest appeals of cryptocurrency is that you don't have to deal with an intermediary when transacting.



KEY QUOTE

“One of the benefits of cryptocurrency, which could have prevented a lot of this, is the fact that you can self-custody your assets.” 

Resources

Matt Stankiewicz on LinkedIn

Email Matt: [email protected] 

The Fall of FTX: The Legal Ramifications of the Collapse of Sam Bankman-Fried’s Cryptocurrency Empire (I of IV)