Sam Bankman-Fried, founder of the cryptocurrency exchange FTX, which faced a colossal collapse this year, was arrested in the Bahamas on Monday, and is facing criminal charges in the United States, according to a Bahamian official.
The Attorney General of the Bahamas, through spokesman Latrae Rahming, posted a statement on Twitter detailing the arrest. Bankman-Fried, commonly known as SBF, lives in the Bahamas, where the cryptocurrency exchange was also based.
“SBF’s arrest followed receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition,” the statement reads.
The U.S. Attorney for the Southern District of New York later tweeted that his office had filed a sealed indictment, which led to the arrest.
“We expect to move to unseal the indictment in the morning and will have more to say at that time,” Damian Williams said in a tweet from the office’s official Twitter account.
FTX, one of the largest cryptocurrency exchanges in the world, filed for bankruptcy protection in November, and Bankman-Fried resigned as CEO. The new CEO of FTX, John J. Ray III, is expected to testify in front of members of Congress on Tuesday, and in prepared remarks released Monday, he said that Bankman-Fried’s management of FTX was an “utter failure” that lacked any level of financial control.
MarketWatch staff writer Robert Schroeder contributed to this article.
The Federal Trade Commission on Thursday sued Microsoft Corp. to block its $69 billion deal to buy Activision Blizzard Inc.
The acquisition, which would be Microsoft’s MSFT, +1.07%
largest and the biggest ever in the video gaming industry, would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business,” the FTC claimed.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” Holly Vedova, director of the FTC’s Bureau of Competition, said in a statement. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
FTC members pointed to Microsoft’s record of “acquiring and using valuable gaming content to suppress competition from rival consoles,” including its acquisition of ZeniMax, parent company of Bethesda Softworks.
Microsoft President Brad Smith indicated the software giant will fight the lawsuit. In a statement, he said Microsoft has “been committed since Day One to addressing competition concerns.”
“While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” Smith said.
Activision CEO Bobby Kotick, in a statement, said the suit “sounds alarming, so I want to reinforce my confidence that this deal will close. The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge.”
Still, In recent weeks Microsoft has taken steps to demonstrate to regulators its acquisition of Activision would not give it an unfair advantage in the gaming market. On Tuesday, Microsoft said it would bring the “Call of Duty” franchise to Nintendo Co.’s 7974, -1.31%
Switch, a rival of Microsoft Xbox, and Microsoft has said it would make Call of Duty available on rival Sony Group Corp.’s SONY, -0.06%
PlayStation.
“It’s a bad idea,” Geoffrey Manne, president of the International Center for Law and Economics, said of the FTC’s lawsuit vs. Microsoft. “There may be markets in which some activities of some of these large tech companies cause concerns, but when they are expanding into new markets or enhancing competition in markets where they aren’t leaders, we should be encouraging them, not threatening them with lawsuits.”
The government’s action in administrative court marks the first serious regulatory threat to Microsoft’s business in more than two decades, when the Justice Department brought a landmark antitrust lawsuit against the software giant that took years and was settled in 2002. Since then, Microsoft had sidestepped antitrust scrutiny and Smith in particular has focused the glare on its tech rivals Amazon.com Inc. AMZN, +2.24%,
Apple Inc. AAPL, +1.19%,
Alphabet Inc.’s GOOGL, -0.94%
Shares of Microsoft are up 1% in trading Thursday. Activision’s ATVI, -1.33%
stock is down 1.5%.
The FTC’s lawsuit comes the same day it is heading to court in San Jose, Calif., in what is expected to be a three-week trial to bloc Meta’s $300 million acquisition of VR fitness app maker Within.
The trial is likely to showcase an intriguing look at the agency’s ability to stifle alleged anticompetitive conductusing largely untested legal theories at a time when Congress is sitting on tech antitrust legislation.
SAN JOSE, Calif. — A judge on Wednesday sentenced former Theranos executive Ramesh “Sunny” Balwani to nearly 13 years in prison for his role in the company’s blood-testing hoax — a sentence slightly longer than that given to the CEO, who was his lover and accomplice in one of Silicon Valley’s biggest scandals.
Balwani was convicted in July of fraud and conspiracy connected to the company’s bogus medical technology that duped investors and endangered patients. His sentencing came less than three weeks after Elizabeth Holmes, the company’s founder and CEO, received more than 11 years in prison for her part in the scheme.
The scandal revolved around the company’s false claims to have developed a device that could scan for hundreds of diseases and other potential problems with just a few drops of blood taken with a finger prick.
The case threw a bright light on Silicon Valley’s dark side, exposing how its culture of hype and boundless ambition could veer into lies.
Holmes, 38, could have gotten up to 20 years in prison — a penalty that U.S. District Judge Edward Davila could have imposed on Balwani, who spent six years as Theranos’ chief operating officer while remaining romantically involved with Holmes until a bitter split in 2016.
While on the witness stand in her trial, Holmes accused Balwani, 57, of manipulating her through years of emotional and sexual abuse. Balwani’s attorney has denied the allegations.
The two trials had somewhat different outcomes. Unlike Balwani, Holmes was acquitted on several charges of defrauding and conspiring against people who paid for Theranos blood tests that produced misleading results and could have pointed patients toward the wrong treatment. The jury in Holmes’ trial also deadlocked on three charges.
Balwani was convicted on all 12 felony counts, and his lawyers sought a far more lenient sentence of just four to 10 months in prison. Prosecutors for the Justice Department asked for 15 years. A probation report recommended nine years.
Duncan Levin, a former federal prosecutor who is now a defense attorney, described Balwani’s bid for a light sentence as “utterly unrealistic.” Levin suspects the judge may give greater weight to the Justice Department and the probation office recommendations, which mirror the sentences those agencies sought for Holmes.
The judge ultimately gave her 11 1/4 years in prison and recommended that the sentence be served in a low-security facility in Byran, Texas.
Federal prosecutors also want the judge to order Balwani to pay $804 million in restitution to defrauded investors — the same amount sought from Holmes. Davila deferred a decision on restitution during Holmes’ Nov. 18 sentencing until an unspecified future date.
In court documents, Balwani’s lawyers painted him as a hardworking immigrant who moved from India to the U.S. during the 1980s to become the first member of his family to attend college. He graduated from the University of Texas in 1990 with a degree in information systems.
He later moved to Silicon Valley, where he first worked as a computer programmer for Microsoft before founding an online startup that he sold for millions of dollars during the dot-com boom of the 1990s.
Balwani and Holmes met around the same time she dropped out of Stanford University to start Theranos in 2003. He became enthralled with her and her quest to revolutionize health care.
Balwani’s lawyers said he eventually invested about $5 million in a stake in Theranos that eventually became worth about $500 million on paper — a fraction of Holmes’ one-time fortune of of $4.5 billion.
That wealth evaporated after Theranos began to unravel in 2015 amid revelations that its blood-testing technology never worked as Holmes had boasted in glowing magazine articles that likened her to Silicon Valley visionaries such as Apple co-founder Steve Jobs.
Before Theranos’ downfall, Holmes teamed up with Balwani to raise nearly $1 billion from deep-pocketed investors that included software mogul Larry Ellison and media magnate Rupert Murdoch.
“Mr. Balwani is not the same as Elizabeth Holmes,” his lawyers wrote in a memo to the judge. “”He actually invested millions of dollars of his own money; he never sought fame or recognition; and he has a long history of quietly giving to those less fortunate.” Balwani’s lawyers also asserted that Holmes “was dramatically more culpable” for the Theranos fraud.
Echoing similar claims made by Holmes’s lawyers before her sentencing, Balwani’s attorneys also argued that he has been adequately punished by the intense media coverage of Theranos, which has been the subject of a book, documentary and award-winning TV series.
Balwani “has lost his career, his reputation and his ability to meaningfully work again,” his lawyers wrote.
Federal prosecutors cast Balwani as a ruthless, power-hungry accomplice in crimes that ripped off investors and imperiled people who received flawed results. The blood tests were to be available in a partnership with Walgreen’s that Balwani helped engineer.
“Balwani presented a fake story about Theranos’ technology and financial stability day after day in meeting after meeting,” the prosecutors wrote in their memo to the judge. “Balwani maintained this façade of accomplishments, after making the calculated decision that honesty would destroy Theranos.”
Former Theranos chief operating officer and president Ramesh “Sunny” Balwani was sentenced to nearly 13 years in prison Wednesday for fraud, after the unraveling of the blood-testing juggernaut prompted criminal charges in California federal court against both Balwani and Theranos founder Elizabeth Holmes, who on Nov. 18 was sentenced to more than 11 years in prison.
During the sentencing hearing, attorneys for Balwani attempted to pin the blame on Holmes, telling U.S. District Court Judge Edward J. Davila that “decisions were made by Elizabeth Holmes.”
Davila had set a sentencing range of 11 years plus 3 months to 14 years, but prosecutors today sought a 15-year sentence given his “significant” oversight role at Theranos’ lab business.
The final guideline sentence was 155 months, plus three years of probation. Davila set a Mar. 15, 2023, surrender date.
Sunny Balwani, former president of Theranos Inc., arrives at federal court in San Jose, California, on Wednesday, Dec. 7, 2022.
David Paul Morris | Bloomberg | Getty Images
Balwani and Holmes, former romantic partners, helmed Theranos as the company enjoyed a meteoric rise, attracting backers ranging from the DeVos family to news magnate Rupert Murdoch. It was one of Murdoch’s publications, The Wall Street Journal, that first reported on irregularities with Theranos’ purportedly revolutionary blood-testing machines.
As COO, Balwani managed both the laboratory business and the financial aspects of the company. Theranos was marred with repeated failures during his tenure, including falsified documents and erroneous test results.
“I am responsible for everything at Theranos,” Balwani said in a message to Holmes. Balwani assumed broad responsibility for day-to-day operations at the company.
Theranos claimed the machines required just a few drops of blood to run and could execute more than 1,000 tests. In reality, the Journal reported the company could only process a little over a dozen tests. The Journal’s reporting eventually prompted the company’s dissolution in 2018 and, later, the arrest of Balwani and Holmes on fraud charges.
Balwani’s sentencing in federal court marks the end of the Theranos saga, which enthralled the public and prompted documentary films and novel treatments.
With a star-studded investor list, a captivating founder who drew comparisons to Apple’s Steve Jobs, and a potentially revolutionary technology, the company for a time represented the apex of Silicon Valley ingenuity.
The revelations about Theranos brought about a stunning fall from grace for both Balwani and Holmes, who were in a relationship for much of their tenure at the company. Holmes accused Balwani of abuse in court proceedings, providing text messages and contemporaneous notes from their relationship as evidence.
“Kill the old Elizabeth,” Balwani purportedly told her.
Balwani perpetrated a “decade-long campaign of psychological abuse,” Holmes’ lawyers argued. Balwani is nearly 20 years older than Holmes, who testified that he managed the lab and financial side of the business.
This is a developing story. Please check back for updates.
A former Theranos executive learns Wednesday whether he will be punished as severely as his former lover and business partner for peddling the company’s bogus blood-testing technology that duped investors and endangered patients.
The sentencing for Ramesh “Sunny” Balwani, who was convicted in July of fraud and conspiracy, comes less than three weeks after Elizabeth Holmes, the company’s founder and CEO, received more than 11 years in prison for her role in the scheme. The scandal revolved around the company’s false claims to have developed a medical device that could scan for hundreds of diseases and other potential problems with just a few drops of blood taken with a finger prick.
The case threw a bright light on Silicon Valley’s dark side, exposing how its culture of hype and boundless ambition could veer into lies.
Holmes, 38, could have gotten up to 20 years in prison — a penalty that U.S. District Judge Edward Davila could now impose on Balwani, who spent six years as Theranos’ chief operating officer while remaining romantically involved with Holmes until a bitter split in 2016.
While on the witness stand in her trial, Holmes accused Balwani, 57, of manipulating her through years of emotional and sexual abuse. Balwani’s attorney has denied the allegations.
The two trials had somewhat different outcomes. Unlike Balwani, Holmes was acquitted on several charges of defrauding and conspiring against people who paid for Theranos blood tests that produced misleading results and could have pointed patients toward the wrong treatment. The jury in Holmes’ trial also deadlocked on three charges.
Balwani was convicted on all 12 felony counts, and his lawyers contend he deserves a far more lenient sentence of just four to 10 months in prison, preferably in home confinement. Prosecutors for the Justice Department are seeking 15 years. A probation report recommends nine years.
Duncan Levin, a former federal prosecutor who is now a defense attorney, described Balwani’s bid for a light sentence as “utterly unrealistic.” Levin suspects the judge may give greater weight to the Justice Department and the probation office recommendations, which mirror the sentences those agencies sought for Holmes.
The judge ultimately gave her 11 1/4 years in prison and recommended that the sentence be served in a low-security facility in Byran, Texas.
The Justice Department “has now conceded that both defendants deserve the same sentence, even though Balwani was convicted for far more counts,” Levin said. Since Holmes got an 11-year sentence, “it follows logically that he will get the same sentence.”
Federal prosecutors also want the judge to order Balwani to pay $804 million in restitution to defrauded investors — the same amount sought from Holmes. Davila deferred a decision on restitution during Holmes’ Nov. 18 sentencing until an unspecified future date.
In court documents, Balwani’s lawyers painted him as a hardworking immigrant who moved from India to the U.S. during the 1980s to become the first member of his family to attend college. He graduated from the University of Texas in 1990 with a degree in information systems.
He later moved to Silicon Valley, where he first worked as a computer programmer for Microsoft before founding an online startup that he sold for millions of dollars during the dot-com boom of the 1990s.
Balwani and Holmes met around the same time she dropped out of Stanford University to start Theranos in 2003. He became enthralled with her and her quest to revolutionize health care.
Balwani’s lawyers said he eventually invested about $5 million in a stake in Theranos that eventually became worth about $500 million on paper — a fraction of Holmes’ one-time fortune of of $4.5 billion.
That wealth evaporated after Theranos began to unravel in 2015 amid revelations that its blood-testing technology never worked as Holmes had boasted in glowing magazine articles that likened her to Silicon Valley visionaries such as Apple co-founder Steve Jobs.
Before Theranos’ downfall, Holmes teamed up with Balwani to raise nearly $1 billion from deep-pocketed investors that included software mogul Larry Ellison and media magnate Rupert Murdoch.
“Mr. Balwani is not the same as Elizabeth Holmes,” his lawyers wrote in a memo to the judge. “”He actually invested millions of dollars of his own money; he never sought fame or recognition; and he has a long history of quietly giving to those less fortunate.” Balwani’s lawyers also asserted that Holmes “was dramatically more culpable” for the Theranos fraud.
Echoing similar claims made by Holmes’s lawyers before her sentencing, Balwani’s attorneys also argued that he has been adequately punished by the intense media coverage of Theranos, which has been the subject of a book, documentary and award-winning TV series.
Balwani “has lost his career, his reputation and his ability to meaningfully work again,” his lawyers wrote.
Federal prosecutors cast Balwani as a ruthless, power-hungry accomplice in crimes that ripped off investors and imperiled people who received flawed results. The blood tests were to be available in a partnership with Walgreen’s that Balwani helped engineer.
“Balwani presented a fake story about Theranos’ technology and financial stability day after day in meeting after meeting,” the prosecutors wrote in their memo to the judge. “Balwani maintained this façade of accomplishments, after making the calculated decision that honesty would destroy Theranos.”
NEW YORK — Donald Trump’s company was convicted of tax fraud on Tuesday in a case brought by the Manhattan District Attorney, a significant repudiation of financial practices at the former president’s business.
A jury found two corporate entities at the Trump Organization guilty on all 17 counts, including conspiracy charges and falsifying business records.
The verdict came on the second day of deliberations following a trial in which the Trump Organization was accused of being complicit in a scheme by top executives to avoid paying personal income taxes on job perks such as rent-free apartments and luxury cars.
The conviction is a validation for New York prosecutors, who have spent three years investigating the former president and his businesses, though the penalties aren’t expected to be severe enough to jeopardize the future of Trump’s company.
As punishment, the Trump Organization could be fined up to $1.6 million — a relatively small amount for a company of its size, though the conviction might make some of its future deals more complicated.
Trump, who recently announced he was running for president again, has said the case against his company was part of a politically motivated “witch hunt” waged against him by vindictive Democrats.
Trump himself was not on trial but prosecutors alleged he “knew exactly what was going on” with the scheme, though he and the company’s lawyers have denied that.
The case against the company was built largely around testimony from the Trump Organization’s former finance chief, Allen Weisselberg, who previously pleaded guilty to charges that he manipulated the company’s books and his own compensation package to illegally reduce his taxes.
Weisselberg testified in exchange for a promised five-month jail sentence.
To convict the Trump Organization, prosecutors had to convince jurors that Weisselberg or his subordinate, Senior Vice President and Controller Jeffrey McConney, were “high managerial” agents acting on the company’s behalf and that the company also benefited from his scheme.
Trump Organization lawyers repeated the mantra “Weisselberg did it for Weisselberg” throughout the monthlong trial. They contended the executive had gone rogue and betrayed the company’s trust. No one in the Trump family or the company was to blame, they argued.
Though he testified as a prosecution witness, Weisselberg also attempted to take responsibility on the witness stand, saying nobody in the Trump family knew what he was doing.
“It was my own personal greed that led to this,” an emotional Weisselberg testified.
Weisselberg, who pleaded guilty to dodging taxes on $1.7 million in fringe benefits, testified that he and McConney conspired to hide that extra compensation from his income by deducting their cost from his pre-tax salary and issuing falsified W-2 forms.
During his closing argument, prosecutor Joshua Steinglass attempted to refute the claim that Trump knew nothing about the scheme. He showed jurors a lease Trump signed for Weisselberg’s company-paid apartment and a memo Trump initialed authorizing a pay cut for another executive who got perks.
“Mr. Trump is explicitly sanctioning tax fraud,” Steinglass argued.
The verdict doesn’t end Trump’s battle with Manhattan District Attorney Alvin Bragg, a Democrat who took office in January.
Bragg has said that a related investigation of Trump that began under his predecessor, District Attorney Cyrus Vance Jr., is “active and ongoing.”
In that wide-ranging probe, investigators have examined whether Trump misled banks and others about the value of his real estate holdings, golf courses and other assets — allegations at the heart of New York Attorney General Letitia James’ pending lawsuit against the former president and his company.
The district attorney’s office has also investigated whether any state laws were broken when Trump’s allies made payments to two women who claimed to have had sexual affairs with the Republican years ago.
Near the end of his tenure last year, Vance directed deputies to present evidence to a grand jury for a possible indictment of Trump. After taking office, though, Bragg let that grand jury disband so he could give the case a fresh look.
On Monday, he confirmed that a new lead prosecutor had been brought on to handle that investigation, signaling again that it was still active.
NEW YORK — Donald Trump’s company was convicted of tax fraud on Tuesday in a case brought by the Manhattan District Attorney, a significant repudiation of financial practices at the former president’s business.
The guilty verdict came on the second day of deliberations following a trial in which the Trump Organization was accused of being complicit in a scheme by top executives to avoid paying personal income taxes on job perks such as rent-free apartments and luxury cars.
The conviction is a validation for New York prosecutors, who have spent three years investigating the former president and his businesses, though the penalties aren’t expected to be severe enough to jeopardize the future of Trump’s company.
As punishment, the Trump Organization could be fined up to $1.6 million — a relatively small amount for a company of its size, though the conviction might make some of its future deals more complicated.
Trump, who recently announced he was running for president again, has said the case against his company was part of a politically motivated “witch hunt” waged against him by vindictive Democrats.
FTX CEO Sam Bankman-Fried attends a press conference at the FTX Arena in downtown Miami on Friday, June 4, 2021.
Matias J. Ocner | Miami Herald | Tribune News Service | Getty Images
Sam Bankman-Fried, the disgraced former CEO of FTX — the bankrupt cryptocurrency exchange that was worth $32 billion a few weeks ago — has a real knack for self-promotional PR. For years, he cast himself in the likeness of a young boy genius turned business titan, capable of miraculously growing his crypto empire as other players got wiped out. Everyone from Silicon Valley’s top venture capitalists to A-list celebrities bought the act.
But during Bankman-Fried’s press junket of the last few weeks, the onetime wunderkind has spun a new narrative – one in which he was simply an inexperienced and novice businessman who was out of his depth, didn’t know what he was doing, and crucially, didn’t know what was happening at the businesses he founded.
It is quite the departure from the image he had carefully cultivated since launching his first crypto firm in 2017 – and according to former federal prosecutors, trial attorneys and legal experts speaking to CNBC, it recalls a classic legal defense dubbed the “bad businessman strategy.”
At least $8 billion in customer funds are missing, reportedly used to backstop billions in losses at Alameda Research, the hedge fund he also founded. Both of his companies are now bankrupt with billions of dollars worth of debt on the books. The CEO tapped to take over, John Ray III, said that “in his 40 years of legal and restructuring experience,” he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” This is the same Ray who presided over Enron’s liquidation in the 2000s.
In America, it is not a crime to be a lousy or careless CEO with poor judgement. During his recent press tour from a remote location in the Bahamas, Bankman-Fried really leaned into his own ineptitude, largely blaming FTX’s collapse on poor risk management.
At least a dozen times in a conversation with Andrew Ross Sorkin, he appeared to deflect blame to Caroline Ellison, his counterpart (and one-time girlfriend) at Alameda. He says didn’t know how extremely leveraged Alameda was, and that he just didn’t know about a lot of things going on at his vast empire.
Bankman-Fried admitted he had a “bad month,” but denied committing fraud at his crypto exchange.
Fraud is the kind of criminal charge that can put you behind bars for life. With Bankman-Fried, the question is whether he misled FTX customers to believe their money was available, and not being used as collateral for loans or for other purposes, according to Renato Mariotti, a former federal prosecutor and trial attorney who has represented clients in derivative-related claims and securities class actions.
“It sure looks like there’s a chargeable fraud case here,” said Mariotti. “If I represented Mr. Bankman-Fried, I would tell him he should be very concerned about prison time. That it should be an overriding concern for him.”
But for the moment, Bankman-Fried appears unconcerned with his personal legal exposure. When Sorkin asked him if he was concerned about criminal liability, he demurred.
“I don’t think that — obviously, I don’t personally think that I have — I think the real answer is it’s not — it sounds weird to say it, but I think the real answer is it’s not what I’m focusing on,” Bankman-Fried told Sorkin. “It’s — there’s going to be a time and a place for me to think about myself and my own future. But I don’t think this is it.”
Comments such as these, paired with the lack of apparent action by regulators or authorities, have helped inspire fury among many in the industry – not just those who lost their money. The spectacular collapse of FTX and SBF blindsided investors, customers, venture capitalists and Wall Street alike.
Bankman-Fried did not respond to a request for comment. Representatives for his former law firm, Paul, Weiss, did not immediately respond to comment. Semafor reported earlier that Bankman-Fried’s new attorney was Greg Joseph, a partner at Joseph Hage Aaronson.
Both of Bankman-Fried’s parents are highly respected Stanford Law School professors. Semafor also reported that another Stanford Law professor, David Mills, was advising Bankman-Fried.
Mills, Joseph and Bankman-Fried’s parents did not immediately respond to requests for comment.
Bankman-Fried could face a host of potential charges – civil and criminal – as well as private lawsuits from millions of FTX creditors, legal experts told CNBC.
For now, this is all purely hypothetical. Bankman-Fried has not been charged, tried, nor convicted of any crime yet.
Richard Levin is a partner at Nelson Mullins Riley & Scarborough, where he chairs the fintech and regulation practice. He’s been involved in the fintech industry since the early 1990s, and has represented clients before the Securities and Exchange Commission, Commodity Futures Trading Commission and Congress. All three of those entities have begun probing Bankman-Fried.
There are three different, possibly simultaneous legal threats that Bankman-Fried faces in the United States alone, Levin told CNBC.
First is criminal action from the U.S. Department of Justice, for potential “criminal violations of securities laws, bank fraud laws, and wire fraud laws,” Levin said.
A spokesperson for the U.S. Attorney’s Office for the Southern District of New York declined to comment.
Securing a conviction is always challenging in a criminal case.
Mariotti, the former federal prosecutor is intricately familiar with how the government would build a case. He told CNBC, “prosecutors would have to prove beyond a reasonable doubt that Bankman-Fried or his associates committed criminal fraud.”
“The argument would be that Alameda was tricking these people into getting their money so they could use it to prop up a different business,” Mariotti said.
“If you’re a hedge fund and you’re accepting customer funds, you actually have a fiduciary duty [to the customer],” Mariotti said.
Prosecutors could argue that FTX breached that fiduciary duty by allegedly using customer funds to artificially stabilize the price of FTX’s own FTT coin, Mariotti said.
But intent is also a factor in fraud cases, and Bankman-Fried insists he didn’t know about potentially fraudulent activity. He told Sorkin that he “didn’t knowingly commingle funds.”
“I didn’t ever try to commit fraud,” Bankman-Fried said.
Beyond criminal charges, Bankman-Fried could also be facing civil enforcement action. “That could be brought by the Securities Exchange Commission, and the Commodity Futures Trading Commission, and by state banking and securities regulators,” Levin continued.
“On a third level, there’s also plenty of class actions that can be brought, so there are multiple levels of potential exposure for […] the executives involved with FTX,” Levin concluded.
The Department of Justice is most likely to pursue criminal charges in the U.S. The Wall Street Journal reported that the DOJ and the SEC were both probing FTX’s collapse, and were in close contact with each other.
That kind of cooperation allows for criminal and civil probes to proceed simultaneously, and allows regulators and law enforcement to gather information more effectively.
But it isn’t clear whether the SEC or the CFTC will take the lead in securing civil damages.
An SEC spokesperson said the agency does not comment on the existence or nonexistence of a possible investigation. The CFTC did not immediately respond to a request for comment.
“The question of who would be taking the lead there, whether it be the SEC or CFTC, depends on whether or not there were securities involved,” Mariotti, the former federal prosecutor, told CNBC.
SEC Chairman Gary Gensler, who met with Bankman-Fried and FTX executives in spring 2022, has said publicly that “many crypto tokens are securities,” which would make his agency the primary regulator. But many exchanges, including FTX, have crypto derivatives platforms that sell financial products like futures and options, which fall under the CFTC’s jurisdiction.
“For selling unregistered securities without a registration or an exemption, you could be looking at the Securities Exchange Commission suing for disgorgement — monetary penalties,” said Levin, who’s represented clients before both agencies.
“They can also sue, possibly, claiming that FTX was operating an unregistered securities market,” Levin said.
Then there are the overseas regulators that oversaw any of the myriad FTX subsidiaries.
The Securities Commission of The Bahamas believes it has jurisdiction, and went as far as to file a separate case in New York bankruptcy court. That case has since been folded into FTX’s main bankruptcy protection proceedings, but Bahamian regulators continue to investigate FTX’s activities.
Court filings allege that Bahamian regulators have moved customer digital assets from FTX custody into their own. Bahamian regulators insist that they’re proceeding by the book, under the country’s groundbreaking crypto regulations — unlike many nations, the Bahamas has a robust legal framework for digital assets.
But crypto investors aren’t sold on their competence.
“The Bahamas clearly lack the institutional infrastructure to tackle a fraud this complex and have been completely derelict in their duty,” Castle Island Ventures partner Nic Carter told CNBC. (Carter was not an FTX investor, and told CNBC that his fund passed on early FTX rounds.)
“There is no question of standing. U.S. courts have obvious access points here and numerous parts of Sam’s empire touched the U.S. Every day the U.S. leaves this in the hands of the Bahamas is a lost opportunity,” he continued.
Investors who have lost their savings aren’t waiting. Class-action suits have already been filed against FTX endorsers, like comedian Larry David and football superstar Tom Brady. One suit excoriated the celebrity endorsers for allegedly failing to do their “due diligence prior to marketing [FTX] to the public.”
FTX’s industry peers are also filing suit against Bankman-Fried. BlockFi sued Bankman-Fried in November, seeking unnamed collateral that the former billionaire provided for the crypto lending firm.
FTX and Bankman-Fried had previously rescued BlockFi from insolvency in June, but when FTX failed, BlockFi was left with a similar liquidity problem and filed for bankruptcy protection in New Jersey.
Bankman-Fried has also been sued in Florida and California federal courts. He faces class-action suits in both states over “one of the great frauds in history,” a California court filing said.
The largest securities class-action settlement was for $7.2 billion in the Enron accounting fraud case, according to Stanford research. The possibility of a multibillion-dollar settlement would come on top of civil and criminal fines that Bankman-Fried faces.
But the onus should be on the U.S. government to pursue Bankman-Fried, Carter told CNBC, not on private investors or overseas regulators.
“The U.S. isn’t shy about using foreign proxies to go after Assange — why in this case have they suddenly found their restraint?”
Wire fraud is the most likely criminal charge Bankman-Fried would face. If the DOJ were able to secure a conviction, a judge would look to several factors to determine how long to sentence him.
Braden Perry was once a senior trial lawyer for the CFTC, FTX’s only official U.S. regulator. He’s now a partner at Kennyhertz Perry, where he advises clients on anti-money laundering, compliance and enforcement issues.
Based on the size of the losses, if Bankman-Fried is convicted of fraud or other charges, he could be behind bars for years — potentially for the rest of his life, Perry said. But the length of any potential sentence is hard to predict.
“In the federal system, each crime always has a starting point,” Perry told CNBC.
Federal sentencing guidelines follow a numeric system to determine the maximum and minimum allowable sentence, but the system can be esoteric. The scale, or “offense level,” starts at one, and maxes out at 43.
A wire fraud conviction rates as a seven on the scale, with a minimum sentence ranging from zero to six months.
But mitigating factors and enhancements can alter that rating, Perry told CNBC.
“The dollar value of loss plays a significant role. Under the guidelines, any loss above $550 million adds 30 points to the base level offense,” Perry said. FTX customers have lost billions.
“Having 25 or more victims adds 6 points, [and] use of certain regulated markets adds 4,” Perry continued.
In this hypothetical scenario, Bankman-Fried would max out the scale at 43, based on those enhancements. That means Bankman-Fried could be facing life in federal prison, without the possibility of supervised release, if he’s convicted on a single wire fraud offense.
But that sentence can be reduced by mitigating factors – circumstances that would lessen the severity of any alleged crimes.
“In practice, many white-collar defendants are sentenced to lesser sentences than what the guidelines dictate,” Perry told CNBC, Even in large fraud cases, that 30-point enhancement previously mentioned can be considered punitive.
Bankman-Fried could also face massive civil fines. Bankman-Fried was once a multibillionaire, but claimed he was down to his last $100,000 in a conversation with CNBC’s Sorkin at the DealBook Summit last week.
“Depending on what is discovered as part of the investigations by law enforcement and the civil authorities, you could be looking at both heavy monetary penalties and potential incarceration for decades,” Levin told CNBC.
In the most famous fraud case in recent years, Bernie Madoff was arrested within 24 hours of federal authorities learning of his multibillion-dollar Ponzi scheme. But Madoff was in New York and admitted to his crime on the spot.
The FTX founder is in the Bahamas and hasn’t admitted wrongdoing. Short of a voluntary return, any efforts to apprehend him would require extradition.
With hundreds of subsidiaries and bank accounts, and thousands of creditors, it’ll take prosecutors and regulators time to work through everything.
Similar cases “took years to put together,” said Mariotti. At FTX, where record keeping was spotty at best, collecting enough data to prosecute could be much harder. Expenses were reportedly handled through messaging software, for example, making it difficult to pinpoint how and when money flowed out for legitimate expenses.
In Enron’s bankruptcy, senior executives weren’t charged until nearly three years after the company went under. That kind of timeline infuriates some in the crypto community.
“The fact that Sam is still walking free and unencumbered, presumably able to cover his tracks and destroy evidence, is a travesty,” said Carter.
But just because law enforcement is tight-lipped, that doesn’t mean they’re standing down.
“People should not jump to the conclusion that something is not happening just because it has not been publicly disclosed,” Levin told CNBC.
Could he just disappear?
“That’s always a possibility with the money that someone has,” Perry said, although Bankman-Fried claims he’s down to one working credit card. But Perry doesn’t think it’s likely. “I believe that there has been likely some negotiation with his attorneys, and the prosecutors and other regulators that are looking into this, to ensure them that when the time comes […] he’s not fleeing somewhere,” Perry told CNBC.
In the meantime, Bankman-Fried won’t be resting easy as he waits for the hammer to drop. Rep. Maxine Waters extended a Twitter invitation for him to appear before a Dec. 13 hearing.
Bankman-Fried responded on Twitter, telling Waters that if he understands what happened at FTX by then, he’d appear.
Correction: Caroline Ellison is Bankman-Fried’s counterpart at Alameda. An earlier version misspelled her name.
Just hours after filing for Chapter 11 bankruptcyin New Jersey on Monday, cryptocurrency lender BlockFi filed a lawsuit against a holding company by FTX founder Sam Bankman-Fried over his shares in trading platform Robinhood, the Financial Times reported.
The suit was filed against Bankman-Fried’s vehicle Emergent Fidelity Technologies, of whom BlockFi is seeking to recover unpaid collateral.
The filing – also lodged in New Jersey – says BlockFi entered into a pledge agreement with Emergent on Nov. 9 stating that an unnamed borrower was obliged to pledge “certain shares of common stock” and has breached the agreement by failing to comply with its payment obligations.
The Financial Times reports the collateral in question is Bankman-Fried’s 7.6% stake in Robinhood which he bought earlier this year.
“Emergent has defaulted on its obligations under the pledge agreement and failed to satisfy its obligations thereunder despite written notice of default and acceleration,” the lawsuit filing says.
The lawsuit also named London-based brokerage ED&F Man Capital Markets for refusing to “transfer the collateral” to BlockFi.
“This is a highly complex matter,” a spokesperson for ED&F Man Capital Markets told MarketWatch in an emailed statement.
“We cannot comment on matters that are subject to legal proceedings but will of course comply with any direction given by the judge,” they added.
On Monday, BlockFi, who was once valued at $3 billion, filed for bankruptcy protection after becoming the latest company to be pushed over the edge from the collapse of crypto exchange FTX.
The lawsuit is the latest headache for Bankman-Fried, who is already the subject of a number of investigations in the U.S. and the Bahamas – where FTX was based. The downfall of FTX has triggered a chain reaction of crypto-casualties including crypto financial-services firm Genesis.
A Delaware business owner has been sentenced to 30 days of incarceration for storming the U.S. Capitol after seeing the riot erupt on a Tinder date’s television and taking an Uber ride to join the mob’s attack, court records show.
U.S. District Judge Thomas Hogan also on Friday ordered Jeffrey Schaefer to pay a $2,000 fine and $500 in restitution for his participation in the Jan. 6, 2021, riot in Washington.
On the eve of then-President Donald Trump‘s “Stop the Steal” rally on Jan. 6, Schaefer drove from Delaware to northern Virginia to spend the night at the home of a woman whom he had met on the Tinder online dating app. The next day, he decided to take an Uber ride to the Capitol after seeing the riot unfold on TV at his date’s home in Alexandria.
“He had the Uber driver drop him off near the west front of the Capitol and he approached the Capitol from that drop off point,” Justice Department prosecutor Anita Eve wrote in a court filing.
Schaefer entered the Capitol though a broken window near the Senate Wing doors, joined other rioters in chanting and spent approximately 28 minutes inside the building before leaving through a door, prosecutors said. He posted several images of the riot on Facebook, including one showing a pile of destroyed media equipment.
Schaefer, 36, of Milton, Delaware, was arrested in January 2022, He pleaded guilty in August to one count of parading, demonstrating or picketing in a Capitol building, a misdemeanor punishable by a maximum sentence of six months behind bars.
Defense attorney Joshua Insley noted that Schaefer wasn’t accused of engaging in any violence or destructive conduct on Jan. 6, when Congress had convened a joint session to certify the results of President Joe Biden’s 2020 electoral victory.
Schaefer owns a charter transportation company based in Milton. Once a “committed supporter” of Trump, Schaefer now believes he was “manipulated and used by those who hold power and will never face any consequences,” his lawyer said.
“While Mr. Schaefer accepts responsibility for his actions, he was guided and urged every step of the way by no less of an authority than the President of the United States and a majority of Republican Senators and Congressman that continued to repeat the ‘Big Lie’ that the election had been stolen by the Democrats,” Insley wrote.
More than 900 people have been charged with Capitol riot-related federal crimes. Over 460 of them have pleaded guilty, mostly to misdemeanor offenses. Over 320 of them have been sentenced, with roughly half of them receiving terms of imprisonment ranging from seven days to 10 years.
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For full coverage of the Capitol riot, go to https://www.apnews.com/capitol-siege
Theranos founder Elizabeth Holmes was sentenced Friday to more than 11 years in prison for fraud after deceiving investors about the purported efficacy of her company’s blood-testing technology. She was ordered to surrender on April 27.
Holmes was convicted in January in the U.S. District Court for the Northern District of California. She cried while speaking to the court ahead of her sentencing on Friday.
“I loved Theranos. It was my life’s work,” Holmes said. “My team meant the world to me. I am devastated by my failings. I’m so so sorry. I gave everything I had to build my company.”
Her defense team argued she should face a maximum sentence of 18 months, according to court filings. Instead, she was given 135 months, which amounts to 11 years and three months, behind bars.
The Wall Street Journal first broke the story of how Theranos’ blood-testing technology was struggling to meet expectations in 2015. Whistleblowers and other witnesses came forth to provide detailed accounts of how Holmes and former operating chief Ramesh “Sunny” Balwani deceived patients, partners, investors and employees about the company’s progress and the capabilities of its technology.
Once valued at $9 billion by private investors, Theranos shut down in 2018.
“Thank you for having me. Thank you for the courtesy and respect you have shown me,” she said Friday. “I have felt deep pain for what people went through because I failed them. To investors, patients, I am sorry.”
Prosecutors sought a 15 year sentence for the pregnant 38-year-old former billionaire and Silicon Valley celebrity. In July, Balwani, who was romantically involved with Holmes years earlier, was found guilty of 12 criminal fraud charges. His sentencing is set for next month.
U.S. District Court Judge Edward Davila, who presided over Holmes’ trial, handed down the sentence.
The erstwhile billionaire had attempted to move for a new trial after a former employee appeared at her doorstep in August to speak with her. Holmes’ partner, Billy Evans, told the court that the former employee made remorseful remarks at their shared residence.
But that employee, Adam Rosendorff, told the court that his remarks were due to distress at the thought of a child spending time without their mother. The Theranos founder gave birth in July to her first child, and is expecting another.
Holmes’ sentencing comes as another young tech former billionaire icon, Sam Bankman-Fried, faces a daunting future, following the sudden collapse of his cryptocurrency exchange FTX last week. Bankman-Fried hasn’t been charged with a crime, but he’s in legal jeopardy after revelations that his company was unable to give depositors their money back because some of it was used to fund risky, losing bets.
Theranos founder and former chief executive Elizabeth Holmes was sentenced to 135 months, or over 11 years, in prison, putting an endpoint on the unraveling of a onetime vigorously hyped Silicon Valley startup that collapsed under allegations of fraud.
The sentence, handed down from U.S. District Judge Edward Davila, came after Holmes was convicted in January of defrauding investors in the blood-testing company, which purported to have technology that could identify diseases from a pinprick of blood from the tip of a finger.
Prior to the sentencing, Holmes had sought more lenient treatment, while prosecutors aimed for more. Holmes had requested up to 18 months in prison, along with home confinement and community service, according to The Wall Street Journal. Prosecutors sought 15 years in prison, a three-year supervised release and restitution of $800 million, the Journal said.
Holmes had until April 27 to surrender, and 14 days to appeal the conviction, according to the Journal. Her lawyers said they would seek permission to keep her out of prison on bail, pending appeal, the Journal said.
Founded in 2003, Theranos’ value over the years ballooned to $9 billion. But the company’s pitch of simple-to-use blood-testing technology — which attracted the likes of the Walton and Murdoch families, along with former U.S. Secretary of State Henry Kissinger — began to fall apart in 2015, after reporting from the Wall Street Journal raised questions about the claims’ veracity.
The Securities and Exchange Commission in 2018 charged Holmes and former president Ramesh “Sunny” Balwani with what the agency called “massive fraud,” leading Holmes to give up control of the company. Criminal charges, and the company’s dissolution, followed later that year.
A federal judge on Friday will decide whether disgraced Theranos CEO Elizabeth Holmes should serve a lengthy prison sentence for duping investors and endangering patients while peddling a bogus blood-testing technology.
Holmes’ sentencing in the same San Jose, California, courtroom where she was convicted on four counts of investor fraud and conspiracy in January marks a climactic moment in a saga that has been dissected in an HBO documentary and an award-winning Hulu TV series about her meteoric rise and mortifying downfall.
U.S. District Judge Edward Davila will take center stage as he weighs the federal government’s recommendation to send Holmes, 38, to federal prison for 15 years. That’s less than the maximum sentence of 20 years she could face, but her legal team is asking for incarceration of no more than 18 months, preferably served in home confinement.
Her lawyers have argued that Holmes deserves more lenient treatment as a well-meaning entrepreneur who is now a devoted mother with another child on the way. Their arguments were supported by more than 130 letters submitted by family, friends and former colleagues praising Holmes.
A probation report also submitted to Davila recommended a nine-year prison sentence for Holmes.
Prosecutors want Holmes to pay $804 million in restitution. The amount covers most of the nearly $1 billion that Holmes raised from a list of sophisticated investors that included software magnate Larry Ellison, media mogul Rupert Murdoch, and the Walton family behind Walmart.
While wooing investors, Holmes leveraged a high-powered Theranos board that included former U.S. Defense Secretary James Mattis, who testified against her during her trial, and two former U.S. Secretaries of State, Henry Kissinger and the late George Shultz, whose son submitted a statement blasting Holmes for concocting a scheme that played Shultz “for the fool.”
Davila’s judgment – and Holmes’ reporting date for a potential stint in prison — could be affected by her second pregnancy in two years. After giving birth to a son shortly before her trial started last year, Holmes became pregnant at some point while free on bail this year.
Although her lawyers didn’t mention the pregnancy in a 82-page memo submitted to Davila last week, the pregnancy was confirmed in a letter from her current partner, William “Billy” Evans, that urged the judge to be merciful.
In that 12-page letter, which included pictures of Holmes doting on their 1-year-old son, Evans mentioned that Holmes participated in a Golden Gate Bridge swimming event earlier this year while pregnant. He also noted Holmes suffered through a case of COVID-19 in August while pregnant. Evans didn’t disclose Holmes’ due date in his letter.
Duncan Levin, a former federal prosecutor who is now a defense attorney, predicted that Davila’s sentencing decision won’t be swayed by the pregnancy, but expects the judge to allow her to remain free until after the baby is born.
“She will be no more of a flight risk after she is sentenced than she was while awaiting sentencing,” Levin said. “We have to temper our sentences with some measure of humanity.”
The pregnancy makes it more likely Davila will be criticized no matter what sentence he imposes, predicted Amanda Kramer, another former federal prosecutor.
“There is a pretty healthy debate about what kind of sentence is needed to effect general deterrence to send a message to others who are thinking of crossing that line from sharp salesmanship into material misrepresentation,” Kramer said.
Federal prosecutor Robert Leach emphatically declared Holmes deserves a severe punishment for engineering a scam that he described as one of the most egregious white-collar crimes ever committed in Silicon Valley. In a scathing 46-page memo, Leach told the judge he has an opportunity to send a message that curbs the hubris and hyperbole unleashed by the tech boom of the past decade.
Holmes “preyed on hopes of her investors that a young, dynamic entrepreneur had changed healthcare,” Leach wrote. “And through her deceit, she attained spectacular fame, adoration, and billions of dollars of wealth.”
Even though Holmes was acquitted by a jury on four counts of fraud and conspiracy tied to patients who took Theranos blood tests, Leach also asked Davila to factor in the health threats posed by Holmes’ conduct.
Holmes’ lawyer Kevin Downey painted her as a selfless visionary who spent 14 years of her life trying to revolutionize health care with a technology that was supposed to be able to scan for hundreds of diseases and other aliments with just a few drops of blood.
Although evidence submitted during her trial showed the tests produced wildly unreliable results that could have steered patients in the wrong direction, her lawyers asserted Holmes never stopped trying to perfect the technology until Theranos collapsed in 2018. They also pointed out that Holmes never sold any of her Theranos shares — a stake valued at $4.5 billion in 2014 when Holmes was being hailed as the next Steve Jobs on the covers of business magazines.
Defending herself against criminal charges has left Holmes with “substantial debt from which she is unlikely to recover,” Downey wrote, suggesting that she is unlikely ever to pay any restitution that Davila might order as part of her sentence.
“Holmes is not a danger to society,” Downey wrote.
Downey also asked Davila to consider the alleged sexual and emotional abuse Holmes suffered while she was involved romantically with Ramesh “Sunny” Balwani, who became a Theranos investor, top executive and eventually an accomplice in her crimes. Balwani, 57, is scheduled to be sentenced Dec. 7 after being convicted in a July trial on 12 counts of fraud and conspiracy.
SAN JOSE, Calif. — A federal judge on Friday will decide whether disgraced Theranos CEO Elizabeth Holmes should serve a lengthy prison sentence for duping investors and endangering patients while peddling a bogus blood-testing technology.
Holmes’ sentencing in the same San Jose, California, courtroom where she was convicted on four counts of investor fraud and conspiracy in January marks a climactic moment in a saga that has been dissected in an HBO documentary and an award-winning Hulu TV series about her meteoric rise and mortifying downfall.
U.S. District Judge Edward Davila will take center stage as he weighs the federal government’s recommendation to send Holmes, 38, to federal prison for 15 years. That’s slightly less than the maximum sentence of 20 years she could face, but far longer than her legal team’s attempt to limit her incarceration to no more than 18 months, preferably served in home confinement.
Her lawyers have argued that Holmes deserves more lenient treatment as a well-meaning entrepreneur who is now a devoted mother with another child on the way. Their arguments were supported by more than 130 letters submitted by family, friends and former colleagues praising Holmes.
A probation report also submitted to Davila recommended a nine=year prison sentence for Holmes.
Prosecutors also want Holmes to pay $804 million in restitution. The amount covers most of the nearly $1 billion that Holmes raised from a list of sophisticated investors that included software magnate Larry Ellison, media mogul Rupert Murdoch, and the Walton family behind Walmart.
While wooing investors, Holmes leveraged a high-powered Theranos board that included former U.S. Defense Secretary James Mattis, who testified against her during her trial, and two former U.S. Secretaries of State, Henry Kissinger and the late George Shultz, whose son submitted a statement blasting Holmes for concocting a scheme that played Shultz “for the fool.”
Davila’s judgment – and Holmes’ reporting date for a potential stint in prison — could be affected by the former entrepreneur’s second pregnancy in two years. After giving birth to a son shortly before her trial started last year, Holmes became pregnant at some point while free on bail this year.
Although her lawyers didn’t mention the pregnancy in a 82-page memo submitted to Davila last week, the pregnancy was confirmed in a letter from her current partner, William “Billy” Evans, that urged the judge to be merciful.
In that 12-page letter, which included pictures of Holmes doting on their 1-year-old son, Evans mentioned that Holmes participated in a Golden Gate Bridge swimming event earlier this year while pregnant. He also noted Holmes suffered through a case of COVID in August while pregnant. Evans didn’t disclose Holmes’ due date in his letter.
Duncan Levin, a former federal prosecutor who is now a defense attorney, predicted that Davila’s sentencing decision won’t be swayed by the pregnancy, but expects the judge to allow her to remain free until after the baby is born.
“She will be no more of a flight risk after she is sentenced that she was while awaiting sentencing,” Levin said. “We have to temper our sentences with some measure of humanity.”
The pregnancy makes it more likely Davila will be criticized no matter what sentence he imposes, predicted Amanda Kramer, another former federal prosecutor.
“There is a pretty healthy debate about what kind of sentence is needed to effect general deterrence to send a message to others who are thinking of crossing that line from sharp salesmanship into material misrepresentation,” Kramer said.
Federal prosecutor Robert Leach emphatically declared Holmes deserves a severe punishment for engineering a scam that he described as one of the most egregious white-collar crimes ever committed in Silicon Valley. In a scathing 46-page memo, Leach told the judge he has an opportunity to send a message that curbs the hubris and hyperbole unleashed by the tech boom of the past decade.
Holmes “preyed on hopes of her investors that a young, dynamic entrepreneur had changed healthcare,” Leach wrote. “And through her deceit, she attained spectacular fame, adoration, and billions of dollars of wealth.”
Even though Holmes was acquitted by a jury on four counts of fraud and conspiracy tied to patients who took Theranos blood tests, Leach also asked Davila to factor in the health threats posed by Holmes’ conduct.
Holmes’ lawyer Kevin Downey painted her as a selfless visionary who spent 14 years of her life trying to revolutionize health care with a technology that was supposed to be able to scan for hundreds of diseases and other aliments with just a few drops of blood.
Although evidence submitted during her trial showed the tests produced wildly unreliable results that could have steered patients in the wrong direction, her lawyers asserted Holmes never stopped trying to perfect the technology until Theranos collapsed in 2018. They also pointed out that Holmes never sold any of her Theranos shares — a stake valued at $4.5 billion in 2014 when Holmes was being hailed as the next Steve Jobs on the covers of business magazines.
Defending herself against criminal charges has left Holmes with “substantial debt from which she is unlikely to recover,” Downey wrote, suggesting that she is unlikely ever to pay any restitution that Davila might order as part of her sentence.
“Holmes is not a danger to society,” Downey wrote.
Downey also asked Davila to consider the alleged sexual and emotional abuse Holmes suffered while she was romantically with Ramesh “Sunny” Balwani, who became a Theranos investor, top executive and eventually an accomplice in her crimes. Balwani, 57, is scheduled to be sentenced Dec. 7 after being convicted in a July trial on 12 counts of fraud and conspiracy.
NEW YORK — Donald Trump’s longtime finance chief took the witness stand Tuesday at the Trump Organization’s criminal tax fraud trial, making his long-awaited turn as the star prosecution witness after pleading guilty to evading taxes on $1.7 million in company-paid perks, including a Manhattan apartment and luxury cars.
Allen Weisselberg, a senior adviser and former chief financial officer at Trump’s company, has intimate knowledge of the company’s financial dealings from his nearly five decades working there. But he is not expected to implicate Trump or any members of the Trump family in his testimony.
Weisselberg’s testimony is required as part of a plea agreement he reached in August. If he testifies truthfully and meets other terms of the deal, he’ll be sentenced to five months in jail and could be released with good behavior after about 100 days. Otherwise, he could be sentenced to up to 15 years in prison.
Weisselberg will remain free on bail until he is formally sentenced following the company’s trial.
The Trump Organization — the entity through which former President Donald Trump manages his real estate holdings, marketing deals and other ventures — is accused of helping some top executives avoid paying income taxes on compensation they got in addition to their salaries over a 15-year span.
Prosecutors argue that the Trump Organization — through its subsidiaries Trump Corp. and Trump Payroll Corp. — is liable for the scheme because Weisselberg, the longtime finance chief, was a “high managerial agent” entrusted to act on behalf of the company and its various entities.
In pleading guilty, the 75-year-old Weisselberg pinned blame for the scheme on himself and other top company executives, including senior vice president and controller, Jeffrey McConney, who testified for the trial’s first five days.
The Trump Organization has denied wrongdoing. Its lawyers allege that Weisselberg concocted the scheme on his own, without Trump or the Trump family’s knowledge, and that the company didn’t benefit from his actions. If convicted, the company could be fined more than $1 million.
The company’s lawyers spent part of Monday and Tuesday’s court sessions attempting to preempt Weisselberg testimony, using their cross-examination questioning to underscore their assertion that others at the company, including Trump, knew nothing about the scheme.
The first two prosecution witnesses — McConney and company accounts payable supervisor Deborah Tarasoff — portrayed Weisselberg as a rogue agent who stressed secrecy about his various financial arrangements.
Both witnesses worked under Weisselberg, and both testified that they aided him in hiding benefits — telling jurors that they were just following orders. Tarasoff agreed with a defense lawyer’s description of Weisselberg as an exacting, authoritarian but deeply trusted micromanager.
Tarasoff said she prepared company checks for Weisselberg to pay his apartment rent and car lease payments. She said she prepared checks from Trump’s private account to pay tuition for private schooling for Weisselberg’s grandchildren.
In September 2016, as Trump’s presidential election neared, Tarasoff said Weisselberg ordered her to start deleting notations about some of the transactions in the company’s bookkeeping system. Tarasoff said she didn’t think Weisselberg was asking her to do anything illegal. But even if he had, she said: “I guess I would because he’s the boss and he told me to do it.”
Weisselberg is the only person to face criminal charges so far in the Manhattan district attorney’s investigation of the company.
Weisselberg started working for the company in 1973, when it was run by Trump’s father, Fred. Following his July 2021 arrest, the company changed his title from CFO to senior adviser. The CFO position remains vacant.
Prosecutors alleged that the Trump Organization gave untaxed fringe benefits to senior executives, including Weisselberg, for 15 years. Weisselberg alone was accused of defrauding the federal government, state and city out of more than $900,000 in unpaid taxes and undeserved tax refunds.
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Follow Michael Sisak on Twitter at twitter.com/mikesisak and send confidential tips by visiting https://www.ap.org/tips/.
HARTFORD, Conn. — Search giant Google has agreed to a $391.5 million settlement with 40 states to resolve an investigation into how the company tracked users’ locations, state attorneys general announced Monday.
The states’ investigation was sparked by a 2018 Associated Press story, which found that Google continued to track people’s location data even after they opted out of such tracking by disabling a feature the company called “location history.”
The attorneys general called the settlement a historic win for consumers, and the largest multistate settlement in U.S history dealing with privacy.
It comes at a time of mounting unease over privacy and surveillance by tech companies that has drawn growing outrage from politicians and scrutiny by regulators. The Supreme Court’s ruling in June ending the constitutional protections for abortion raised potential privacy concerns for women seeking the procedure or related information online.
“This $391.5 million settlement is a historic win for consumers in an era of increasing reliance on technology,” Connecticut Attorney General William Tong said in a statement. “Location data is among the most sensitive and valuable personal information Google collects, and there are so many reasons why a consumer may opt-out of tracking.”
Google, based in Mountain View, California, said it fixed the problems several years ago.
“Consistent with improvements we’ve made in recent years, we have settled this investigation, which was based on outdated product policies that we changed years ago,” company spokesperson Jose Castaneda said in a statement.
Location tracking can help tech companies sell digital ads to marketers looking to connect with consumers within their vicinity. It’s another tool in a data-gathering toolkit that generates more than $200 billion in annual ad revenue for Google, accounting for most of the profits pouring into the coffers of its corporate parent, Alphabet — which has a market value of $1.2 trillion.
In its 2018 story, The AP reported that many Google services on Android devices and iPhones store users’ location data even if they’ve used a privacy setting that says it will prevent Google from doing so. Computer-science researchers at Princeton confirmed these findings at the AP’s request.
Storing such data carries privacy risks and has been used by police to determine the location of suspects.
The AP reported that the privacy issue with location tracking affected some 2 billion users of devices that run Google’s Android operating software and hundreds of millions of worldwide iPhone users who rely on Google for maps or search.
The attorneys general who investigated Google said a key part of the company’s digital advertising business is location data, which they called the most sensitive and valuable personal data the company collects. Even a small amount of location data can reveal a person’s identity and routines, they said.
Google uses the location information to target consumers with ads by its customers, the state officials said.
The attorneys general said Google misled users about its location tracking practices since at least 2014, violating state consumer protection laws.
As part of the settlement, Google also agreed to make those practices more transparent to users. That includes showing them more information when they turn location account settings on and off and keeping a webpage that gives users information about the data Google collects.
The shadowy surveillance brought to light by The AP troubled even some Google engineers, who recognized the company might be confronting a massive legal headache after the story was published, according to internal documents that have subsequently surfaced in consumer-fraud lawsuits.
Arizona Attorney General Mark Brnovich filed the first state action against Google in May 2020, alleging that the company had defrauded its users by misleading them into believing they could keep their whereabouts private by turning off location tracking in the settings of their software.
Arizona settled its case with Google for $85 million last month, but by then attorneys general in several other states and the District of Columbia had also pounced on the company with their own lawsuits seeking to hold Google accountable for its alleged deception.
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Gordon reported from Washington, D.C. AP Technology writer Michael Liedtke in San Ramon, California, contributed to this report.
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This story has been updated to reflect that the Supreme Court ruling on abortion was issued in June, not last month.
Billionaire Dallas Maverick’s owner Mark Cuban recently offered his perspective on the implosion of crypto platform FTX late this week.
“‘That’s somebody running a company that’s just dumb-as-fucking greedy.’”
— Mark Cuban
Cuban, speaking on Friday at a conference in Washington, D.C. hosted by Sports Business Journal, shared the view that avarice was at the root of the downfall of one-time crypto darling Sam Bankman-Fried, whose firm FTX Group just filed for chapter 11 bankruptcy.
“So what does Sam Bankman [Fried] do, he’s just–‘gimme more, gimme more, gimme more.’ So I’m gonna borrow money, loan it to an affiliated company and hope and pretend to myself that the FTT tokens that are in there on my balance sheet are gonna to sustain their value.”
FTX’s collapse marks a stunning turnabout for a company, which was once valued at $26 billion, and whose founder, Bankman-Fried was viewed by many in the crypto industry as a venerable actor in the Wild West of digital exchanges.
On Thursday, the 30-year-old entrepreneur tweeted: “I f—ked up, and should have done better,” referencing the collapse of his exchange.
Embattled FTX, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, an affiliated hedge fund Alameda Research, and dozens of other related companies also filed a bankruptcy petition in Delaware on Friday morning. Boasting a nearly $16 billion fortune recently, Sam Bankman Fried’s net worth had all but evaporated in the wake of the FTX implosion, according to the Bloomberg Billionaires Index.
The price of FTX’s native token FTT went down about 88.8% over the past seven days to around $2.74, according to CoinMarketCap data.
The U.S. Justice Department and the Securities and Exchange Commission are looking into the crypto exchange to determine whether any criminal activity or securities offenses were committed.
Regulators and are examining whether FTX used customer deposits to fund bets at Alameda Research, a no-no in traditional markets, according to reports.
Cuban, who is one of the stars of the investing show “Shark Tank” and owns the NBA’s Dallas Mavericks, is a big investor in crypto and blockchain-related platforms. According to a CNBC report, he has said that 80% of his investments that aren’t on Shark Tank are crypto-centric.
Cuban mentioned Voyager in his Friday interview. Representatives for the billionaire investor didn’t immediately respond to a request for comment.
The Mavericks owner took to Twitter on Saturday to say that the crypto implosions “have been banking blowups. Lending to the wrong entity, misvaluations of collateral, arrogant arbs, followed by depositor runs.”
LOS ANGELES — Los Angeles County prosecutors will look into past cases involving a former police captain who allegedly tipped off CBS executive Les Moonves that a woman had filed a confidential police report accusing him of sexual assault, the district attorney’s office said Friday.
“Our office is dismayed” by the allegations against Cory Palka and will look at cases in which he was a witness to determine whether they must be reviewed and defense counsel notified, the DA’s office said in a statement.
Past prosecutions could be compromised by questions about Palka’s credibility, although the office said it was still trying to figure out the number of cases in which he played a role.
The prosecutor’s office also said it would consider criminal charges against Palka if investigators present them with evidence of police misconduct.
Palka, who formerly was in charge of the Los Angeles Police Department’s Hollywood Division, was something of a minor celebrity himself. He posed with performers receiving stars on the Walk of Fame, ran security for the Oscars awards show, was photographed on red carpets and even landed a bit part playing himself on the television drama “Bosch.”
Video footage of Palka went viral during the racial injustice protests in Los Angeles in the aftermath of George Floyd’s death when he took a knee with protesters on Sunset Boulevard in Hollywood.
However, from 2008 to 2014, Palka not only was a cop but he provided private security for Moonves at the Grammy Awards, which CBS produced.
Now he is the subject of an LAPD internal investigation, and the state attorney general’s office is probing any criminal elements after a report by the New York attorney general’s office said he conspired with CBS to conceal sexual assault allegations against Moonves.
Palka, who retired as a commander last year after nearly 35 years with the LAPD, did not return requests for comment, nor did an attorney for Moonves and CBS.
The report, which didn’t name Palka, was part of a settlement announced Wednesday by New York Attorney General Letitia James in which CBS and Moonves, its former president, agreed to pay $30.5 million for keeping shareholders in the dark while executives tried to prevent the allegations from becoming public.
Weeks after the #MeToo movement erupted with sex abuse allegations against film mogul Harvey Weinstein in 2017, Phyllis Golden-Gottlieb reported to police in the Hollywood Division that she had been sexually assaulted by Moonves in 1986 and 1988 when they worked together at Lorimar Productions, the studio behind “Dallas” and “Knots Landing.”
A law enforcement official briefed on the matter confirmed that Golden-Gottlieb, who died this summer, was the woman involved in the leak by Palka. The official was not authorized to speak publicly and did so on condition of anonymity.
Golden-Gottlieb went public with her accusations at the time Ronan Farrow reported on allegations against Moonves in The New Yorker in September 2018. Within hours of that publication, Moonves quit.
Nearly a year later, the woman filed a police report, which was marked “confidential” in three places. Within hours, Palka tipped off CBS and later met personally with Moonves and another CBS executive, the New York AG’s report said.
The report said the complainant had requested confidentiality. It cited the California Constitution, which prohibits disclosure of confidential information to “a defendant, a defendant’s attorney, or any other person acting on behalf of the defendant that could be used to locate or harass the victim or the victim’s family.”
The captain told CBS that he instructed police officers investigating the complaint to “admonish” the woman not to go to the media with her allegations. He also put CBS officials in touch with the lead investigator.
When the allegations ultimately became public, the captain sent a note to a CBS contact saying, “We worked so hard to try to avoid this day.” He sent Moonves a note saying he was sorry and, “I will always stand with, by and pledge my allegiance to you.”
Moonves acknowledged having relations with three of his accusers, but said they were consensual. He denied attacking anyone, saying in a statement at the time that “Untrue allegations from decades ago are now being made against me.”
The Los Angeles County district attorney declined to file criminal charges against Moonves in 2018, saying the statute of limitations from Golden-Gottlieb’s allegations had expired.
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Associated Press writer Michael R. Sisak in New York contributed.
LOS ANGELES — As the former captain in charge of the Hollywood Division of the Los Angeles Police Department, Cory Palka was a star himself.
The towering cop with a telegenic smile hobnobbed with celebrities getting stars on the Walk of Fame, ran security for the Oscars awards show and even landed a bit part playing himself on the television drama “Bosch” about a talented but troubled maverick LAPD detective.
But Palka’s ties to the entertainment industry and his allegiances were under scrutiny Thursday after prosecutors said he leaked a sexual assault victim’s confidential police report to the accused, former CBS leader Les Moonves, for whom Palka served as a private bodyguard for years.
The LAPD said it was conducting an internal affairs investigation into Palka’s conduct and the state attorney general was probing any criminal elements after a report said he conspired with CBS to conceal sexual assault allegations against Moonves.
The report, which didn’t name Palka, was part of a settlement announced Wednesday by New York Attorney General Letitia James in which CBS and Moonves, its former president, agreed to pay $30.5 million. About $6 million is going to sexual assault and harassment programs. The rest will go to shareholders kept in the dark while executives tried to prevent allegations from becoming public and at least one benefited by unloading shares before news broke.
Weeks after the #MeToo movement erupted with sex abuse allegations against film mogul Harvey Weinstein in 2017, Phyllis Golden-Gottlieb reported to police in the Hollywood Division that she had been sexually assaulted by Moonves in 1986 and 1988 when they worked together at Lorimar Productions, the studio behind “Dallas” and “Knots Landing.”
A law enforcement official briefed on the matter confirmed that Golden-Gottlieb, who died this summer, was the woman involved in the leak by Palka. The official was not authorized to speak publicly and did so on condition of anonymity.
Jim Gottlieb said in an email to The Associated Press that he was “shocked and very disappointed” that his mother’s report was leaked to CBS. He said his mother was never looking for money, she just didn’t want Moonves to “get away with what he did” and was satisfied that her report contributed to his downfall.
“We would like to think the police are looking out for us, the victims, and not the perpetrators,” Gottlieb said. “This sounds just like what you hear about certain police departments being in cahoots with organized crime.”
Attorney Gloria Allred, who represented Golden-Gottlieb, said in nearly a half-century of legal practice, she had never heard of police tipping off a suspect to an investigation and said it could have a chilling effect on other women coming forward to report abuse.
“It’s very, very disturbing,” Allred said. “It’s really outrageous if they did that. And I have to ask, what were their motives if that, in fact occurred? Why were they, for example, trying to curry favor with CBS? Did they receive anything in return?”
Golden-Gottlieb went public with her accusations at the time Ronan Farrow reported on allegations against Moonves in The New Yorker in September 2018. Within hours of that publication, Moonves quit.
Nearly a year earlier, the ink was just drying on her police report — which was marked “confidential” in three places — when Palka tipped off CBS, the report said. Palka then met personally with Moonves and another CBS executive.
The New York AG’s report said the complainant had requested confidentiality. It cited the California Constitution, which prohibits disclosure of confidential information to “a defendant, a defendant’s attorney, or any other person acting on behalf of the defendant that could be used to locate or harass the victim or the victim’s family.”
The captain told CBS that he instructed police officers investigating the complaint to “admonish” the woman not to go to the media with her allegations. He also put CBS officials in touch with the lead investigator.
CBS immediately went into damage control mode, with an executive alerting a member of the news staff to stay close to the phone because they “have a situation.” He told another staffer not to miss any messages and added: “I wouldn’t bother you if this wasn’t serious.”
When the allegations ultimately became public, Palka sent a note to a CBS contact saying, “We worked so hard to try to avoid this day.” He sent Moonves a note saying he was sorry and, “I will always stand with, by and pledge my allegiance to you.”
From 2008 to 2014, Palka had provided private security for Moonves at the Grammy Awards, which CBS produced.
Jessica Levinson, a professor at Loyola Law School and former president of the Los Angeles Ethics Commission, said a police officer has to adhere to legal and ethical obligations as a member of the force and can’t violate those duties when providing private security. Typically, those two roles wouldn’t be in conflict.
“The question is on a case by case basis as to whether or not it leads to divided loyalty,” Levinson said. “But the truth is, most of the time it really shouldn’t be a tough call.”
Patti Giggans, executive director of the nonprofit Peace Over Violence in Los Angeles, said she expects the scandal to have repercussions that extend beyond victims being afraid to report assaults to the LAPD to advocates reevaluating relationships they have built with detectives.
Palka, who retired as a commander last year after nearly 35 years with LAPD, said in his LinkedIn profile that he grew up with eight siblings in a low-income housing project in the Mar Vista community and had spent most of his life in Los Angeles.
Video footage of Palka went viral during the racial injustice protests in Los Angeles in the aftermath of George Floyd’s death when he took a knee with protesters on Sunset Boulevard in Hollywood.
He was incident commander at the Academy Awards and “numerous high profile events related to the entertainment industry,” his profile said.
In Hollywood, he was a frequent fixture on red carpets and at Walk of Fame ceremonies, posing with celebrities like Lynda Carter, Jack Black and Stacy Keach. He was personally thanked during Mark Hamill’s star ceremony and posed with Hamill, Harrison Ford and George Lucas.
The Hollywood Chamber Community Foundation’s honored him in 2019 as one of the “Heroes of Hollywood.”
“Celebrity always equates to power and influence,” said attorney Debra Katz, who specializes in sexual-harassment law. “It becomes very troubling when you have a town of celebrities that have access to the police — when they have a dual role where they provide security and they hobnob with one another.”
Palka did not return requests for comment Thursday, nor did an attorney for Moonves and CBS.
Moonves acknowledged having relations with three of his accusers, but said they were consensual. He denied attacking anyone, saying in a statement at the time that “Untrue allegations from decades ago are now being made against me.”
The Los Angeles County district attorney declined to file criminal charges against Moonves in 2018, saying the statute of limitations from Golden-Gottlieb’s allegations had expired.
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Associated Press writer Michael R. Sisak in New York contributed.
Former U.S. President Donald Trump throws caps as he attends a rally in Warren, Michigan, U.S., October 1, 2022.
Dieu-nalio Chery | Reutersm
Former President Donald Trump and related defendants are opposing New York Attorney General Letitia James’ call for an independent monitor to oversee the Trump Organization’s submission of financial statements to third parties as part of a bombshell fraud lawsuit, according to a new court filing.
James has asked a judge to name a watchdog who would review financial information that the company and defendants give lenders, insurers and accountants pending the outcome of the lawsuit.
The attorney general’s office requested the watchdog as part of a sweeping September lawsuit accusing Trump, three of his adult children, their company and others of a decadelong fraud related to financial statements.
In their court filing Wednesday, Trump’s lawyers said James’ request for an outside monitor for the company is “a politically motivated attempt to nationalize a highly successful private enterprise.” The lawyers argued that it “is precluded under our Constitution and must and should therefore be rejected.”
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James’ suit in Manhattan Supreme Court accuses the former president and the Trump Organization of repeatedly misstating the value of various real estate assets and his net worth on financial statements that were used to obtain loans, insurance policies and tax benefits.
She claims Trump overstated his net worth by billions of dollars, and has asked federal prosecutors in Manhattan and the IRS to investigate him for possible federal crimes. James said evidence obtained during her three-year civil probe of Trump indicated possible crimes of bank fraud and making false statements to financial institutions.
James’ suit seeks about $250 million in penalties.
The Trump defense filing Wednesday flatly rejects her allegations of fraud.
“Even the excerpted and selected transcripts and documents fail to show the Trump Parties have ever even been late on so much as one loan payment over the past decade much less engaged in any actual fraud,” the filing said.
Trump’s lawyers accuse the attorney general of manufacturing “a bill of grievances based on nothing more than a misapplication of standard accounting principles and gross exaggeration of routine valuation differences between counter parties to complex commercial lending transactions,” according to the filing.
The filing said the monitor she requests would possess “staggeringly overbroad” powers because the person would have access to “all of the Trump Parties’ financial records, compelling the Trump Parties to make onerous informational disclosures to the monitor, and grant the monitor operational oversight over the financial affairs of private businesses.”
James’ request “would effectively allow the NYAG to nationalize the Trump business empire,” the lawyers claimed.
