Samuel Bankman-Fried of course is presumed innocent of the criminal charges against him (including the recent Foreign Corrupt Practices Act charge – see here for the prior post) until proven otherwise by the government or a plea by the defendant.
As detailed in the prior post, the FCPA charge against Bankman-Fried focuses on an alleged bribe to Chinese officials to unfreeze certain trading accounts containing over $1 billion in cryptocurrency – which had been frozen by Chinese authorities – so that Bankman-Fried and others could use the assets to fund additional trading activity.
In other words, the DOJ alleges, Bankman-Fried conspired to violate the FCPA to help facilitate the overall financial fraud schemes he allegedly engaged in.
As detailed below, this is not the first time the FCPA was lurking in the background of a high-profile financial fraud case.
As discussed in this prior post, in 2009 the DOJ unsealed a criminal indictment against Robert Allen Stanford, Leroy King (the former chief of Antigua’s Financial Services Regulatory Commission) and others charging each with one count of conspiracy to commit mail, wire and securities fraud; seven counts of wire fraud; ten counts of mail fraud, and one count of conspiracy to commit money laundering stemming from a $7 billion investment fraud scheme. The indictment also charged Stanford and King with one count of conspiracy to obstruct a SEC investigation and one count of obstruction of an SEC investigation.
Although never charged with FCPA offenses, the DOJ alleged that Stanford and his co-defendants made false and misleading representations about the regulatory scrutiny of the Stanford International Bank Ltd. (SIBL) (an offshore bank controlled by Stanford and located on the island of Antigua) by Antiguan authorities, when, in fact, Stanford was making corrupt payments of more than $100,000 to King to ensure that the Antiguan bank regulatory authority that he headed did not accurately audit, or verify the assets reported in the bank’s financial statements.
In 2012, Stanford was convicted at trial of one count of conspiracy to commit wire and mail fraud, four counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct a SEC investigation, one count of obstruction of an SEC investigation and one count of conspiracy to commit money laundering. The jury also found that 29 financial accounts located abroad and worth approximately $330 million were proceeds of Stanford’s fraud and should be forfeited. Stanford was sentenced to 110 years in prison and other co-defendants were also convicted and sentenced to prison.
The case against King lingered, but in 2020 King pleaded guilty to one count of conspiracy to obstruct justice and one count of obstruction of justice for his role in obstructing the SEC investigation. In 2021, King was sentenced to 10 years in prison. As part of the plea agreement, King admitted that Stanford’s cash payments to King totaled approximately $520,963.87 over the course of the conspiracy. Stanford also provided King tickets to both Super Bowl XXXVIII in Houston (2004) and Super Bowl XL in Detroit (2006). In addition, Stanford provided King with repeated flights on private jets Stanford or SFG entities owned.
The Stanford matter, just like the Bankman-Fried matter, spawned a significant amount of civil litigation.
I was involved as an expert in one such matter in which the FCPA was lurking in the background.
The defendant was actually a major law firm and the issue addressed in my expert report was whether law firm attorneys participated in and/or aided and abetted Allen Stanford’s breach of fiduciary duties owed to Class Plaintiffs. Specifically, whether during the relevant time period, law firm attorneys were aware, or should have been aware as reasonably prudent attorneys given the circumstances, that Stanford and/or Stanford entities were breaching fiduciary duties owed to Class Plaintiffs by engaging in conduct in violation of the FCPA.
The FCPA issue was one of just many issues in the case and several other experts were involved as well.
Ultimately, the major law firm agreed to resolve the matter for $65 million.
