In December 2022, the Department of Justice announced criminal charges against Samuel Bankman-Fried arising from an “alleged wide-ranging scheme by [him] to misappropriate billions of dollars of customer funds deposited with FTX, the international cryptocurrency exchange [he] founded …, and mislead investors and lenders to FTX and to Alameda Research, the cryptocurrency hedge fund [he] also founded.”
Specifically, Bankman-Friend was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to defraud the Federal Election Commission and commit campaign finance violations.
As highlighted in this prior post, in March 2023 the DOJ filed a superseding indictment adding a Foreign Corrupt Practices Act conspiracy charge to the criminal charges Bankman-Fried is facing.
As alleged by the DOJ:
“In or about 2021, Bankman-Fried authorized and directed a bribe of at least $40 million to one or more Chinese government officials. The purpose of the bribe was to influence and induce one or more Chinese government officials to unfreeze certain Alameda trading accounts containing over $1 billion in cryptocurrency, which had been frozen by Chinese authorities. Bankman-Fried and others sought to regain access to the assets to fund additional Alameda trading activity, in order to assist Bankman-Fried and Alameda in obtaining and retaining business.”
As highlighted in this prior post, last month Bankman-Fried filed numerous pre-trial motions including a motion to dismiss the FCPA conspiracy charge (Count 13).
Recently, the DOJ responded as follows (certain citations omitted):
“Count Thirteen Sufficiently Alleges that the Defendant Directed and Authorized a Bribe in Order to Assist Alameda in Obtaining or Retaining Business
Count Thirteen alleges that the defendant conspired to violate the FCPA by directing a $40 million bribe to one or more Chinese officials in order to regain use by Alameda of trading capital worth approximately $1 billion, which had been frozen and was therefore not available for Alameda to use in its business activities. Contrary to the defendant’s argument, this Count sufficiently alleges that the bribe was made “in order to assist [a] domestic concern in obtaining or retaining business.” The “business nexus” or “business purpose” element of Section 78dd-2 requires proof that the unlawful payment was “to assist [the] domestic concern in obtaining or retaining business for or with, or directing business to, any person.” The Indictment tracks this statutory language […], which is ample ground on which to reject the defendant’s motion. Because “the business nexus element … does not go to the FCPA’s core of criminality,” an indictment “paraphrasing” the statute without alleging “details regarding what business is sought or how the results of the bribery are meant to assist” passes the test for sufficiency. United States v. Kay, 359 F.3d 738, 761 (5th Cir. 2004) (reversing district court’s dismissal of indictment that was barebones and did not recite any particularized facts concerning the business nexus element).
Even if the Court were to evaluate the factual allegations—which is unwarranted at this stage of the case, … —the Indictment sufficiently alleges that the bribes directed by the defendant were intended to assist the defendant, Alameda, and others in “obtaining or retaining business.” The FCPA applies “broadly” to payments intended to assist the payor, “either directly or indirectly,” in obtaining or retaining business. As the Fifth Circuit held in Kay, Congress intended “the statute to apply to payments that even indirectly assist in obtaining business or maintaining existing business operations in a foreign country.” 359 F.3d at 756 (emphasis added); see also United States v. Ho, 984 F.3d 191, 200 (2d Cir. 2020) (citing favorably Kay’s observation that “Congress was concerned about both the kind of bribery that leads to discrete contractual arrangements and the kind that more generally helps a domestic payor obtain or retain business for some person in a foreign country”). The Indictment alleges that the bribe was paid to regain access to frozen trading funds and the funds, once unfrozen, were used by Alameda in its business investments. These allegations make clear that the bribe was directly aimed at funding trading activity, Alameda’s core business, and a jury could easily conclude that these facts prove the business nexus element of the charge.
Case law supplies several examples of the ways in which business can directly or indirectly be obtained or retained through bribery. For example, in Donziger, it was a payment by a plaintiff’s attorney to a court-appointed expert to obtain favorable expert reports that indirectly made it more likely the attorney’s contingency litigation business “would benefit from a favorable judgment.” In Kay, the court hypothesized that more favorable tax treatment obtained through bribery indirectly could, for example, “reduce the beneficiary’s cost of doing business as to allow the beneficiary to underbid competitors,” “provide the margin of profit needed to fend off potential competition,” “make the difference between an operating loss and an operating profit,” and “free up funds to expend on legitimate lobbying.” The Kay court explained that the “fact question” for the jury was whether lowering or removing the foreign government-imposed disadvantage was “of assistance to the payor in obtaining or retaining business” and held that “[e]ven a modest imagination can hypothesize myriad ways that an unwarranted reduction in duties and taxes … could assist in obtaining or retaining business.” The facts alleged in the Indictment set forth a more direct business nexus than the facts at issue in Kay and Donziger, because rather than paying for a reduction in taxes or favorable expert reports, here the defendant is alleged to have directed a bribe in order to release $1 billion in assets that Alameda intended to use, and in fact did use, to fund its trading activities, allowing it to continue to obtain and retain business.
In a variation on the same argument, the defendant claims that the payments must be to obtain or retain business to which the person “would not otherwise be entitled.” But this requirement is found nowhere in the statute, and runs counter to the plain meaning of “retain.” See “Retain,” https://www.merriam-webster.com/dictionary/retain (defining “retain” as to “continue to have something” or to “keep possession of” it); see also H.R. Conf. Rep. No. 100- 576, at 918 (“retaining business” means the “carrying out of existing business”). And as the defense recognizes, the statute equally prohibits paying a bribe to accomplish an “unlawful result” as a “lawful result by some unlawful method or means,” The crime is properly pled, and therefore the defendant must await trial to challenge the Government’s evidence.
Finally, the defendant’s suggestion that Count Thirteen should be dismissed because the Indictment fails to identify the officials who froze the accounts or the bribe recipients by name, title, or government agency, should be swiftly rejected. Not only is there no requirement that an indictment contain those particulars, but the FCPA also does not require proof of the identity of the intended governmental recipient of a corrupt payment. Indeed, given that the FCPA prohibits using “any person” to facilitate the bribe to any “foreign official” or “any foreign political party,” the statute clearly contemplates situations in which the payor knows that a “foreign official” will ultimately receive a bribe but only the intermediary knows the foreign official’s specific identity. 15 U.S.C. § 78dd-2(a)(3); see, e.g., SEC v. Straub, 921 F. Supp. 2d 244, 265 (S.D.N.Y. 2013) (finding that a civil complaint alleging that bribes were paid to “Macedonian government officials” adequately pled the involvement of “foreign officials” under the FCPA where “there is no requirement that the ‘foreign official’ be specifically named and that reading such a requirement into the FCPA would be contrary to the statutory scheme”); SEC v. Jackson, 908 F. Supp. 2d 834, 850 (S.D. Tx. 2016) (“The Court seriously doubts that Congress intended to hold an individual liable under [the FCPA] only if he took great care to know exactly whom his agents would be bribing and what precise steps that official would be taking.”).”
