Tension is thick in the air as questions rise regarding the involvement of FTX lawyers in a $200M loan transaction from Alameda that was signed off by Gary Wang. This was taken a step further when the legal squad of Sam Bankman-Fried sought permission to examine the role of said lawyers in the matter. Earlier, Bankman-Fried was restrained from implicating FTX attorneys, who allegedly were involved in drafting and sanctioning the loans between Alameda and FTX.
US Judge Lewis Kaplan upheld the government’s call and ruled that any allusion to the participation of FTX attorneys during the trial would require the validation of Bankman-Fried’s lawyers. They’ve since asked to quiz Wang about the alleged contribution of the FTX counselors in arranging the loans given to FTX by Alameda.
Fueling the fire, the defense claims it might introduce promissory notes that symbolize the loans to Wang, who reportedly revealed to the prosecution that he didn’t expect FTX attorneys would pressure him to sign illicit arrangements. This recent turn of events is casting a cloud of speculation over what should usually be a clear-cut loan agreement.
As we traverse the rapidly changing location that is the global cryptocurrency space, examples like this highlight the need for robust legislation and policy. Comparatively, across the sea to Europe, Cyprus is tightening the screws on crypto regulation. The local Ministry of Finance seeks to amend existing law to better align with international standards for AML/CFT, set by the Financial Action Task Force (FATF), as well as the recommendations of the MONEYVAL report.
This change will require all service providers who deal with digital assets to register with the financial regulator, the Cyprus Securities and Exchange Commission (CySEC), which also introduced this provision in the proposed amendments. If this motion were to pass, penalties could range from up to €350,000 in fines to a prison sentence of up to five years or both.
Reflecting on these latest events, it seems the need for the right checks and balances is more crucial than ever. While the appeal of cryptocurrencies and blockchain has significantly increased, there is a fine line between risk and reward, and it appears regulators are pushing for increased definition. The path of clear-cut legislation would benefit all involved, ensuring transparency, and reducing room for ambiguity or illicit activities.