On September 7, Salame appeared in a Manhattan federal court to plead guilty to charges of conspiracy to make unlawful political campaign contributions and thereby defraud the Federal Election Commission (FEC), as well as conspiracy to operate an unlicensed money-transmitting business. Salame will face a sentencing hearing on March 6, 2024, where he could face up to five years in prison on each count (served consecutively).
The former co-CEO of FTX Digital Markets also agreed to forfeit $1,555,186,143, which represents “the property involved in [the money transmitting] offense.” Sadly, Salame admits that as a result of his “acts and/or omissions,” said billion-and-a-half “cannot be located upon the exercise of due diligence.”
In reality, Salame has agreed to surrender $6 million in cash, multiple real estate properties, ownership of East Rood Farm Corporation (which operates a tavern in Lenox, Massachusetts) and a 2021 Porsche. Salame must also pay $5.6 million to the FTX Debtors as restitution for his crimes.
Salame initially appeared to have escaped blowback from his involvement in the multi-billion-dollar fraud that led to last November’s bankruptcy of FTX, its affiliated market-maker Alameda Research, and countless other offshoots. The collapse of SBF’s former ‘crypto’ empire left untold numbers of customers with money stranded on FTX, along with ripple effects that continue to take down other companies in this sector.
But the Federal Bureau of Investigation (FBI) raided Salame’s home in April under unspecified circumstances. Last month brought word that Salame was negotiating a deal with federal prosecutors, even as he vowed to invoke his Fifth Amendment rights against self-incrimination if called to testify in SBF’s criminal trial next month.
In a document filed with the court, Salame and FTX engineering director Nishad Singh are shown to assist SBF “obscure his association with certain [political] contributions.” As Salame said in a private message to a friend, the idea was “to weed out anti crypto dems for pro crypto dems and anti crypto repubs for pro crypto repubs.”
The donations originated with funds from Alameda that were transferred via its subsidiaries into Salame and Singh’s accounts before being forwarded to political campaigns. All told, more than 300 contributions totaling “tens of millions of dollars” were made via these ‘straw donor’ shams. The contributions exceeded FEC limits, and the obfuscated journeys impaired and impeded the FEC’s reporting and enforcement functions.
As always, Thursday’s session was attended by Inner City Press, who quoted Salame saying he called his political contributions “loans, which I never intended to repay.” Salame—whose name apparently rhymes with ‘Salem’—said he knew what he was doing was prohibited and that SBF “supported” this ploy.
Salame was part of a two-pronged approach to cozy up to U.S. lawmakers, with SBF donating millions to Democratic party members and Salame doing likewise for Republican officials (including his girlfriend, Michelle Bond, a failed GOP primary candidate). Salame’s contributions totaled over $23 million in 2022 alone.
Thursday also saw Salame cop to deceiving U.S. banks to ensure stateside customers could continue to funnel cash to FTX without the exchange having to register as a money services business. This was done by establishing a shell company called North Dimension that Salame and SBF claimed was involved in “trading” and “market-making.”
Also playing a role in this North Dimension charade was FTX’s general counsel, Daniel Friedberg, whose criminal role in perpetuating SBF’s fraud is well documented. (And Friedberg’s criminal history predates FTX by over a decade.) Friedberg has yet to face any charges or strike his own deal, but the wheels of justice grind slowly.
Salame, who was released post-plea on a $1 million bond, is the fourth executive in SBF’s former empire to have reached a plea agreement with prosecutors, following Singh, FTX co-founder Zixio ‘Gary’ Wang, and former Alameda CEO Caroline Ellison. Unlike Salame, the other three have agreed to testify against SBF when his case comes to trial.
Damian Williams, U.S. Attorney for the Southern District of New York, issued a statement saying Salame “advance[d] the interests of FTX, Alameda Research, and his co-conspirators through an unlawful political influence campaign and through an unlicensed money transmitting business, which helped FTX grow faster and larger by operating outside of the law.”
Kaplan getting tired of herding cats
Meanwhile, SBF’s attempts to extricate himself from New York’s Metropolitan Detention Center (MDC) are headed for the U.S. Court of Appeals for the Second Circuit. In August, U.S. District Judge Lewis Kaplan revoked SBF’s bail after losing patience with SBF’s ongoing attempts to influence/intimidate potential witnesses against him.
A three-judge panel of the Second Circuit has agreed to hear arguments about why SBF shouldn’t remain behind bars while awaiting the October 3 start of his criminal trial. The date for this hearing has yet to be scheduled. Meanwhile, the Second Circuit court rejected SBF’s bid to secure his immediate release ahead of that three-judge hearing.
When we last left our frizzy-headed hero, he was refusing to meet with his own attorneys due to his dissatisfaction with (a) the narrow windows of time in which he was allowed to leave his prison cell, (b) MDC’s crappy Wifi, and (c) the crappy battery in his prison-supplied laptop.
This allegedly made it impossible for him to study all the Google Docs (NASDAQ: GOOGL) the prosecution intends to use as evidence against him at trial. Prosecutors countered that most of these are SBF’s own documents in his own Google account, meaning he had unfettered access to them during the seven months he was under house arrest at his parents’ home in California.
On August 30, Kaplan ordered both parties to submit proposals to navigate this dilemma. Prosecutors claimed they’d reached an agreement with SBF’s team to supply him with “air-gapped laptop access at the MDC” for 11 hours per day, Monday to Friday, with five-and-a-half hours access on Saturdays and Sundays.
SBF’s team responded that the prosecution “has not devised a plan that works in practice.” A frustrated Kaplan noted that it is “not entirely clear whether the defendant agrees with the factual statements contained in the government’s letter ‘on behalf of the parties.'” Kaplan gave the defense until Friday, September 8, to clarify whether or not it’s on board with the prosecution’s claims and, if not, to offer specifics on where they disagree.
Binance and Tether enter the chat
On Thursday, several new court documents were filed under seal in SBF’s case, opening up tantalizing possibilities as to what they might contain and why their contents are deemed worthy of hiding from public view.
Suspicions are mounting that the filings pertain to Binance, the criminal exchange once a minority stakeholder in FTX and whose boss, Changpeng ‘CZ’ Zhao, played a key role in ensuring FTX’s downfall. The U.S. Securities and Exchange Commission (SEC), which is suing Binance for violations of U.S. securities law, filed a document under seal last week, leading to speculation that it contained revelations that the U.S. Department of Justice (DoJ) wants to keep out of the public eye until it can file criminal charges against Binance.
The sealed FTX filing could also pertain to Tether, which sent over $36 billion of its USDT stablecoins to SBF’s companies before the roof fell in. Tether is widely expected to face its own federal charges based on its lengthy history of bank fraud, money laundering, and economic sanctions evasion. Assisting the DoJ in pursuing either Binance or Tether (or both) could be the only card SBF has left to play.
On September 6, crypto podcaster Tiffany Fong interviewed disgraced ‘pharma bro’ Martin Shkreli, who did his own stint at MDC before being sentenced to seven years in federal prison for securities fraud. Following SBF’s extradition from the Bahamas to the U.S. last December, Shkreli offered SBF tips on how to survive his MDC stay: tone down the effeminacy, develop a liking for hip-hop music, and “learn everything there is to know about gangs.”
Also on Wednesday’s discussion was another MDC veteran, Jeremy Lorenzo, who claimed the popular suspicion among SBF’s fellow inmates was that SBF was a child molester. This reportedly contributed to SBF being moved to the relative safety of MDC’s fourth floor, which is supposedly less volatile than the rest of the general population.
Perhaps more ominously, based on his discussions during his own incarceration, Shkreli suspects that many correctional officers at MDC may have been ‘crypto’ customers—possibly former FTX customers who lost cash when the exchange imploded. If we were SBF, we’d find ourselves a prison protector like fictitious French fraudster Louis Dega found in Steve McQueen. Pronto.
And speaking of former customers, the FBI is reportedly reaching out to FTX account holders, asking whether they’d be interested in discussing their experience with the exchange, whether they had funds stranded when FTX collapsed, and whether they’d preserved any documents related to their accounts. Word to the wise: fan fiction involving SBF’s vivisection doesn’t count.
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