Crypto legal developments this week: Courtroom updates and regulatory actions
A five-year trading prohibition was issued by the CFTC against former FTX and Alameda executives, while federal prosecutors challenged a dismissal motion filed by a soldier charged with profiting from intelligence about Nicolas Maduro's ousting.
Five-year trading prohibitions handed down to former FTX and Alameda Research executives
This past Tuesday, consent orders connected to a 2022 enforcement proceeding against Caroline Ellison, who previously served as CEO of Alameda Research, and Zixiao "Gary" Wang, co-founder of the FTX crypto exchange, were entered by the US District Court for the Southern District of New York (SDNY).
The directives handed down by the US Commodity Futures Trading Commission (CFTC) mandated that both Ellison and Wang face a five-year prohibition from trading in connection with their involvement in the cryptocurrency exchange's downfall. Additionally, the CFTC mandated that the former Alameda CEO serve a 10-year ban from registration, whereas Wang was given an eight-year registration prohibition.
As stated by CFTC enforcement director David Miller, the directives were a reflection of the "material assistance in the Commission's FTX-related investigations" provided by both Wang and Ellison. These civil proceedings stand apart from the criminal prosecutions concerning the misappropriation of customer assets at FTX, where Ellison received a two-year prison sentence and Wang was given time served.
Federal prosecutors challenge dismissal motion from Polymarket trader regarding $400,000 wager on Maduro
This past Wednesday, government attorneys representing the United States in SDNY submitted their opposition to the dismissal motion brought by Gannon Ken Van Dyke, an American soldier accused of generating over $400,000 through event contracts on the Polymarket prediction market platform by utilizing nonpublic intelligence. Van Dyke had connections to the military action that resulted in the removal of Venezuelan President Nicolás Maduro this past January.
The dismissal motion from the American soldier, which was filed on July 31, contained assertions that the Commodity Exchange Act, which forms the basis of three charges against him, exhibited "ambiguity" in categorizing event contracts as "swaps" falling under the CFTC's jurisdiction. In the filing submitted on Wednesday, federal government attorneys contended that Van Dyke "advances hypotheticals, edge cases, and ongoing litigation over state gaming laws" which were not necessary for consideration in order to proceed with the prosecution.
Van Dyke's motion asks the Court to make a factual determination not appropriate at the motion-to-dismiss stage. His argument relies on speculative assertions about facts, based on improper inferences from the Indictment and incorrect conclusions about the nature of the charge, to claim that facts do not amount to 'property.'
SDNY Deputy US Attorney Sean Buckley
As of this Friday, no ruling on the dismissal motion had been published to the public court docket by the court.