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Client Alert: FTX Fraud Case Highlights Risks and Rewards of Cooperation in Crypto Cases

The recent sentencing of Zixiao "Gary" Wang, a tech expert involved in the $11 billion FTX fraud, underscores the importance of cooperation with authorities in complex and high-stakes crypto cases. Wang, who admitted to helping FTX's founder Sam Bankman-Fried manipulate the code of the bankrupt crypto exchange to siphon off funds from customers and investors, received no jail time but was ordered to forfeit his share of the ill-gotten gains. He was credited for his prompt and substantial cooperation, which included providing crucial information about the code-based ways in which Bankman-Fried committed the fraud and testifying against him at trial.

Wang's lenient sentence contrasts sharply with the harsh outcomes for his co-defendants, who either pleaded guilty or were convicted after trial. Bankman-Fried, who was described by prosecutors as the mastermind of one of the greatest financial frauds in American history, was sentenced to 25 years in prison and ordered to forfeit over $11 billion. Caroline Ellison, Bankman-Fried's former top lieutenant, and ex-girlfriend, received a two-year prison term despite her cooperation, which the court acknowledged was courageous but came too late. Ryan Salame, Bankman-Fried's former friend and political guru, was sentenced to 10 years in prison and ordered to forfeit over $1 billion. Nishad Singh, FTX's former chief engineer, avoided prison but was ordered to forfeit over $1 billion and to be supervised for three years.

The FTX fraud case illustrates the challenges and opportunities that crypto cases present for white-collar defense attorneys and their clients. Crypto cases often involve complex and novel legal and technical issues, such as the nature and regulation of digital assets, the jurisdiction and authority of various agencies, and the interpretation and application of existing laws and rules to emerging technologies and markets. Crypto cases also often involve large amounts of money, multiple jurisdictions, and international cooperation, which can increase the exposure and pressure for the defendants. At the same time, crypto cases also offer the possibility of cooperation, which can significantly reduce the penalties and consequences for the defendants, especially if they have valuable information and expertise that can assist the authorities in their investigations and prosecutions.

As a firm with significant experience in white-collar defense and crypto law, we advise our clients to be proactive and strategic in assessing their potential exposure and options in the face of crypto-related inquiries or charges. We can help our clients navigate the complex and evolving legal and regulatory landscape, protect their rights and interests, and negotiate favorable outcomes with the authorities. We can also help our clients leverage their cooperation, if appropriate and advisable, to obtain the maximum benefits and recognition for their assistance. We are closely monitoring the developments and trends in crypto cases, and we are ready to assist our clients with any crypto-related issues or challenges they may face.

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