Gibson Dunn Plays 'Too Big To Fail' Argument For Their Crypto Client
Is it though?
As Sam Bankman-Fried sits in a Bahamian jail awaiting the inevitable extradition request from the United States, the rest of the crypto industry scrambles to avoid following suit. While the rivals of Bankman-Fried’s FTX empire may not have been as reckless as to maintain a group chat titled “Wirefraud” or publicly admit that it “wasn’t even trying” to manage risk, they’re legitimately concerned about the Department of Justice looking their way next.
Because the animating feature of the whole endeavor is a quasi- (or perhaps not-so-quasi-) Ponzi scheme where crypto holders sitting on speculative bubbles spend like mad to convince someone, anyone, to buy their hoards at inflated prices so the early investors wouldn’t be left holding the bag when the foundations crumbled. Spare all the talk about cutting greedy banks out of dominating the electronic funds transfer process… whatever noble uses crypto might have, that’s just not the industry that exists anymore.
Binance is already talking to the DOJ in an effort to get the government to step aside and let it continue on its merry way. And its lawyers from Gibson Dunn have reached into a well-worn playbook.
Binance’s defense attorneys at U.S. law firm Gibson Dunn have held meetings in recent months with Justice Department officials, the four people said. Among Binance’s arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn. The discussions included potential plea deals, according to three of the sources.
It worked for everyone responsible for the Great Recession, so you can’t blame them for trying. But Bitcoin is not Citigroup. Letting the big banks skate in 2009 deeply damaged basic faith in the rule of law, but at least there was an argument that the banks had grown too embedded in the system to fail without pulling the economy under. Coupling that reprieve with harsh and necessary reforms to curtail the power of the banks and avoid future misconduct would’ve been nice, but that ship sailed.
In any event, crypto is not going to destroy the economy if the scheme collapses. Crypto is all in probably less than 5 percent of the global money supply (it was less than 3 percent a year ago). And given the speculation surrounding these things, it’s really much less. The failure of the crypto industry is a speedbump.
More to the point, the banking industry in 2009 argued that it should get a pass for its toxic behavior so it could keep doing its constructive work. What exactly is the equivalent here? Facilitating money laundering? Encouraging boiler rooms? Paying Eric Adams?
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See? Three completely unjustified use cases.
The Reuters headline states that the DOJ is “split” over charging Binance, but that’s not really what the article backs up. Rather, the article cites four sources close to the investigation for the claim that the DOJ is divided between charging Binance and its executives now or waiting to further review evidence. Prosecutors tend not to talk themselves out of cases at this juncture — if anyone is urging caution, it’s most likely because they want to drive the nails even deeper in the coffin before acting.
And they’re certainly unlikely to say they just need to review more evidence because they’re worried crypto is too big to fail.
Exclusive: U.S. Justice Dept is split over charging Binance as crypto world falters [Reuters]
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Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
