When fraud charges against Sam Bankman-Fried jolted the financial world in December 2022, it capped several frenetic weeks of work for Nina Ruvinsky, ’13. She and her colleagues at the Commodity Futures Trading Commission (CFTC), in parallel with counterparts at the US Attorney’s Office for the Southern District of New York (SDNY) and the US Securities and Exchange Commission (SEC), had brought a first-of-its-kind case involving more than $8 billion stolen from Bankman-Fried’s FTX cryptocurrency exchange.
“It was six weeks from the time the company went bankrupt to the time we brought charges. And that time frame was completely unheard of for the CFTC for a complex trading fraud,” she says of the case against Bankman-Fried, FTX, and Alameda Research, the digital asset trading firm that he also founded.
Ruvinsky was involved because she had become an expert in cryptocurrency during her short tenure at the CFTC. She joined the organization—an independent agency of the federal government that regulates the derivatives markets—in 2020, knowing next to nothing about cryptocurrency.
“I was assigned a variety of cases, one of which was a crypto case,” she says of her early days with CFTC. “It was the first case that we brought where the company—Polymarket—was operating directly on the blockchain. And I didn’t know what the blockchain was.”
But she quickly got up to speed, learning from experts at the CFTC about how to apply laws that had been on the books as far back as the 1970s to the area of cryptocurrency. As a result, Polymarket, a prediction market platform, paid a $1.4 million penalty for illegally operating in the United States. Another result: Ruvinsky was hooked and jumped at the opportunity to become an expert in this relatively new field.
Then came the Bankman-Fried case.
The CFTC’s complaint alleged that FTX held itself out as “the safest and easiest way to buy and sell crypto,” according to a press release issued in December 2022, and represented that customers’ assets were held in “custody” by FTX and segregated from FTX’s assets. However, Bankman-Fried’s digital trading firm, Alameda Research, routinely accepted and held those assets and commingled them with other Alameda funds. Bankman-Fried and others also used customer funds for their own activities, including luxury real estate purchases and political contributions.
“They took people’s deposits on the exchange and spent them as if they were their own money,” says Ruvinsky. The complaint also alleged that FTX employees created features in the FTX programming code that favored Alameda and allowed it to execute transactions even when it did not have sufficient funds available.
Nina Ruvinsky, ’13These were in some cases very accomplished people whose lives and careers were blown up.
An investigation in record time
Ruvinsky, then a senior trial attorney and co-chair of the CFTC’s Digital Assets Task Force in the Division of Enforcement, says news broke about problems at FTX after an article on the crypto news site CoinDesk alleged a liquidity crisis at the Alameda hedge fund.
“It started with a news article about a leaked balance sheet,” says Ruvinsky. “At first, no one seemed sure what was happening. What was the big deal about a leaked balance sheet?” But in less than two days, after a series of activities that included freezing of customer withdrawals and a failed acquisition of FTX, the company was in bankruptcy.
“The Southern District of New York and the CFTC as well as the SEC were all moving quickly to identify and interview witnesses,” says Ruvinsky. “As I was on the way to New York for the first witness interview, we got the call that FTX was filing bankruptcy and that all the assets were being frozen, that Sam Bankman-Fried was stepping down as CEO of the company, and that an emergency CEO was being appointed. All of this was happening very, very quickly.”
The quick time frame for the investigation was due, in part, to the fact that billions of dollars were on the platform and no one could access their money. Ruvinsky and her colleagues and counterparts had a long to-do list to figure out where the money was, whether assets needed to be frozen or preserved, and who the responsible parties were. Fortunately, many of the people involved in FTX, but not Bankman-Fried, came forward to share what they knew with the CFTC as well as the SDNY and the SEC, which had opened parallel cases.
“There were people who came in to speak with us after a search warrant was executed on their home and their devices,” she says. “There were people who were going through mental health episodes, people who were worried they would always be associated with this. These were, in some cases, very accomplished people whose lives and careers were blown up.”
Over the course of six weeks, Ruvinsky spent most of her time in New York as she and her counterparts interviewed people, sifted through documents, and quickly pieced the story together. The CFTC worked cooperatively with its federal law enforcement and regulatory partners.
“We prepared our complaint and went through an internal process to have it approved. We didn’t want to do anything that was going to interfere with SDNY’s covert actions but were ready to file and go public when the SDNY was. As soon as they made the arrest of Bankman-Fried, we filed our cases.”
Nina Ruvinsky, ’13It was just the best training ground and learning opportunity you could possibly have. I also had a really tremendous opportunity to be a subject matter expert.
A historic, “generational” fraud case
In November 2023, the jury in United States v. Samuel Bankman-Fried found him guilty of several counts of fraud and money laundering, and in March 2024, Bankman-Fried was sentenced to 25 years in prison.
After Bankman-Fried was convicted and sentenced in the criminal action, Ruvinsky continued work on the civil cases against him and the three cooperators who were co-defendants in the CFTC action: Caroline Ellison, Nishad Singh, and Gary Wang. They agreed to liability on the Commodities Exchange Act charges on the civil side, including permanent injunctive relief. On August 8, 2024, the CFTC announced that the US District Court for the Southern District of New York entered a consent order of permanent injunction and other equitable relief in its case against FTX and Alameda. The court ordered them to pay a historic $12.7 billion to their customers and victims.
“I really learned so much in working on this case and got to see some of the best people in the world in this area of law at work,” she says. “It was just the best training ground and learning opportunity you could possibly have. I also had a really tremendous opportunity to be a subject matter expert, because I had been doing crypto all the time. So, in addition to learning from the best, I got to contribute in a valuable way.”
Ruvinsky appreciates the support that the team received from the independent CFTC commissioners, including Kristin Johnson, ’03.
“All of the Division of Enforcement’s recommendations for enforcement must be approved by the commission, which is made up of five commissioners, including Commissioner Johnson,” says Ruvinsky. “Our commission was engaged and bent over backwards to make themselves available at all times, morning or night, and allow us to keep up with our counterparts. They made it possible for us to act as quickly as we did.”
As she reflects on the case, she also sees how it has affected the world of cryptocurrency and the law.
“It was a moment—not just because of the volume of the fraud, the billions of dollars that people lost—but this generational moment that made people really second guess crypto. I think there are still people whose impression of the industry is colored by that. And along with some other events, it brought on the ‘crypto winter,’” she says, referring to a period of lower cryptocurrency prices. “I think in some ways we’re still responding to that.”
