According to US prosecutors, the current legal framework is sufficient for charging Sam Bankman-Fried for fraud-related violations.
On Wednesday, the Department of Justice (DOJ) submitted a filing in which it outlined its position for countering claims of the disgraced crypto mogul about the absence of relevant laws related to crypto.
In the filing, the DOJ said that the existence of laws may be relevant for establishing a statutory duty of care.
However, it asserted that the lack of regulation did not apply to whether money had been entrusted to the care of the defendant by his victims.
Most stakeholders have advocated for different approaches, including stringent regulation as well as a more permissive and open regulatory environment.
The DOJ said that any argument or evidence regarding the absence of crypto regulation would end up confusing the jury about a regulation that would impose a duty for the misappropriation to have happened.
The filing said that misappropriation of customer funds comes with prohibitions and the defendant has been charged with violation of those laws.
The trial of the former CEO and founder of the FTX crypto exchange, Sam Bankman-Fried had begun on Tuesday and it was mostly focused on jury selection.
The crypto entrepreneur has been accused by federal prosecutors of orchestrating one of the biggest financial frauds in the history of the US.
The charges filed against SBF, as he is known, are related to defrauding customers of the FTX crypto exchange, including accusations of money laundering securities fraud and wire fraud.
In addition, the DOJ said that not only did SBF misappropriate customer funds, but he also made material misrepresentations.
Therefore, the prosecutors stated that the absence of laws and regulations applicable is irrelevant to whether material omissions or misstatements were made by the defendant or not.
The filing also rejected claims of SBF that reallocating and pooling customer funds is a common practice in the crypto sector.
The prosecutors have said that in this case, the allegations are not concerned with whether the conduct of the defendant was in line with the general practices applicable in the crypto industry.
Instead, they asserted that they were about the statements and actions of the defendant, which had prompted customers to entrust their funds to him and he had subsequently misappropriated them.
The filing said that evidence of actions conducted by other crypto exchanges will only be relevant if SBF is able to establish that he had firsthand knowledge about the practices of other exchanges.
Furthermore, he should also have believed that the said exchanges were acting in a lawful manner. The trial is expected to last for six weeks and has received a great deal of media attention.