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The Morning Risk Report: He Went to Prison for Crypto Crime. Now He’s an Advocate for Compliance.
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Good morning. As crypto entrepreneurs such as FTX co-founder Sam Bankman-Fried and former Celsius CEO Alex Mashinsky face criminal allegations of misconduct and possibly prison time, one of the Justice Department’s earliest collars has a message for today’s players: Get compliant.
Charlie Shrem was an early apostle of cryptocurrency, earning millions of dollars trading bitcoin and treated like a rock star worldwide, with fans at conferences snapping photos of him and pushing business cards at him. But the one-time chief executive and compliance officer of BitInstant went to prison in 2015 for a drug scheme involving the bitcoin exchange he co-founded and an online black market, making Shrem one of the first in the U.S. to get jail time for crimes connected to crypto.
Today, the 33-year-old says he is mining his experience and urging the latest generation of crypto companies to erect guardrails against corporate misconduct, Shrem told me in recent interviews.
“There’s a whole bunch of people out there wrestling with the crypto compliance beast, trying to figure it all out with their lawyers,” said Shrem, who is now a general partner at venture-capital firm Druid Ventures, advising crypto startups and projects on strategy and growth. “That’s where I come in, helping them get their ducks in a row.”
Shrem's story has values for policing the crypto market today, former prosecutors told me.
The Justice Department viewed the purpose of enforcement and criminal prosecutions such as Shrem’s as a way to push the crypto industry into a regulated system with money-laundering and sanctions-compliance programs, instead of into a gray area worked by criminals and terrorists, according to Alexander J. Wilson, a former prosecutor in the Southern District of New York who oversaw Shrem’s sentencing in 2014 and now a partner at law firm Jones Day.
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“His arrest was one of the moments where everybody started to think that we live in an environment of rules and laws."
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— Lennart Lopin, co-founder of Byte Federal, said of Charlie Shrem's conviction
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Prudential: Integrating Risk Management Across the 3 Lines
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The insurer applied a common framework across risk management, internal audit, and compliance, says vice president of operational risk Sal Gianone, who helped launch and lead the transformation. Keep Reading ›
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Indicted FTX founder Sam Bankman-Fried arrived at U.S. Court in New York last month. REUTERS/Mike Segar PHOTO: MIKE SEGAR/REUTERS
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Sam Bankman-Fried accused of trying to discredit FTX witness Caroline Ellison
The Justice Department accused FTX founder Sam Bankman-Fried of seeking to discredit a former member of his inner circle who is expected to testify against him at his coming fraud trial over the crypto exchange’s collapse.
Prosecutors, in a court filing late Thursday, asked a judge to restrict Bankman-Fried’s ability to discuss the case outside of court, alleging he tried to interfere with the trial and bias a jury by sharing private writings of Caroline Ellison, his onetime romantic partner and the former chief executive of his crypto-investment firm, Alameda Research, with a New York Times reporter.
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White House says Amazon, Google, Meta, Microsoft agree to AI safeguards
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The White House said seven major AI companies—Amazon.com, Anthropic, Google, Inflection, Meta Platforms, Microsoft and OpenAI—are making voluntary commitments that also include testing their AI systems’ security and capabilities before their public release, investing in research on the technology’s risks to society, and facilitating external audits of vulnerabilities in their systems.
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Michael Cohen is settling his long-running dispute with the Trump Organization over legal bills, averting a trial that had been scheduled to begin next week.
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75%
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The share of companies in the the S&P 500 that had created a chief diversity officer position by 2022, according to a study from Russell Reynolds, an executive search firm. In 2018, less than half the companies employed someone in the role. Diversity executives hit the exits as company priorities shift; ‘everything is a battle’
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The National Bank of Ukraine, based in Kyiv, says it has withdrawn the Russian-controlled bank from the market. PHOTO: VALENTYN OGIRENKO/REUTERS
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Ukraine to seize Russian-controlled bank in bid to curb Moscow’s influence
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Sense Bank, formerly known as Alfa Bank-Ukraine, is controlled by Mikhail Fridman and Petr Aven, two Russian businessmen under European Union and United Kingdom sanctions over their alleged ties to the Kremlin, which they have denied.
Also, Russia notched a victory in the fight for influence over global oil markets in recent days when the price of the country’s most coveted crude traded above a Western price cap imposed to starve Moscow of funds for the war in Ukraine.
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The U.S. has blocked students from China’s military-linked universities but its ally Japan is giving them a green light, a divergence that some believe could open the door to academic espionage.
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The Biden administration’s attempt to surgically cut economic ties with China is proving difficult to execute.
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China’s leadership is lavishing the country’s beleaguered private sector with a sweeping show of support as a nascent economic recovery falters.
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Amazon.com has told employees across the company that they may have to relocate to main offices concentrated in bigger cities, an escalation of its efforts to bring workers back to the office in-person.
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The world’s largest tool company couldn’t figure out how to make a wrench.
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