Reuters reported earlier this week that the Justice Department is “split” over bringing criminal charges against Binance, the world’s largest crypto exchange company.
According to Reuters’ sources, the charges under DOJ investigation include “unlicensed money transmission, money laundering conspiracy and criminal sanctions violations.”
Binance’s defense, the story continues, includes the argument that “A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn.”
In other words, the crypto corporation is arguing that it should receive the same leniency that the so-called “too big to jail” banks received by making similar arguments.
The DOJ has a long and unfortunate history of granting excess deference to corporate defense lawyers claiming that prosecuting their clients will cause a cascade of “collateral consequences.” The policy, dubbed the “Holder doctrine” after Eric Holder, who (as Deputy Attorney General) established it in a memo in the final year of the Clinton administration.
And it just so happens that M. Kendall Day, the Gibson Dunn lawyer defending Binance, is a big defender of DOJ leniency agreements with 15 years of experience as a DOJ white-collar prosecutor in the Bush, Obama and Trump administrations.
Too big to jail was a disgraceful policy when the banks enjoyed the privilege of avoiding prosecution after the 2008 financial crisis. The solution then should have been to break up the banks so there is no such thing as a bank that is so significant to the financial system that the ripple effects of prosecuting it risk widespread harm.
But to revive too big to jail today for the crime-riddled crypto sector would be an even greater disgrace. It would demonstrate how little the DOJ has learned over the intervening years about the need for tough enforcement to deter corporate crime, not to mention a shocking degree of credulity when confronted with the self-interested arguments from corporate defendants.
Unlike banks, which make loans to consumers and businesses that impact the real-world economy, the crypto sector has demonstrated no tangible consumer-facing use case for its technology, apart from trading of crypto “assets,” which time and time again have been shown to be rife with fraud.
Turning a blind eye to this cesspool of violations does no favors for the American public or our financial system. Fraud-riddled “innovators” and “innovations” must be allowed to fail in order to make room for more honest innovators and innovations. Corporate defense lawyers’ arguments about damaging innovation should fall on deaf ears.
A bright spot for the abrupt bankruptcy of the crypto exchange FTX, the collapse of cryptocurrencies, and the myriad enforcement actions regulators are finally bringing against corporations that cheated retail speculators, is how little an impact all of this has had on the broader economy. (Side note: containing the crypto risk didn’t happen on its own — it’s something for which SEC Chair Gary Gensler deserves a great deal of credit.)
The minimal impact the crypto zone’s woes have had on the broader economy should make DOJ prosecutors’ job easier. If the investigation uncovered evidence that executives and the corporation itself committed crimes, then prosecutors should file criminal charges.
It’s not the prosecutors’ job to bend over backwards to protect lawbreaking corporations from the consequences of prosecution.
It’s the corporate executives’ job to steer the corporations they oversee as far as possible away from criminality.
On that note, the DOJ’s indictment of FTX’s Sam Bankman-Fried is a heartening sign.
As David Dayen writes in The American Prospect, “This is an opportunity to reset the assumption that your bank account determines your criminal liability. But it’ll take going beyond the easiest criminal case in history to complete the job.”
Deterring future wrongdoing means prosecuting not only individuals, but corporations too.
However it plays out, the Binance case will be one to watch.
Big Business Blotter News Roundup
CORPORATE RECIDIVISM
Corporate Crime Groundhog Day - Dirt Diggers Digest
There is something almost comical about this history. ABB keeps getting caught breaking the rules and keeps promising to mend its ways. DOJ and the SEC keep giving special consideration to a company whose business model seems to depend on the use of improper payments. Leniency deals such as deferred prosecution agreements are supposed to act as a deterrent against future misconduct, but the arrangement loses all meaning if the company continues to offend and is then offered another agreement.
CFPB Proposes Registry to Detect Repeat Offenders - CFPB
“Protecting American households is a shared effort across local, state, and federal authorities,” said CFPB Director Rohit Chopra. “The proposed registry will help the CFPB, the law enforcement community, and the public limit the harms from repeat offenders.”
ANTITRUST
Twin complaints signal new FTC strategy to rein in tech industry - The Washington Post
The Federal Trade Commission on Thursday took its most aggressive actions since Lina Khan became chair to rein in the power of Big Tech, pursuing a lawsuit to block Microsoft’s acquisition of a game developer on the same day it opened arguments in another case against Meta’s purchase of a virtual reality start-up. In both cases, the FTC argued that the acquisitions would squash future innovation in emerging gaming markets, a relatively novel interpretation of antitrust law that Khan (D) and her allies have championed as they seek to usher in an era of competition enforcement.
FRAUD
Today, Danske Bank pleaded guilty to one count of conspiracy to commit bank fraud. Under the terms of the plea agreement, the company has agreed to criminal forfeiture of $2.059 billion. Danske Bank will also enter into separate criminal or civil resolutions with domestic and foreign authorities and the department will credit approximately $850 million in payments the bank makes to the SEC and the Danish authorities.
Rupert Murdoch's turn to face questions in $1.6 billion lawsuit against Fox News - NPR
Attorneys for Dominion privately questioned Murdoch's elder son Lachlan, the Fox Corp boss, under oath for hours at a powerful Los Angeles law firm last Monday. The company is seeking to find proof Lachlan Murdoch knew that the claims of election fraud in the 2020 presidential elections were false and that he encouraged or simply allowed them to be broadcast anyway on Fox News, his family's dominant profit engine.
Attorney General Josh Shapiro announced today a $38.8 million settlement with JUUL Labs, Inc. for violating Pennsylvania’s Unfair Trade Practices and Consumer Protection Law and jeopardizing the health of Pennsylvanians, in particular the young people that JUUL targeted with their products.
CVS Sued Over ‘Fraudulent’ Donations to American Diabetes Association - Law Street Media
According to the complaint, prior to the completion of a customer’s transaction, the checkout screen would prompt the customer with several boxes of pre-selected amounts (and an opt out option) to donate to the American Diabetes Association (ADA). The plaintiff alleges that CVS did not merely collect the customer’s donations and forward them to the ADA, but instead, counted the donations toward a legally binding obligation of $10 million that CVS had made to the ADA.
Judge Blasts Ex-Wells Fargo Execs - Radical Compliance
Administrative law judge Christopher McNeil recommended that Anderson pay $10 million in civil penalties, Julian pay $7 million, and McLinko pay $1.5 million. The judge also recommended that Anderson and Julian be banned from working in the banking industry again; McLinko would only face a cease-and-desist order. Those penalty amounts are actually more than what the Office of the Comptroller of the Currency originally sought when it began proceedings against the three executives last year.
TRIANGLE SHIRTWAIST REDUX
Amazon Probed by OSHA Over Retaliation Claims After NYC Fire - Bloomberg
Federal safety officials are investigating Amazon.com Inc. over allegedly retaliating against employees who raised safety concerns after a fire at the company’s unionized New York City warehouse. The US Occupational Safety and Health Administration is trying “to determine whether Amazon retaliated against employees” who complained to management “about the safety of the working environment following the fire,” a federal Department of Labor spokesperson said via email Thursday.
Employees of Kentucky candle factory destroyed by deadly tornado file new lawsuit - ABC News
In the latest lawsuit, the workers allege that Mayfield Consumer Products "repeatedly threatened to terminate" any employee who left due to the expected tornado, did not train the employees in emergency safety protocols and that there was only one hallway and two restrooms for its 110 employees to shelter in during the tornado. The lawsuit further alleges that the company "defamed the character" of employees who gave interviews to news organizations about their experience. The lawsuit accuses the company of false imprisonment and intentional infliction of emotional distress and is seeking unspecified damages.
The findings of the Richmond Hill inspection add to Dollar Tree's lengthy history of workplace safety violations. Since 2017, federal and state OSHA programs have found more than 300 violations in more than 500 inspections at stores operated as Dollar Tree and Family Dollar locations. In 81 previous federal and state workplace safety inspections, the company's Family Dollar stores received citations for 12 willful, 27 repeat, 53 serious and 15 other-than-serious violations for similar hazards found in Richmond Hill.
WAGE THEFT / WORKER RIGHTS
D.C. attorney general files lawsuit against Amazon, alleging stolen tips - The Washington Post
D.C. Attorney General Karl A. Racine on Wednesday announced that his office had filed a consumer protection lawsuit against Amazon, alleging that the e-commerce giant stole tips from drivers and deceived consumers about the tipping model.
New penalties for companies that illegally fire workers who unionize - The Washington Post
Under the new ruling, the labor board can also hold companies, as well as unions, liable for damages, such as a wronged worker’s health care and child care costs, immigration paperwork and visas, lost investment income and legal fees for defending against unpaid bills.
FOOD
Waffle-Maker Eggo Fined for Toxic Gas Release in San Jose - Santa Clara District Attorney's Office
Eggo was criminally charged with negligently discharging an air contaminant, failing to immediately report that release, providing inadequate training to its contractors, and failing to implement an adequate emergency action plan. The company was ordered to pay approximately $85,000.
TECH
Elon Musk's Neuralink Is Reportedly Under Federal Investigation Over Animal Welfare - Gizmodo
One employee reportedly referred to some of Neuralink’s recent animal surgeries as “hack jobs.” Others told Reuters they’ve attempted to raise their concerns internally, and at least one former employee said they were rebuffed by a senior executive at the company for their requested changes. The exec allegedly said a more standard testing protocol wasn’t possible because of Musk’s constant demands for faster work.
The plaintiffs argue that the decision-making around which employees would be laid off was made under “extremely hurried circumstances” with little regard given to employees’ job performance, qualifications, experience and abilities.
Co-founder of NFT platform Blockparty charged with fraud - Reuters
The former chief technology officer of Blockparty was arrested on Wednesday after U.S. prosecutors alleged he stole more than $1 million in cash and cryptocurrency from the company, which operates a marketplace for non-fungible tokens.
HERTZ
Hertz to Pay $168 Million to Customers Accused of Auto Theft - NYT
The company, which filed for bankruptcy in 2020, occasionally recorded certain vehicles as stolen, even after customers had extended and paid for their rental periods, sometimes leading to frightening run-ins with the authorities, and even jail time, according to lawsuits filed on behalf of customers across the country. Though Hertz initially contested these claims, the company, which in February hired a new chief executive, has since acknowledged some wrongdoing.