Interesting, thanks. Re litigation, what would be an example of a possible litigation against an EA org (or an individual working for them)? I can’t really think of anything much that would be potential for litigation. I mean, I don’t think “x warned that SBF was a bad character because he screwed over y; z didn’t take any significant action re SBF’s role in EA” (to paraphrase what might’ve happened around 2018 re Alameda, based on public claims), would be anything more than bad for PR/reputation for those involved (and by extension EA), but correct me if I’m wrong.
That’s a good question, which is impossible to answer without knowing the underlying facts.
The most obvious possibility to me is that the state of mind could be relevant to a clawback defense. The following is not intended as actual legal analysis, but only as illustrative of the type of potential issues that the lawyers could be pondering. Section 550 gives some protections to certain subsequent transferees if they meet certain requirements including that they acted “without knowledge of the voidability of the transfer avoided.” At least in the Madoff context, the court of appeals held that the trustee did not have to show the sbsequent transferee was willfully blind to obvious red flags. It was enough to show that the subsequent transferee was on inquiry notice (basically that they knew enough to know they should have investigated further).
I am having a hard time coming up with non-clawback exposures to the debtor on the facts known to me. That does not mean they don’t exist.
I guess there could be exposures to victims—similar to the lawsuit filed against Tom Brady et al. -- if someone was found to have affirmatively promoted FTX in violation of applicable law and/or with good reason to believe it was a fraud. That seems rather unlikely to me as to the organizations. Or let’s say someone knowingly facilitated SBF making an investment into a third-party company despite strong reason to believe FTX was a fraud, and the third-party company was harmed as a result. I’m not convinced the third-party company would have a successful cause of action against the facilitator without more. But in the facilitator’s shoes, I’d rather not advertise what information I may have known about FTX and when. When you get sued, you lose by incurring the cost and pain of defending yourself—the question is whether you also lose in other ways too.
Interesting, thanks. Re litigation, what would be an example of a possible litigation against an EA org (or an individual working for them)? I can’t really think of anything much that would be potential for litigation. I mean, I don’t think “x warned that SBF was a bad character because he screwed over y; z didn’t take any significant action re SBF’s role in EA” (to paraphrase what might’ve happened around 2018 re Alameda, based on public claims), would be anything more than bad for PR/reputation for those involved (and by extension EA), but correct me if I’m wrong.
That’s a good question, which is impossible to answer without knowing the underlying facts.
The most obvious possibility to me is that the state of mind could be relevant to a clawback defense. The following is not intended as actual legal analysis, but only as illustrative of the type of potential issues that the lawyers could be pondering. Section 550 gives some protections to certain subsequent transferees if they meet certain requirements including that they acted “without knowledge of the voidability of the transfer avoided.” At least in the Madoff context, the court of appeals held that the trustee did not have to show the sbsequent transferee was willfully blind to obvious red flags. It was enough to show that the subsequent transferee was on inquiry notice (basically that they knew enough to know they should have investigated further).
I am having a hard time coming up with non-clawback exposures to the debtor on the facts known to me. That does not mean they don’t exist.
I guess there could be exposures to victims—similar to the lawsuit filed against Tom Brady et al. -- if someone was found to have affirmatively promoted FTX in violation of applicable law and/or with good reason to believe it was a fraud. That seems rather unlikely to me as to the organizations. Or let’s say someone knowingly facilitated SBF making an investment into a third-party company despite strong reason to believe FTX was a fraud, and the third-party company was harmed as a result. I’m not convinced the third-party company would have a successful cause of action against the facilitator without more. But in the facilitator’s shoes, I’d rather not advertise what information I may have known about FTX and when. When you get sued, you lose by incurring the cost and pain of defending yourself—the question is whether you also lose in other ways too.