From a prosecutorial perspective, the Justice Department’s aggressive pursuit of Sam Bankman-Fried for financial fraud has been brutally efficient. His conviction came a year to the day after the public learned that there could be serious problems with the finances at his cryptocurrency exchange FTX, and it generated a wave of public interest and positive press for the department.
The U.S. attorney in Manhattan, Damian Williams, earned a victory lap on behalf of his office, and he took it shortly after the conviction — emerging from the courthouse late that night to deliver a warning “to every single fraudster out there who thinks that they’re untouchable.” “I promise we’ll have enough handcuffs for all of them,” he told reporters.
Some of this was standard prosecutorial tough talk — awkward, perhaps, but par for the course. These comments, however, also provide a rather misleading account of the Justice Department’s broader record on financial fraud. We may have enough handcuffs for all the fraudsters out there, but we are definitely not using them.
In fact, the Justice Department has been losing ground in the fight against financial fraud, notwithstanding the laudable pursuit of Mr. Bankman-Fried. The situation hit an undeniable low point during Donald Trump’s administration, when I worked at the Justice Department, but the overall trend has continued under President Biden and Attorney General Merrick Garland. Simply put, we are still not making nearly enough headway, even as Americans continue to suffer enormous financial losses at the hands of financial fraudsters.
Some basic figures underscore the problem. According to data compiled by Syracuse University, the overall number of white-collar prosecutions, including for financial fraud, has not significantly risen during the Biden administration. In fact, the figure is hovering near a 20-year low.
Meanwhile, the losses attributable to fraud have significantly increased. According to the F.B.I.’s most recent annual report, businesses and individuals reported $10.3 billion in losses last year to internet crime, which includes everything from phishing scams to investment frauds like the one that Mr. Bankman-Fried perpetrated. This was a 50 percent increase over the prior year’s number and, by far, the highest number since the F.B.I. began producing this report more than 20 years ago. Similarly, according to the Federal Trade Commission, consumers reported losing nearly $8.8 billion to fraud last year — a more than 30 percent increase over the prior year. A large majority of fraud victims never report the crimes to law enforcement, so the actual losses are most likely many times higher.
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