[quanticle]

    This might just be the 'first arrow' from the SEC with much more to be added
    down the track, but it's interesting to see that they have gone in heavily
    on defrauding equity investors in the FTX business -- rather than pulling
    the rug on customers.

Isn't that the same approach that federal prosecutors took with Theranos as well? From what I understand, Elizabeth Holmes went to jail for defrauding her investors, not providing false test results to patients. I think the SEC's reasoning here is the same — investor fraud is easier to prove, so hit the fraudster with that charge first.

[nnmg]

I think you're spot on, it is easier to prove (or prosecutors have more experience prosecuting) financial crimes. To give them credit-- they at least tried to get Holmes for defrauding patients too, but she was acquitted of those charges [0]. Her partner, Sunny Balwani, was convicted on all counts, including defrauding patients [1].

[0]: https://en.wikipedia.org/wiki/Elizabeth_Holmes#U.S._v._Holme....

[1]: https://en.wikipedia.org/wiki/Sunny_Balwani#United_States_v....

[jcranmer]

It's also worth point out, if you're interested in seeing punitive justice, that you're going to steeper punishments for defrauding investors than patients. If Holmes were nailed on defrauding patients, that would add something like $100 worth of fraud for sentencing guidelines, which is nothing. But an investor who was defrauded of $100 million... that's $100 million of fraud.

You have to specifically prove every instance fraud in a criminal case, so harm that is spread very widely but very shallowly (millions of people who lost $10) doesn't scale up for a fraud case, but harm that is narrow but deep (an investor who lost millions) can be easily done.

[evancox100]

It wasn’t for lack of trying though, Holmes was charged with defrauding patients but acquitted on those counts. Only the investment fraud charges stuck.