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Former FTX executive Nishad Singh spared prison for cooperation

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Former FTX executive Nishad Singh spared prison for cooperation

Former cryptocurrency executive Nishad Singh, who once shared a $35m Bahamas penthouse with FTX founder Sam Bankman-Fried, has been spared prison time by a judge for his role in the theft by his imprisoned former boss of about $8bn in customer funds from the now-bankrupt exchange.

During a hearing in Manhattan federal court on Wednesday, United States District Judge Lewis Kaplan imposed no prison time, but ordered three years of supervised release. Kaplan credited Singh for cooperating with prosecutors and coming clean about his actions in what they have called one of the biggest financial frauds in US history.

Singh, who had pleaded guilty to six felony counts of fraud and conspiracy, testified last year as a prosecution witness in the trial that led to Bankman-Fried’s conviction on fraud and other charges. Singh, in a plea deal with prosecutors, admitted to his role in the fraud and for serving as a “straw donor” in some of Bankman-Fried’s millions of dollars in political donations.

“I am overwhelmed with remorse for the harm that I participated in and that I caused to so many innocent people,” Singh told the judge at the hearing. “I strayed so far from my values.”

Prosecutors had urged leniency for the 29-year-old Singh, FTX’s former chief engineer, in light of his cooperation. His defence lawyers recommended he serve no prison time.

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Bankman-Fried, 32, is serving a 25-year prison sentence imposed by Kaplan stemming from FTX’s November 2022 collapse.

Last month, Kaplan sentenced Caroline Ellison, Bankman-Fried’s former girlfriend and an executive at FTX’s sister hedge fund Alameda Research, to two years in prison. The judge had also praised her cooperation, but said that such assistance was not a “get out of jail free card” in a case this serious.

The judge told Singh that his involvement “was much more limited than, certainly, Bankman-Fried and Ellison.”

During the hearing, Singh said he looked up to and supported Bankman-Fried, even after coming to see him as deceptive and self-serving.

“I still have an enormous debt to society,” Singh added.

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“You did the right thing,” Kaplan told Singh. “You immediately and truthfully – as far as I can see – fully unburdened yourself to the government about wrongdoing about which you were aware and which they quite clearly were not.”

Prosecutor Nicolas Roos told the judge that Singh deserved credit for coming forward and implicating himself by describing conversations that were not otherwise documented.

“It could have been very easy for Mr Singh to have denied everything,” Roos said.

“He wanted to right a wrong or at least start to make that effort and do the right thing,” Roos added.

FTX founder Sam Bankman-Fried, centre left, is serving a 25-year prison [File: Rebecca Blackwell/AP Photo]

‘A monumental crime’

Singh’s lawyer Andrew Goldstein told the judge that nearly all of the billions of dollars in customer funds were stolen before his client learned of the scheme.

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“The overwhelming majority of the conduct that made it such a monumental crime took place before Nishad ever became involved,” Goldstein said, arguing that Bankman-Fried and Ellison were responsible for the decision to steal funds from FTX customers to pay Alameda’s lenders. “That was their crime. It was not Nishad’s crime.”

Goldstein said Singh’s brother, parents and fiance, among other family members, were present in court.

A 2017 graduate of the University of California, Berkeley, Singh lived with Bankman-Fried and seven other employees of FTX and its sister firm Alameda Research in a waterfront penthouse in the Bahamas, where the exchange was based.

Singh said he owned an equity stake of about 6-7 percent in FTX. He said that made him a billionaire on paper during a boom in cryptocurrency prices during the COVID pandemic. By October 2021, Bankman-Fried was worth $26bn, according to Forbes magazine, and gained prominence as a prolific donor to philanthropic causes and Democratic politicians.

Singh testified during the trial that he became suicidal as FTX unravelled in November 2022 amid a flurry of customer withdrawals. He returned to the US shortly before the exchange declared bankruptcy on November 12 of that year, and had his first meeting with federal prosecutors later that month.

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Singh testified that he confronted Bankman-Fried about an enormous shortfall of customer funds during an hourlong conversation held in September 2022 on the balcony of their penthouse. Singh said Bankman-Fried assured him he would raise more funds and cut costs.

Bankman-Fried is appealing his conviction and sentence.

Gary Wang, a third former FTX executive who cooperated with prosecutors, is scheduled to be sentenced on November 20.

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No Capital Gains On Bitcoin – A Good Idea?

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No Capital Gains On Bitcoin – A Good Idea?

The question of whether Bitcoin and other cryptocurrencies should be subject to capital gains taxation has been bandied about for years, but has found renewed interest since former President Trump won a second term. The typical argument for capital gains treatment being inappropriate for cryptocurrencies is an assumption, in contravention of current tax policy, that they are currencies—and that currencies are not subject to capital gains tax.

This is partly true, but not for the reasons proponents think, as profits from currency exchanges are by default taxed as ordinary income under Internal Revenue Code (IRC) Section 988. This would mean any profit made from currency exchanges, including cryptocurrencies if they gain currency treatment, would be subject to taxation at ordinary income tax rates. Of course, as the top capital gain rate is 20% while the top income tax bracket is 37%, holders of cryptocurrencies in the upper income brackets would be none too pleased with this outcome.

That said, if a foreign currency is held as an investment and an election is made by a taxpayer under IRC Section 988(a)(1)(B) prior to any transaction occurring, it is possible for currency exchanges to receive capital treatment.

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Advocates for excluding cryptocurrencies from the capital gains regime in favor of treating them as more traditional currencies, however, seem to be misunderstanding the effect and assuming that would mean gains on cryptocurrencies would not be taxed. In fact, by default, they’d be taxed at the potentially higher ordinary income rates.

Eliminating Tax on Bitcoin

It is clear what advocates for cryptocurrency tax reform are really hoping for is tax exemption.

However, there is no policy rationale for eliminating taxes on Bitcoin or any other cryptocurrency. At best, cryptocurrencies function as currencies—but ones with an incredibly inefficient and resource-intensive minting process and for which the very use creates externalities.

Unlike traditional fiat currencies, whose creation and transaction costs are relatively minimal, cryptocurrencies like Bitcoin require significant computing power, electricity, and the resulting environmental impact to maintain. Even cryptocurrencies that rely on more efficient systems than Bitcoin’s proof-of-work are still more resource-intensive than minting a nickel. This inefficiency undermines the argument that cryptocurrencies should enjoy the incentivizing power of complete exemption from taxation.

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Moreover, cryptocurrencies lack the stability and governmental backing of traditional currencies, which makes them speculative assets rather than conventional mediums of exchange—regardless of what you call them.

Given that cryptocurrencies can and do function in the economy in a manner similar to other investment assets—like stocks or real estate—exempting them from taxation would create an inequitable tax environment. Other investment vehicles that generate a profit are subject to tax, and granting an exception for cryptocurrencies would simply endorse them as a special class of untaxed speculative wealth—a precedent with no underlying policy goal beyond boosting the wealth of those that hold it.

Economic and Social Realities of Tax-Exempt Crypto

There’s no precedent for the special treatment proposed for cryptocurrency gains, as no other asset class is exempted from tax solely for speculation. Municipal bonds are the closest comparison, but they differ in purpose and impact.

Municipal bonds are traditionally tax-advantaged to encourage investment in local and state infrastructure and keep the cost of municipal borrowing as low as possible. Tax exemptions on the interest from these bonds incentivize investors to support public projects which benefit society as a whole. Cryptocurrency holdings provide no such benefits.

A tax exemption for cryptocurrencies would almost certainly disproportionately benefit high-income individuals, further exacerbating wealth inequality. Much of cryptocurrency wealth is highly concentrated among a small group—with large holdings by early adopted and institutional investors. Placing cryptocurrencies on par with municipal bonds in terms of tax treatment would be a huge tax break grant to well-capitalized groups, rather than toward investments in social projects—depending economic divides.

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There is also the tax revenue loss to contend with—as capital gains from cryptocurrencies are a growing revenue source for governments, particularly as the market for these assets expands. This revenue loss would likely need to be offset by shifting the tax burden onto wage earners and businesses or by reducing public services and infrastructure investments. I

Cryptocurrency Tax Policy Realities

The reality is that most of the proponents of eliminating capital gains tax treatment on cryptocurrencies—beginning with former President Trump and extending to others in his political sphere—likely do not fully understand the implications of their proposals. Statements from these advocates reveal a fundamental misunderstanding of the current tax system as they seem to believe that by treating assets like Bitcoin as currency, their gains would be rendered tax-free. In reality, however, shifting cryptocurrencies to “currency” treatment would, by default, subject profits to higher tax rates.

This misconception stems from an incomplete, or wholly lacking, grasp of tax law fundamentals. By framing cryptocurrencies as currency without understanding the tax implications, they risk promoting a policy that would, in practice, often result in taxing these assets more heavily—rather than less. This is emblematic of their broader policy understanding and corresponding vision.

In conclusion, while cryptocurrency itself is undoubtedly volatile, tax policy should be anything but. Any fundamental alteration to cryptocurrency tax treatment should be based on a thorough analysis and a compelling rationale, rather than mere hunch or political impulses.

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Piper Sandler says Trump will usher in a wave of mainstream crypto adoption — so buy these stocks

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Piper Sandler says Trump will usher in a wave of mainstream crypto adoption — so buy these stocks

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Billionaires Love This Soaring Cryptocurrency: Here's Why | The Motley Fool

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Billionaires Love This Soaring Cryptocurrency: Here's Why | The Motley Fool

Bitcoin combines long-term upside potential with a surprising amount of downside protection.

As widely anticipated, Bitcoin (BTC -0.68%) is getting a big post-election rally, soaring to a new all-time high of more than $75,000. For the year, it is now up more than 70% (as of Nov. 7), and some investors now suggest it could hit $100,000 by next January.

Among those investors are some high-profile billionaires, including a mix of tech entrepreneurs and hedge fund titans, who have been buying the cryptocurrency throughout the year. If these billionaires are buying it, should you be, too?

The upside potential

Leading the charge is the tech billionaire Michael Saylor, founder and executive chairman of enterprise software maker MicroStrategy (MSTR -0.14%). In July, he predicted that Bitcoin could eventually soar to $13 million by the 2045.

Not surprisingly, he’s now positioning his company to buy as much as it possibly can during the next three years. It plans to buy another $42 billion worth of the digital currency by 2028, adding to its already substantial hoard of 252,200 bitcoins.

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And Saylor is not alone among tech billionaires. Jack Dorsey, chief executive officer of Block, now thinks that Bitcoin could hit $1 million by 2030. He’s particularly attracted to its technological features that help to make it the world’s premier digital currency.

Another tech billionaire buying the crypto is Mark Cuban. During the past few months, he has been suggesting that it could soar in value as it gains in adoption and becomes a more important part of the global financial system. In fact, he has even suggested that it could eventually replace the U.S. dollar as the global reserve currency.

Price predictions of $1 million or higher might sound like pie in the sky. But Bitcoin has a long track record of delivering market-beating performance. For more than a decade, it has been one of the top-performing asset classes in the world.

From 2011 to 2021, for example, it delivered annualized returns of 230%, and no other asset class was even close. Last year, Bitcoin was up more than 150% and is now on pace to hit triple-digit percentage gains this year. Of course, past performance is no guarantee of future results, but there’s ample reason to be optimistic about the cryptocurrency’s upside potential.

The downside risk protection

Hedge fund billionaires are also buying Bitcoin, but not for the reasons you might think. They are certainly aware of the long-term potential, but they are just as interested in its unique hedging properties. As they see it, Bitcoin can help protect against economic, political, and geopolitical risk, and that is what helps to make it so valuable to them.

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Image source: Getty Images.

Of particular concern is the current situation in the US. As some top hedge fund managers see it, the current $35 trillion debt load of the U.S. government is no longer sustainable. At some point, the house of cards propping up the economy is going to come crashing down. When that happens, hedge fund billionaire Paul Tudor Jones warns, you want to be holding Bitcoin, not dollars.

Other hedge fund managers are much more focused on inflation. From their perspective, the crypto can play a role similar to gold when it comes to hedging against inflation. In fact, as billionaire Stanley Druckenmiller pointed out last year, Bitcoin could actually become more popular than gold as a hedge against inflation, simply because it is a digital asset that can be traded on a 24/7 basis.

What’s next?

Now that Bitcoin has hit a new all-time high of more than $75,000, it’s only natural to ask: What’s next for the world’s most popular cryptocurrency? A high of $100,000 by the time of Donald J. Trump’s inauguration as president in January is certainly on the table right now, especially if he shows signs of following through on his pro-Bitcoin campaign promises.

Meanwhile, investment firm Bernstein is calling for a new high of $200,000 by the end of next year. That’s when things get really interesting, because that’s when you can really start to visualize how Bitcoin’s ascent to $1 million is going to happen. To hit $1 million by the year 2030, it would only need to deliver annualized returns of about 40% per year for the next five years.

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Given Bitcoin’s historical track record of delivering triple-digit returns on a regular basis, 40% certainly sounds like an achievable goal. I’m long-term bullish. I agree with the billionaires who are buying Bitcoin right now: A combination of enormous upside potential with significant downside risk protection creates a very compelling investment thesis over the long run.

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