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Clarence Fanto: Will former crypto VIP Ryan Salame face legal fallout? Here’s what could happen to his Lenox investments

Salame stands at the bar of Firefly Gastropub

Ryan Salame has invested millions into the downtown restaurant scene in Lenox. Any legal fallout from his role in the FTX matter likely would take years to sort out, according to bankruptcy experts.

LENOX — Will local restaurant and real estate empire-builder Ryan Salame be facing the music for his role in the implosion of Sam Bankman-Fried’s bankrupt and allegedly corrupt FTX crypto exchange?

It’s been widely reported that Salame, 29, the Sandisfield native who has amassed a $7 million investment in the downtown, is the unnamed co-conspirator-2 listed in U.S. Attorney Damian Williams’s recently expanded indictment against SBF, as the FTX founder is known. 

Nearly $9 billion in FTX funds from at least nine million defrauded investors is missing. All of that was funneled illegally into Bankman-Fried’s affiliated Alameda Research without customers’ knowledge, according to the indictment.

Salame, former co-CEO of FTX Digital Markets, took out a $55 million loan from Alameda, and he has donated nearly $24 million to 97 Republican candidates and political action committees. That would make him a “straw donor” for Bankman-Fried, who wanted to curry favor with members of both parties on Capitol Hill while covering his tracks.

Nishad Singh, FTX’s co-founder and head of engineering, was the “assigned” straw donor, $13 million to support Democrats. Such straw donations are illegal.

Singh’s guilty plea to criminal charges in New York on Feb. 28 includes conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to violate campaign finance laws. He has been cooperating with federal prosecutors.

Salame, who hasn’t returned The Eagle’s messages seeking comment, was the first to tip off officials in the Bahamas, where FTX was headquartered, about the exchange’s misuse of investors’ funds last November. It’s understood that he is cooperating with federal prosecutors.

When and if Salame enters a guilty plea to any charges that may be brought by Williams, the U.S. attorney for New York’s Southern District, what could happen to Salame’s downtown Lenox holdings?

According to several bankruptcy specialists, the U.S. attorney could seek to forfeit his assets.

The U.S. Justice Department website has an explanation:

“U.S. Attorneys’ Offices, along with the Department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss.

“While restitution is paid to the victim, criminal fines and felony assessments are paid to the Department’s Crime Victims Fund, which distributes the funds collected to federal and state victim compensation and victim assistance programs.”

Other possibilities:

• The U.S. bankruptcy trustee Andrew Vara could work to recover funds for payback to victimized investors.

John J. Ray III, the FTX CEO who replaced Bankman-Fried after the crypto firm went bankrupt last November, is trying to “claw back” any remaining assets for the investors. Ray, a Pittsfield native, has said the FTX crypto exchange had a “complete failure of corporate controls and such a complete absence of trustworthy financial information.”

He called the FTX situation “unprecedented” and something he had never seen in his career. (By the way, he submitted a bill for $305,565 for his work during February.)

Bankruptcy attorney Steve Weiss, of the Springfield firm Shatz, Schwartz and Fentin, told me on Monday that any recovery of Salame’s assets, if that happens, would require years of legal wrangling before collecting any funds, potentially from the sale of Salame’s real estate properties.

“There’s a whole range of collection actions at the trustee’s disposal,” Weiss said. Certain investors or creditors may have received preferential treatment, or fraudulent transfers of funds could be targeted. “The trustee has the ability to pursue preferential transfers for up to two years, and fraudulent transfers up to four years before the bankruptcy filing,” he explained.

And the trustee could attach or place liens on Salame’s properties so they couldn’t be sold without awaiting legal action allowing proceeds from any sales to be used to pay back the defrauded investors.

As Weiss pointed out: If Salame’s properties are attached, any sales of his properties would be prevented without a sign-off by the bankruptcy trustee. Or, the trustee could sue to recover some or all of the $55 million loan Salame took from Alameda Research. Investigative accountants would be hard at work to discover where he spent that loan.

My bottom line: For the foreseeable future, business as usual should continue for the Olde Heritage Tavern and Firefly GastroPub. Whether Salame’s still-to-come “Lenox Eats” venues such as Campfire (formerly Cafe Lucia) will open in time for the summer is anyone’s guess. Also pending: A firm reopening date for the seasonal Sweet Dreams shop and a new schedule for the Lunch Pail food truck.

Salame’s downtown commitments had created plenty of good will in the community. Some people are cautiously optimistic or hopeful that he’ll land on his feet. But the legal tangle surrounding the FTX fraud of the century appears formidable, to say the least.

The opinions expressed by columnists do not necessarily reflect the views of The Berkshire Eagle. Clarence Fanto can be reached at cfanto@yahoo.com.

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