According to people familiar with the matter, FTX founder Sam Bankman-Fried is unlikely to plead guilty to fraud and other charges at his indictment next week.
The U.S. Attorney’s Office for the Southern District of New York earlier this month indicted Mr. Bankman-Fried for involvement in criminal acts that contributed to the collapse of the cryptocurrency exchange, alleging he committed one of the largest financial frauds in American history supervised. Mr. Bankman-Fried is likely to appear in person in New York on Jan. 3 to present his plea, one of the people said.
Prior to his arrest, Mr. Bankman-Fried blamed the loss of client funds on sloppy record keeping and a problem with bank accounts that allowed Alameda Research, an affiliated trading firm, to cover large losses with funds earmarked for FTX. His not-guilty plea was widely expected.
The collapse of FTX has sparked the largest crypto-related bankruptcy to date, and court filings are already shedding light on what went wrong and how complicated things could get. Here are three things you should know about the company’s bankruptcy process. Photo: Lam Yik/Bloomberg News
Mr. Bankman-Fried is at odds with his associates — Caroline Ellison, former executive director of Alameda Research, and Gary Wang, former chief technology officer of FTX — who are both guilty of similar offenses to those charged with Mr. Bankman-Fried have acquainted with. Both cooperate with federal investigators.
The collapse of FTX and its sister trading firm Alameda has rocked the burgeoning crypto world. Prosecutors allege that Mr. Bankman-Fried took billions of dollars in customer funds from FTX.com to pay the expenses and debts of his trading firm, Alameda Research. Both companies filed for bankruptcy last month. Individual traders who have trusted FTX with their cryptos are likely to face lengthy bankruptcy proceedings before they have a chance to get their funds back.
Mr Bankman-Fried was released on $250 million bail last week and was ordered to stay at his parents’ home in Palo Alto, California, after appearing in federal court in New York following his extradition from the Bahamas had appeared.
Prosecutors say Mr Bankman-Fried conspired with unnamed individuals to defraud customers and lenders from 2019 to November. He gave lenders false and misleading information about Alameda’s financial condition, the US Attorney’s Office said in the indictment.
Mr Bankman-Fried is also accused of defrauding the Federal Elections Commission as of 2020 by conspiring with others to make illegal donations to candidates and political bodies on behalf of others.
He and his associates have contributed more than $70 million to election campaigns in recent years, the Wall Street Journal previously reported. He personally donated $40 million ahead of the 2022 midterm elections.
Mr. Bankman-Fried also faces allegations from the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The SEC alleged in a civil complaint that Mr. Bankman-Fried diverted client funds from FTX’s inception to support Alameda and make venture investments, property purchases and political contributions. The CFTC filed a lawsuit tying his alleged fraudulent conduct at Alameda and FTX to the markets regulated by the CFTC.
On Friday afternoon, Mr. Bankman-Fried returned took to Twitter for the first time since Dec. 12 to defend himself against rumors that he has been moving funds from multiple crypto wallet addresses linked to Alameda.
Cryptocurrency prices have plummeted this year amid rising central bank interest rates and the collapse of a once-prominent hedge fund and crypto lenders, with Bitcoin and Ether plunging 64% and 67%, respectively, according to CoinDesk data. The total market cap of all digital tokens fell to $795 billion, compared to $2.2 trillion at the start of the year, according to CoinMarketCap data.
Write to Caitlin Ostroff at [email protected] and Vicky Ge Huang at [email protected]
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