FTX Founder Sam Bankman-Fried Faces New Criminal Charges


NY
CNN

The federal prosecutor’s office announced the initiation of four new criminal cases against Sam Bankman-Friedfounder of cryptocurrency trading platform FTX, expanding his potential liability in what authorities claim is a billion-dollar scam.

The new allegations, uncovered in Thursday’s replacement indictment, add to the already serious charges being leveled against the so-called crypto king.

“We are working hard and will continue to work until justice is served,” said Damian Williams, U.S. Attorney for the Southern District of New York, whose office is investigating the FTX collapse.

Bankman-Fried was indicted in December on eight counts. Thursday’s 12-count indictment added four new charges, including conspiracy to operate an unlicensed money transfer business, conspiracy to commit bank fraud, securities fraud and fraud in connection with the purpose or sale of derivatives.

Prosecutors said Bankman-Fried and others misused customer accounts on the FTX trading platform to support the business operations of sister hedge fund Alameda Research, enrich themselves, make venture capital investments and try to buy influence from US politicians. Prosecutors say Bankman-Fried has raised at least $1.8 billion from investors.

“Defendant was well aware that FTX, which by early 2022 claimed to be processing approximately $15 billion daily on its platforms, was not focused on protecting investors or customers and it was not a legitimate business as Bankman-Fried claimed.” upholds the indictment.

Bankman Fried, who released on $250 million bail and under house arrest in Palo Alto, California, where his parents lived. home, pleaded not guilty to December charges. At the time, he was charged with multiple counts of conspiracy, wire fraud, and conspiracy to violate U.S. campaign finance laws by making illegal political contributions.

Bankman-Fried will be brought to trial on new charges in the future. He now faces up to 155 years in prison if found guilty on all counts. Two of his top aides, Gary Wang and Caroline Ellison, have pleaded guilty to multiple charges and are cooperating with the investigation.

The 39-page indictment lays out the alleged fraud in more detail than the 14-page indictment released in December when Bankman-Freed was arrested in the Bahamas, where he lived.

Among the new details is the reaction of FTX insiders after the news organization reported Alameda’s balance sheet, indicating that billions of dollars worth of assets were concentrated in the FTX FTT digital token, raising concerns about the stability of FTX and Alameda.

Bankman-Fried and Ellison, at his behest, tweeted allegedly false statements to prevent the collapse of FTT and try to stop clients withdrawing funds from FTX.

These efforts were unsuccessful and FTX faced massive bankruptcy. While customers were withdrawing funds from their FTX accounts, Ellison wrote to Bankman-Fried in a message: “I only had a growing fear of this day that weighed on me for a long time, and now that this is really happening, I just feel great that it’s over. one way or another.”

On November 8, three days before FTX filed for bankruptcy, the general counsel, in a message via Signal, an encrypted messaging platform, demanded from Bankman-Fried and other partners, “I need to know the fucking truth about FTX US. right now.” Prosecutors allege that FTX suspended client withdrawals that day. Despite the suspension, prosecutors allege, Bankman-Freed allowed clients in the Bahamas, where he lived, to withdraw funds totaling millions of dollars.

Prosecutors allege that Bankman-Fried tried to hide his activities while FTX was falling apart by communicating with his employees via Signal. He ordered employees to use Signal and set it to automatically delete messages after a while.

FTX’s General Counsel warned employees to keep records and told the company’s Slack channel that FTX needed to be shut down. Bankman-Fried, prosecutors allege, deleted that Slack message from General Counsel, continued using Signal, and deleted some of the tweets.

In the days of the company’s decline, Bankman-Fried discussed with one in-house lawyer a possible legal explanation for the use of customer funds. They looked at allegations that Alameda had borrowed money from customers who opted for the FTX peer-to-peer borrowing program. According to the indictment, the idea was dismissed because Alameda’s loan exceeded the amount of money provided by the program. Prosecutors allege that Bankman-Fried later publicly accepted this explanation despite privately admitting that it was not supported by the facts.

The accusation also sheds light on political donations done on behalf of FTX employees.

According to prosecutors, Bankman-Fried made more than 300 illegal political donations totaling tens of millions of dollars through shell donors using corporate money. The donations were made in the names of two FTX employees identified in the indictment as CC-1 and CC-2. The indictment says the faces were used to give Bankman-Fried “cover” to keep him from looking too left-wing or joining the Republicans, and to cover up that the donations came from Alameda and FTX. It also allowed Bankman-Fried to bypass restrictions on individual donations he had already made to candidates.

According to the indictment, the SBF wanted Republican contributions to remain “shadowy,” so these donations were made through an FTX executive identified in the indictment as CC-2, who had publicly aligned himself with the conservatives.

The indictment alleges that CC-1 was chosen as the face of leftist donations. The indictment alleges that Bankman-Fried conspired to contribute “at least a million dollars” to a supercommittee that supported a candidate running for a seat in the U.S. Congress and was apparently linked to LGBTQ issues.

A political consultant working for Bankman-Fried asked CC-1 to contribute, telling him, “In general, being the center left of our spending means you’re giving away a lot of crap for transactional purposes.”

CC-1 expressed discomfort, the indictment alleges, but agreed that no one is “trusted” at FTX. [who was] bi/gay” is able to contribute, the new indictment says.

In another instance, shortly before the 2022 midterms, an FTX employee was ordered to transfer $107,000 from Bankman-Fried’s account to the New York State Democratic Committee, but asked to be updated to indicate that it came from CC-1.

The executive branch ultimately emerged as one of the biggest Democratic donors in the 2022 midterm elections, pushing the Bankman-Fried agenda with donations that executives would not have willingly made, the statement said.

The indictment alleges that to cover up donations, money was transferred from Alameda to FTX employees’ accounts and then paid out as political donations.

In November 2022, when FTX clients were withdrawing funds, CC-1 expressed SBF’s concerns in chat messages about “maybe 80 million” “donations/personal/etc” that went through his bank account in his name. The indictment states that the two discussed plans to cover up wire transfers, but ultimately never made transactions that could further cover up the campaign finance scheme.

FTX filed for bankruptcy on November 11.