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Crypto tycoon Sam Bankman-Fried pleads not guilty to fraud

January 4, 2023

The judge has tentatively set the trial for the founder of the now-bankrupt FTX crypto exchange for October 2. Bankman-Fried was also barred from accessing FTX or Alameda Limited assets, as a new bail condition.

Former FTX Chief Executive Sam Bankman-Fried arrives on the day of a hearing at Manhattan federal court in New York City, U.S. January 3, 2023.
The 30-year-old crypto tycoon has pleaded not guilty to what has been described as an epic fraudImage: David Dee Delgado/REUTERS

Former cryptocurrency tycoon Sam Bankman-Fried on Tuesday pleaded not guilty to charges of defrauding investors in his now-bankrupt FTX crypto exchange.

The 30-year-old FTX founder faces eight criminal counts, including wire fraud and money laundering conspiracy. He is accused of redirecting the deposits of FTX customers without their consent to his Alameda Research hedge fund, which financed his lavish real estate purchases and hefty political donations.

Two of his former associates have already pleaded guilty to fraud charges. Carolyn Ellison, who ran Alameda, and FTX co-founder Gary Wang are cooperating with prosecutors and may testify at trial with the hopes of getting lenient treatment.

Bankman-Fried has acknowledged mistakes were made at FTX, but insisted he doesn't believe he is criminally liable. If convicted, he could face up to 115 years in prison.

US District Judge Lewis Kaplan set October 2 as a tentative date for the trial, which is projected to last around four weeks. Oral arguments were scheduled for May 18.

Why was an extra condition added to Bankman-Fried's bail?

The judge also imposed a new bail condition on Tuesday, barring Bankman-Fried from accessing FTX or Alameda assets.

It came after the prosecutor, Danielle Sassoon, accused Bankman-Fried of working to transfer assets to an undisclosed foreign country in the hopes of receiving a more "lenient" treatment.

She said prosecutors were also looking into reports suggesting that funds were transferred out of Alameda cryptocurrency wallets last month, although she noted that prosecutors had no evidence Bankman-Fried was behind the transactions.

His lawyer, Mark Cohen, denied his client was behind the transfers.

He also addressed the accusation of attempting to transfer money overseas. He said Bankman-Fried was simply seeking to comply with a Bahamas court order which temporarily seized some FTX assets last month.

In November, the Securities Commission of the Bahamas directed Bankman-Fried and Wang to transfer assets under their control, as per a December 29 affidavit filed in the Bahamas Supreme Court.

US Attorney Damian Williams speaks during a news conference about the criminal charges filed against FTX founder Sam Bankman-Fried, Tuesday, Dec. 13, 2022.
Bankman-Fried has acknowledged mistakes were made at FTX, but insisted he doesn't believe he is criminally liableImage: Julia Nikhinson/AP Photo/picture alliance

Secrecy for bond co-signers

Bankman-Fried was required to remain confined at his parents' home in California with electronic monitoring, following his extradition from the Bahamas last month, where FTX was based.

Prior to Bankman-Fried's Tuesday appearance, his legal team requested in a letter that the judge refrain from disclosing the names of two co-signers to his $250 million (€236.77 million) personal bond.

The letter cited the purported harassment the other co-signers, Bankman-Fried's own parents, have thus far suffered, including threats and "communications expressing a desire that they suffer physical harm."

Judge Kaplan approved Bankman-Fried's request and said the names were allowed to stay secret for the time being, but left the door open to reconsidering the decision should the media or others object.

Future of cryptocurrencies 'highly uncertain'

A high-profile crypto blowup

Bankman-Fried founded FTX in 2019, and was hailed as a rising star soon afterwards when the cryptocurrency exchange and hedge fund became one of the largest platforms of its kind worldwide.

His net worth last year was estimated to stand at $26.5 billion (€24.9 billion), according to Forbes. He also became a major donor to US political campaigns.

FTX, which had been among the world's largest cryptocurrency exchanges, filed for bankruptcy protection on November 11 in one of the highest-profile crypto blowups after traders pulled $6 billion (€5.7 billion) from the platform in three days.

Bankman-Fried resigned as FTX's chief executive officer the same day as the bankruptcy filing.

FTX's demise marked the latest turmoil for the cryptocurrency industry in 2022. The overall crypto market has slumped amid a string of meltdowns that have taken down other key players including Voyager Digital and Celsius Network.

rmt/sri (AP, Reuters)