FTX Founder Sam Bankman-Fried Charged With Fraud, Denied Bail

NASSAU, Bahamas/New York, Dec 13 (Reuters) – A judge in the Bahamas has denied bail to Sam Bankman-Fried, founder of cryptocurrency exchange FTX, charged by U.S. prosecutors on Tuesday with fraud and violating campaign finance laws, His removal was instead sent to the local correctional facility.

The former FTX CEO, who was arrested in the Bahamas on Monday, bowed his head and hugged his parents after a magistrate refused bail, citing a “significant” risk of flight.

He was ordered to be remanded to a correctional facility in the island nation until February 1. On the 8th, according to a local official, he will initially serve in the medical department.

The day’s events capped a spectacular decline in recent weeks for the 30-year-old, who amassed a fortune worth more than $20 billion amid the cryptocurrency boom that turned FTX into the world’s largest exchange One, then abruptly closed down this year.

Bankman-Fried has previously apologized to clients and acknowledged FTX’s oversight lapses, but said he personally does not believe he bears any criminal responsibility.

Earlier on Tuesday, U.S. Attorney Damian Williams in New York said that Bankman-Fried paid Democrats and Republicans “by stealing client funds.” made illegal campaign contributions, calling it one of the “largest financial frauds in American history.”

“While this is our first public announcement, it won’t be our last,” he said, adding that Bankman-Fried “made tens of millions of dollars in campaign contributions.”

Prosecutors said Bankman-Fried could face up to 115 years in prison if convicted on all eight counts, although any sentence would depend on a number of factors.

Williams declined to say whether prosecutors will bring charges against other FTX executives or whether any FTX insiders are cooperating with the investigation.

In his first public appearance in person since the collapse of the cryptocurrency exchange, Bankman-Fried appeared in court on Tuesday in the Bahamas, home of FTX, where he was arrested in a gated community in the capital, Nassau.

He appeared relaxed when he arrived at the high-security Bahamian court and told the court he could fight extradition to the United States.

Bahamian prosecutors had asked that Bankman-Fried be denied bail if he opposed extradition.

“Mr. Bankman-Fried is reviewing these allegations with his legal team and considering all of his legal options,” his attorney, Mark S. Cohen, said in an earlier statement.

The “brazen” plan

FTX lost $8 billion in client funds, current FTX CEO John Ray told congressional lawmakers on Tuesday, saying the firm showed “absolute concentration of control in the hands of a small group of inexperienced, inexperienced individuals.” “.

In an indictment unsealed Tuesday morning, U.S. prosecutors said Bankman-Fried participated in a scheme to defraud FTX clients by embezzling their deposits to pay fees and debts and invest on behalf of his crypto hedge fund, Alameda Research LLC.

Prosecutors say he also defrauded Alameda’s lenders by providing false and misleading information about the hedge fund’s status and attempted to disguise funds he earned through wire fraud.

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) both charged Bankman-Fried with fraud in lawsuits filed Tuesday.

The CFTC sued Bankman-Fried, Alameda and FTX on Tuesday for digital commodity asset fraud.

Beginning at least May 2019, FTX raised more than $1.8 billion from equity investors through a years-long “brazen multi-year plan” in which Bankman-Fried concealed FTX’s transfer of client funds to Alameda, the SEC alleges. Research.

Cryptocurrency Investors Lost Billions

Bankman-Fried, who founded FTX in 2019, is an unconventional figure, sporting wild hair, a T-shirt and shorts at panels with politicians like former U.S. President Bill Clinton. He became one of the largest Democratic donors, contributing $5.2 million to President Joe Biden’s 2020 campaign. A year ago, Forbes pegged his net worth at $26.5 billion.

FTX filed for bankruptcy protection in November. On the 11th, an estimated 1 million customers and other investors faced billions of dollars in losses. The crash reverberated throughout the crypto world, sending Bitcoin and other digital assets plummeting.

The crash is one of a string of bankruptcies in the crypto industry this year as the digital asset market tumbles from its 2021 peak. A cryptocurrency exchange is a platform where investors can trade digital tokens such as Bitcoin.

As legal challenges mount, Congress is also considering legislation to rein in the loosely regulated industry.

FTX has shared its findings with the SEC and U.S. Attorneys, and is investigating whether Bankman-Fried’s parents were involved in the operation.

The Bahamas Attorney General’s Office said it expected Bankman-Fried to be extradited to the United States.

Bankman-Fried resigned as FTX CEO on the same day he filed for bankruptcy protection. According to Reuters, FTX’s liquidity crunch came after he secretly used $10 billion in client funds to back his proprietary trading firm, Alameda. At least $1 billion in client funds disappeared.

Additional reporting by Luc Cohen and Jack Queen in New York and Hannah Lang, Chris Prentice and Susan Heavey in Washington Writing by Nick Zieminski and Deepa Babington Editing by Noeleen Walder, Megan Davies, Anna Driver and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

Luc Cohen

Thomson Reuters

Report on the New York Federal Court. Worked as a journalist in Venezuela and Argentina.

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