Former FTX CEO’s Sam Bankman-Fried appeared before a U.S. federal court in the Southern District of New York for his arraignment on Tuesday. He pleaded not guilty as expected even though two of his former colleagues so far are fully co-operating with prosecutors and federal agencies.
Bankman-Fried has been charged with eight counts of wire and securities fraud, conspiracy, and campaign financial violations to the tune of $80 million.
The prosecutors have alleged that under Bankman-Fried’s direction that billions of customers’ assets were transferred to Alameda Research, his trading company, which included crypto trading, venture capital investment, Bahamian real estate purchases, and over one billion dollars in loans to FTX employees.
Assistant U.S. Attorney Danielle Sassoon proffered to U.S. District Judge Lewis Kaplan that the prosecutors expect to complete their discovery in the near future and will produce the evidence which they have already received from the FTX’s bankruptcy attorneys.
"I think the bulk of discovery will take place over the next few weeks," with discovery continuing on a "rolling basis,” Sassoon told Judge Kaplan.
Sassoon also asked the court to modify Bankman-Fried’s bail conditions and prohibit the former FTX CEO from transferring any assets linked to FTX and its affiliated entities. She noted that just last week it was discovered that several Alameda wallets had moved crypto into other accounts.
Earlier in the day, Bankman-Fried’s attorney requested that the two additional guarantors of his $250 million bail bond package be sealed from the public. Judge Kaplan granted that request without prejudice. Hence, the press and other vested parties have until January 12 to object to that sealing order. Bankman-Fried’s attorney argued to the court that if those parties’ names were made public that they may be at risk for harassment and privacy violations. The DOJ has scheduled interviews with both parties.
Bankman-Fried’s parents pledged the equity in their $4 million Palo Alto, California home where the defendant is under house arrest awaiting his trial and wearing a monitored ankle bracelet. The court previously had ordered two additional sureties to the bail bond package since the equity in their home does not equal the value of the bail bond package.
Outstanding evidence includes search warrants and file access to FTX’s AWS database that holds FTX’s transactional histories.
The prosecutors also have asked to provide a victim notification website to account for the more than one million FTX customers who lost money.
If convicted, Bankman-Fried could face 115 years in prison.
The defense motion is set for April 3. The government’s opposition briefs are due by or before April 24 and the oral argument or status conference is set for those pleadings by May 18.
The judge set Bankman-Fried’s trial date for October 2, 2023.
The trial will pit Bankman-Fried against at least two FTX former executives so far. Caroline Ellison, who has been reported to be his former girlfriend, and Gary Wang, his former M.I.T. roommate, have pleaded guilty to fraud that resulted in FTX’s collapse in November.
The government has charged Ellison with seven counts that include wire fraud and wire fraud conspiracy against FTX customers and FTX's sister hedge fund Alameda Research, conspiracy to commit commodities and securities fraud, and conspiracy to commit money laundering. Her charges could carry up to 110 years in prison and millions in potential penalties.
Wang's has pleaded guilty to four counts of wire fraud and wire fraud conspiracy, as well as conspiracy to commit commodities and securities fraud. His charges carry up to 50 years in prison, plus fines.
In addition, the SEC has charged both Wang and Ellison with fraud. Both are cooperating with the SEC investigation and have entered into settlements with the agency.
Judge Kaplan has replaced Judge Ronnie Abrams as presiding judge. Judge Abrams recused herself over a conflicting business relationship between FTX and her husband’s law firm, Davis & Polk.
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