U.S. prosecutors on Tuesday accused Sam Bankman-Fried, the founder and former CEO of crypto currency exchange FTX, of fraud and violating campaign finance laws by misappropriating his customers' funds, saying the investigation is ongoing and "moving very quickly," Reuters reported. U.S. Attorney Damian Williams in New York said Bankman-Fried made illegal campaign contributions to Democrats and Republicans with "stolen customer money," saying it was part of one of the "biggest financial frauds in American history." "While this is our first public announcement, it will not be our last," he said, adding Bankman-Fried "made tens of millions of dollars in campaign contributions." Williams declined to say whether prosecutors would bring any charges against other FTX executives, emphasizing that the investigation was ongoing. He also declined to say whether any FTX insiders were cooperating with the investigation. Bankman-Fried made a court appearance on Tuesday in the Bahamas, where he was arrested on Monday and where FTX is based. A lawyer for Bankman-Fried requested that his client be released on $250,000 bail. Bahamian prosecutors have asked that Bankman-Fried be denied bail if he fights extradition. Read more.
In related news, Bahamas government officials worked closely with Sam Bankman-Fried and tried to help him regain access to key computer systems of bankrupt FTX Trading, lawyers for FTX said in a court filing before the failed crypto magnate was arrested on Monday, Bloomberg News reported. Before Bankman-Fried was blocked from FTX systems, the Bahamas asked him to mint new digital coins worth hundreds of millions of dollars and then transfer those tokens to the control of island officials, according to the legal team in control of FTX. The accusations escalate a battle between an American team of restructuring executives trying to collect FTX assets to repay creditors, and officials in the Bahamas. Liquidators in the island nation have asked a U.S. judge for access to FTX data controlled by their American counterparts. “It is a request for live, dynamic access that would be provided immediately to the government of the Bahamas and to Messrs. Samuel Bankman-Fried and Gary Wang, who are located in the Bahamas and working closely with Bahamian officials,” American lawyers wrote in a court filing yesterday. Wang is an FTX co-founder. In attempting to paint a portrait of coziness between Bankman-Fried and Bahamas authorities, the company’s U.S. lawyers called out a Nov. 9 email — just days before the bankruptcy — in which Bankman-Fried said he would be “more than happy” to open up withdrawals for all Bahamanian customers, allowing them to be made whole. “It’s your call whether you want us to do this — but we are more than happy to and would consider it the very least of our duty to the country, and could open it up immediately if you reply saying you want us to,” Bankman-Fried wrote, according to court papers. Read more.
Also, a growing group of non-U.S. customers of FTX.com, which currently counts up to around $1.6 billion in lost funds, has lawyered up and is looking to create an official customer committee in order to protect their rights of ownership over their assets on the exchange, CoinDesk.com reported. The non-U.S. FTX customers, led by Eversheds Sutherland attorneys Sarah Paul and Erin Broderick, had already formed the first FTX ad hoc group. “The rights of the non-U.S. customers and why they’re differently situated is really important,” said Paul, a former federal prosecutor in the U.S. Attorney’s Office for the Southern District of New York. “First, there is an irreconcilable conflict between the interests of the non-U.S. customers and the creditors of the other silos. The starkest example of that is the transfer of the $10 billion to Alameda from FTX.com. The terms of service situate the assets differently, as customer funds, as opposed to property of the estate.” Read more.
