A federal indictment was unsealed Tuesday alleging widespread fraud by FTX co-founder Sam Bankman-Fried, a day after the fallen crypto exchange operator was arrested within the Bahamas in reference to the fees.
The indictment in U.S. District Court in Manhattan charges Bankman-Fried with eight criminal counts: conspiracy to commit wire fraud and securities fraud, individual charges of securities fraud and wire fraud, money laundering, and conspiracy to avoid campaign finance regulations.
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Prosecutors allege within the indictment that the previous billionaire was engaging in criminal activity that began way back to 2019 and continued through last month.
Bankman-Fried deliberately and knowingly “agreed with others to defraud customers of FTX.com by misappropriating those customers’ deposits and using those deposits to pay expenses and debts of Alameda Research,” the indictment alleges.
It also accuses Bankman-Fried of conspiring with others to defraud FTX’s lenders “by providing false and misleading information to those lenders regarding Alameda Research’s financial condition.”
Prosecutors also allege he conspired with others to make illegal donations to political candidates, using the names of other individuals to mask and augment political giving.
The front page of the U.S. federal indictment of FTX founder Samuel Bankman-Fried by U.S. prosecutors within the Southern District of Latest York on charges of a conspiracy to commit wire fraud, is seen after being released by the U.S. Government in Washington, December 13, 2022.
U.S. Justice Department | via Reuters
His attorney Mark Cohen, in a press release, said, “Mr. Bankman-Fried is reviewing the fees along with his legal team and considering all of his legal options.”
Howard Fischer, a former Securities and Exchange Commission lawyer, told CNBC, “Given the speed of the federal government complaints and the indictment, it seems likely that former FTX employees (most probably those in senior positions) were cooperating with the authorities, most probably in exchange for leniency.”
“With a big case like this, there is commonly a rush to be the primary one within the prosecutor’s door, since the value of cooperation diminishes rapidly if all you’ll be able to offer is a reproduction of what the authorities have already got,” said Fischer, a partner with the law firm Moses & Singer.
Fischer, referring to former Alameda CEO Caroline Ellison, said, “While it shouldn’t be known yet if that’s the case, or who is perhaps cooperating at this point, I’d not be surprised if Ms. Ellison was one in every of the primary person’s looking for to assist the prosecution.”
He noted that Ellison’s own lawyer is the previous co-head of SEC’s Division of Enforcement, and he or she knows how the system works and the best way to work it to her client’s advantage.”
Ellison’s attorney was not immediately available to comment.
Bankman-Fried’s arrest took the general public and lawmakers by surprise. The accelerated timeline suggests prosecutors have a high level of confidence in securing a conviction, a legal expert told CNBC.
