The Tribune

By NEIL HARTNELL and YOURI KEMP

Tribune Business Reporters

US PROSECUTORS yesterday voiced confidence they have sufficient evidence to convict FTX’s embattled founder, Sam Bankman-Fried, on charges that he “misappropriated billions of dollars of customer funds”.

Damian Williams, the US Justice Department attorney leading the prosecution before the southern New York federal court, told judge Ronnie Abrams that the FTX chief had taken investor monies for his “personal use” as well as to make political donations that violated US campaign finance laws.

Updating the judge on Mr Bankman-Fried’s arrest by the Royal Bahamas Police Force on Monday evening, and his court hearing before Chief Magistrate Joyanne Ferguson-Pratt yesterday, Mr Williams confirmed that a grand jury had indicted the crypto currency exchange’s founder on multiple fraud and financial crime-related charges on Friday, December 9.

The long list of alleged offences includes conspiracy to commit wire fraud; wire fraud; conspiracy to commit commodities fraud; conspiracy to commit securities fraud; conspiracy to commit money laundering; and conspiracy to defraud the US and commit campaign finance violations.

“The charges in the indictment arise from an alleged wide-ranging scheme by the defendant to misappropriate billions of dollars of customer funds deposited on to FTX, the international crypto currency exchange founded by the defendant,” Mr Williams wrote in his December 13 letter.

“The Government expects that the evidence will show that the defendant defrauded FTX customers by misappropriating their funds for his personal use, including to invest for his own account, to make tens of millions of dollars of political contributions, and to cover billions of dollars in expenses and debts of Alameda Research, a crypto currency hedge fund also founded by the defendant.

“The evidence will further show that the defendant made affirmative misrepresentations about the relationship between FTX and Alameda Research, as well as about FTX’s and Alameda Research’s overall financial condition, thereby defrauding FTX’s equity investors as well as Alameda Research’s lenders.

“The Government expects the evidence will show that the defendant violated campaign finance laws by causing political contributions to candidates and committees associated with both major political parties to be made in the names of co- conspirators, when in fact those contributions were funded by Alameda Research with misappropriated customer funds,” Mr Williams added.

“This alleged scheme enabled the evasion of contribution dollar limits, corporate donation limits, and donation reporting requirements, and was in service of the defendant’s desire to influence the direction of policy and legislation on the crypto currency industry.

Mr Williams, later addressing a press conference, added: “A grand jury here in Manhattan indicted Mr Bankman-Fried. Last week Friday, we obtained a warrant for his arrest, and that arrest was executed yesterday in the Bahamas.

“This investigation is very much ongoing and it is moving very quickly. But I also want to be clear about something else. While this is our first public announcement, it will not be our last. The indictment has eight counts but, effectively, it outlines four different areas of misconduct.”

Michael Driscoll, the Federal Bureau of Investigation (FBI) assistant director in charge, citing the role played by multiple US government agencies and criminal investigations networks in the probe, said: “These kinds of cases do not happen without that kind of co-ordination.

“I specifically want to note the assistance provided by the RBPF (Royal Bahamas Police Force) and I want to be clear, this case is about fraud. Fraud is fraud. It does not matter the complexity of the investment scheme. It does not matter the amount of money involved. If you mislead and deceive, to take what does not belong to you, we will hold you accountable.”

Mr Bankman-Fried, who was yesterday denied bail by Chief Magistrate Pratt on the basis that he is a potential flight risk, was remanded into custody in The Bahamas until February 8 next year. He faces up to 115 years in prison in the US if convicted on all charges.