This is a showdown that should not be missed.
It will be a confrontation between federal prosecutors and Sam Bankman-Fried, the former king of the crypto space who fell into disgrace after the bankruptcy of his empire on November 11th.
This empire was made up of the FTX cryptocurrency exchange and its sister company Alameda Research, a hedge fund that also served as a trading platform for institutional investors.
Bankman-Fried, known by its initials SBF, filed for Chapter 11 bankruptcy for these two companies because they were short of cash and could no longer meet the massive withdrawal requests of their customers. The case is the biggest scandal in the financial services industry powered by blockchain technology. Last February, FTX was valued at $32 billion but imploded in just a few days. It is this mystery that regulators are trying to unravel.
SBF, the founder of FTX, pleaded not guilty on January 3 to a series of criminal charges including allegations of fraud, filed against him by the Justice Department during a hearing in US District Court in New York.
The Trial Begins On October 2
He emerged from a black SUV, immediately invaded by a swarm of photographers and television cameras. The 30-year-old former trader wore a blue suit, white t-shirt and blue tie. Unsurprisingly, he later pleaded not guilty before Judge Lewis Kaplan. The federal prosecutors have on their side indicated that they would present the evidence to support their case in the next four months.
Judge Kaplan then set the trial for October 2.
The not guilty plea will allow SBF and its lawyers, led by the famous defense lawyer Mark Cohen, to have access to the file and to know what the prosecution’s evidence is. It also saves him time.
Damian Williams, US attorney for the Southern District of NY, has previously reported that the government has interviewed a dozen FTX employees and seized thousands of pages of documents, emails, financial statements and other chats from FTX and its employees.
The government also secured the cooperation of two SBF lieutenants: Zixiao (Gary) Wang, 29, FTX co-founder and former Chief Technology Officer, and Caroline Ellison, 28, the former CEO of Alameda Research.
They have both pled guilty to multiple federal fraud charges and agreed to cooperate with prosecutors.
“I knew that it was wrong,” Ellison said about her actions, according to a transcript of her plea hearing released on Dec. 23.
Wang also said the same thing: “I knew what I was doing was wrong,” Wang also said, according to the transcript of his guilty plea.
Aware of the stakes, Willians, who is leading the Bankman-Fried case, announced on January 3 the formation of a task force of veteran prosecutors to work on the FTX rout. This team is made up of prosecutors who have worked on cases related to financial fraud, such as securities and commodities, money laundering and transnational crime.
This activism on the part of the government shows that this case is very sensitive. However, it is not excluded that there is an agreement between the government and Bankman-Fried. Very few criminal cases go to trial in the United States.
Justice Department prosecutors filed eight criminal counts against the former trader on December 13. Four of the charges, including conspiracy to commit wire fraud on customers and lenders and wire fraud, indicate that the alleged acts began as early as 2019. This is the year FTX was founded.
“Bankman-Fried was orchestrating a massive, yearslong fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the SEC alleges in its civil complaint.
Bankman-Fried was extradited to the United States on Dec. 21 by the authorities of the Bahamas, where he lived and where FTX is headquartered. He was released after his parents, both law professors at Stanford University, signed a $250 million recognizance bond pledging their California home as collateral. Two other friends with significant assets also signed, according to news reports.
The government asked Judge Kaplan on January 3 to prohibit SBF from having access to the assets of FTX and Alameda Research. Bloomberg News reported last week that federal prosecutors are investigating a series of crypto transactions tied to digital wallets associated with Bankman-Fried.
“We do have concerns that within a period of a few days additional assets could become inaccessible,” Assistant US Attorney Danielle Sassoon said.