The Fallen Crypto Billionaire Sam Bankman Fried was released with $250 million on Thursday, a day after agreeing to be extradited from the Bahamas.
The 30-year-old faces eight counts related to his role in the collapse of the crypto exchange FTX, which carries a maximum sentence of 110 years. Judge Gabriel Gorenstein said Bankman-Fried should remain under strict supervision at his parents’ home in Palo Alto, California.
Bankman-Fried appeared emaciated and tired in a dark blue suit and ankle chains a day after he was transferred from the Bahamas to FBI custody and flown directly to an airport north of New York City.
The hearing comes after federal prosecutors revealed that Caroline Ellison, 28, former CEO of crypto hedge fund firm Alameda Research and ex-girlfriend of Bankman-Fried, and Gary Wang, 29, co-founder of FTX, had pleaded guilty to criminal offenses. linked to the collapse.
The charges against the two men were “related to their roles in the frauds that contributed to the collapse of FTX”, said U.S. Attorney Damian Williams. “Ms. Ellison and Mr. Wang pleaded guilty to these charges and they are both cooperating with the Southern District of New York.”
Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz
— US Attorney SDNY (@SDNYnews) December 22, 2022
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Ellison pleaded guilty to seven counts of defrauding clients and investors of FTX and Alameda, according to the agreement. The charges against her carry a maximum sentence of 110 years. As part of the plea deal, she was released on $250,000 bond.
Wang faces a similar set of charges. Ilan Graff, his attorney, said in a statement: “Gary has accepted responsibility for his actions and takes his obligations as a cooperating witness seriously.”
Williams said prosecutors plan to bring Bankman-Fried before a federal judge “as soon as possible.” If he does not get bail in New York, he faces being locked up in the Brooklyn Metropolitan Detention Center, where he will await trial.
Defense attorneys speculated that, with Bankman-Fried’s close associates pleading guilty to criminal charges and cooperating with investigators, he might have no choice but to do the same.
The criminal charges were coupled with civil charges from the United States Securities and Exchange Commission (SEC), accusing Ellison and Wang, as well as Bankman-Fried, of securities violations related to the internal cryptocurrency “FTT” of the group.
According to The SEC Complaint, between 2019 and 2022, Ellison, “under the direction of Bankman-Fried”, continued the scheme by manipulating the price of FTT, an FTX-issued crypto-security token exchange, by buying large amounts on the open market to support its price. FTT served as collateral for FTX’s undisclosed loans of its client assets to Alameda, which is owned by Wang and Bankman-Fried.
The complaint underscores the image given by multiple investigations of a close connection between Alameda, which had no outside investors, and FTX. The two companies shared bank accounts and key staff, mixed funds and were both under the direct control of Bankman-Fried, according to the complaint, despite the nominal authority of Ellison, his on-and-off girlfriend. .
FTX has secretly advanced Alameda “a virtually unlimited ‘line of credit’ funded by the platform’s customers,” the SEC said, though it assured investors and depositors that it had “measures of automated risk machines” that would prevent any individual transaction from losing client funds. The unlimited line of credit ensured that when Alameda’s bets paid off, they profited, but when they failed, it was FTX customers who ultimately lost.
The complaint also alleged that Wang created FTX software code that allowed Alameda to misappropriate FTX customer funds, and that Ellison used the misappropriated FTX customer funds for Alameda’s business activity. Bankman-Fried has previously dismissed claims of a secret “backdoor” in FTX’s software by noting that he “didn’t even know how to code”.
If the SEC complaint is upheld in court, it will likely have ramifications for the crypto industry beyond FTX. As part of its legal filing, the SEC argues that FTT, created by FTX with the promise that holders would share in the company’s profits, “was offered and sold as an investment contract and therefore a security.”
“Publicly available information has led FTT holders to reasonably expect to share in FTX’s future growth and earnings, as well as our appreciation of FTT’s value,” SEC says, arguing cryptocurrency violates thus the US laws on the issuance of securities without a license. If the argument is accepted in court, it could have a significant impact on other cryptocurrencies, which thrive on regulatory uncertainty surrounding their legal status.
A separate civil case accuses Bankman-Fried of illegally using investors’ money to fund Alameda Research and buy property for him and his family.
Williams, who described FTX’s collapse as one of “biggest financial frauds in american historysaid the investigation was ongoing and again called on former FTX employees to come forward.
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