Bankrupt cryptocurrency kingpin returns to Manhattan federal court

FTX founder Sam Bankman-Fried

Sam Bankman-Fried, kingpin of the bankrupt cryptocurrency exchange FTX, has arrived at a Manhattan federal court where he is set to face charges that include cheating investors out of billions of dollars in what resulted in the fake money’s biggest implosion.

Bankman-Fried entered a not guilty plea at his arraignment in Manhattan and will remain free on bail for now. It was the 30-year-old’s second appearance in court since his extradition from the Bahamas.

Authorities have accused Bankman-Fried of stealing customer funds from FTX to cover loans taken out by Alameda Research, FTX’s affiliated crypto hedge fund. They also say he used those funds to make investments in other companies and donate to campaigns of politicians from both parties to influence public policy.

Damian Williams, the United States Attorney for the Southern District of New York, secured the extradition of Bankman-Fried from the Bahamas.

“We announced charges against Samuel Bankman-Fried for a sweeping fraud scheme that contributed to FTX’s collapse and for a campaign finance scheme that sought to influence public policy in Washington,” said Williams in a statement issued on December 22, 2022. “As I said last week, this investigation is very much ongoing, and it’s moving very quickly.”

Caroline Ellison, the former CEO of Alameda Research, and FTX cofounder Gary Wang have pleaded guilty to fraud and agreed to cooperate with prosecutors.

“FTX collapsed, causing billions of dollars in losses to its customers, lenders, and investors,” said Williams. “Now, a federal grand jury in New York has indicted the former founder and chief executive officer of FTX and charged him with crimes related to the phenomenal downfall of that one-time cryptocurrency exchange, including fraud on customers, investors, lenders, and our campaign finance system.”

Williams said the “charges make clear, this was not a case of mismanagement or poor oversight, but of intentional fraud, plain and simple.”

The Securities and Exchange Commission has charged Ellison and Wang with “a multiyear scheme to defraud equity investors in FTX,” alleging that Ellison — at the direction of Bankman-Fried — manipulated the price of FTT, a token native to FTX.

The Commodity Futures Trading Commission also charged Ellison and Wang with fraud.

Both agencies have lodged complaints against Bankman-Fried, as well.

Federal prosecutors said Bankman-Fried and his co-conspirators made millions of dollars in political contributions funded by Alameda Research to federal political candidates and committees in advance of the 2022 election.

To conceal the fact that those contributions were paid for using funds from a corporation and to evade contribution limits and reporting requirements, Bankman-Fried caused contributions to be reported in the names of co-conspirators rather than in the name of the true source of the funds.

“Only months before the FTX cryptocurrency exchange crashed into reality, resulting in criminal charges against funny-money founder Sam Bankman-Fried and a multi-billion dollar bankruptcy, three New Jersey congressman greedily accepted campaign contributions from more than $70 million distributed by executives of the company,” said Lisa McCormick, progressive Democrat who stunned observers by earning 159,998 votes as a US Senate candidate in the 2018 Democratic primary election without raising more than $5,000 for her grassroots campaign.

McCormick called on three New Jersey congressmen to give up campaign contributions that they accepted from Bankman-Fried.

“While FTX was handing out cash, Josh Gottheimer collected $11,600, Cory Booker received $11,400, and Frank Pallone got a combined total of $7900, $2900 directly plus $5000 directed to his Shore PAC, according to records from the Federal Election Commission,” said McCormick, who posted a petition online asking residents to join her call for the politicians to divest the dirty money.

Williams also announced charges in separate indictments against the founders and promoters of cryptocurrency Ponzi schemes known as OneCoin, IcomTech and Forcount.

With those indictments, Williams said, “this office is sending a message to all cryptocurrency scammers: We are coming for you.  Stealing is stealing, even when dressed up in the jargon of cryptocurrency.”

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