With Sam Bankman-Fried looking on, judge seems skeptical of request to reject criminal fraud charges

Sam Bankman-Fried
Posted at 1:58 PM, Jun 15, 2023

NEW YORK (AP) — FTX founder Sam Bankman-Fried’s lawyers encountered a skeptical federal judge Thursday when they argued that he should toss out criminal fraud charges their client faces after the collapse of his cryptocurrency business.

Judge Lewis A. Kaplan repeatedly pushed back against arguments suggesting that nothing criminal happened if investors and customers of FTX were fooled into believing their money was being used for one purpose when it was being used for another.

When one defense lawyer finished speaking, the judge told him: “I congratulate you on an extraordinarily imaginative argument.” He did not immediately rule.

The Manhattan federal court arguments came after a prosecutor said the government will proceed to a fall trial on only the original charges lodged against Bankman-Fried when he was extradited from the Bahamas in December because new charges added in March have not yet cleared a legal hurdle related to the U.S. Extradition Treaty with the Bahamas.

Those new charges included a claim that Bankman-Fried directed the payment of $40 million in bribes to a Chinese official or Chinese officials to free $1 billion in cryptocurrency that was frozen in early 2021.

According to the terms of the treaty, authorities in the Bahamas would have to provide a waiver for prosecutors to proceed with the new charges.

Assistant U.S. Attorney Thane Rehn said prosecutors will not continue with the new charges unless it obtains the waiver, citing “an interest in observing diplomatic relationships.” He said discussions with Bahamian authorities prior to the unsealing of the March superseding indictment led prosecutors to believe the waiver would be delivered.

He said a trial based on the original indictment would last four to five weeks, about a week shorter than it would be with the new charges included.

Bankman-Fried, 31 — referred to by crypto enthusiasts as “SBF” — has pleaded not guilty to all charges as he awaits trial at his parent's home in Palo Alto, California, where the terms of his $250 million personal recognizance bond severely limit his online communications and ability to move money. If convicted, he could face years in prison. U.S. Attorney Damian Williams has called it “one of the biggest frauds in American history.”

In asking the judge to dismiss the indictment, his lawyers have argued that the charges are flawed, saying they are duplicative, vague and non-specific and the kinds of things that usually result in regulatory enforcement actions rather than criminal charges.

“They're trying to criminalize a civil matter,” argued attorney Christian Everdell as he tried to poke holes in various charges facing his client, including a bank fraud conspiracy charge. It was Everdell who prompted the judge to praise his “extraordinarily imaginative argument.”

Prosecutors contend that Bankman-Fried and other executives in his cryptocurrency operation cheated investors and looted FTX customer deposits to make lavish real estate purchases, donate money to politicians and make risky trades at Alameda Research, his cryptocurrency hedge fund trading firm.

FTX entered bankruptcy in November when the global exchange ran out of money after the equivalent of a bank run.