Sam Bankman-Fried, founder of FTX, is preparing to plead not guilty to the fraud charges against him, while some of his indicted collaborators have pleaded guilty

Sam Bankman-Fried could plead not guilty on Tuesday to criminal charges that he deceived hundreds of investors and looted billions of dollars through the FTX cryptocurrency exchange. After FTX’s calamitous management led to the mysterious disappearance of client funds, Bankman-Fried will appear at 2 p.m. EST (7 p.m. GMT) before Manhattan Judge Lewis Kaplan on Tuesday to make his case. The hearings of some of his former collaborators gave rise to startling revelations, revealing behind the scenes of a gigantic scam of which FTX customers were victims.

Massachusetts Institute of Technology (MIT) graduate and son of two Stanford University law professors, Bankman-Fried it happened in a few years at the top of the cryptocurrency industry. By featuring celebrities in his FTX ads, he managed to legitimize cryptocurrencies among the general public and the political class. His fortune was once estimated at $25 billion and FTX was valued at $32 billion until October 2022. of creditors.

Bankman-Fried was indicted by the US government in mid-December. The 13-page indictment claims that, beginning in 2019, Bankman-Fried devised “a scheme and artifice to defraud” FTX clients and investors, misappropriating their money to pay expenses and debts of his cryptocurrency hedge fund, Alameda Research, and to make lavish real estate purchases and large political donations. FTX Bankruptcy Reports and Process have revealed a long list of decisions and practices that would constitute financial fraud had FTX been a regulated entity in the United States.

Sam Bankman-Fried, founder of FTX

Ex-FTX executives have shown complete failure at all levels of control. “At first glance, the collapse of the FTX group appears to be the result of the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals,” says John Ray, the new CEO of FTX to the US Congress in deploring in particular the total absence of accounting or an independent board of directors for a company which was brewing billions. Charged with the liquidation of FTX, Ray said it is the most disastrous management he has seen in his career.

But while some of his closest associates pleaded Guilty at their hearings, a source familiar with the case recently told Reuters that Bankman-Fried is expected to plead not guilty at his hearing on Tuesday. Bankman-Fried’s attorneys don’t comment on the rumor, but analysts say it’s not uncommon for defendants to initially plead not guilty. Defendants are free to change their plea at a later date. Bankman-Fried has been free on $250 million bond since his extradition last month from the Bahamas, where he lived and where the FTX exchange was based.

Since his release, Bankman-Fried has been under electronic surveillance and has to live with his parents, both law professors at Stanford Law School in California. The FTX founder was charged with two counts of wire fraud and six counts of conspiracy, including money laundering and violation of campaign finance rules. If found guilty, he risque up to 115 years in prison. Bankman-Fried admitted to making mistakes while running the cryptocurrency exchange, but said he did not believe he was criminally responsible.

So, how to explain the position of his close collaborators? Caroline Ellison, former CEO of Alameda Research, and Zixiao “Gary” Wang, co-founder of FTX, have pleaded guilty to the criminal charges and are cooperating with prosecutors. The news was announced by Damian Williams, US Attorney for the Southern District of New York. Williams did not specify which count Ellison and Wang pleaded guilty to, but said the guilty pleas relate to their insider roles at FTX and its company on Alameda Research. Wang owned 10% of Alameda Research (Bankman-Fried owned the remaining 90%).

According to available information, Wang and Ellison risk respectively up to 50 and 110 years in prison. The United States Securities and Exchange Commission (SEC) has also brought civil charges against Bankman-Fried. The SEC alleges that he defrauded investors and illegally used their money to buy real estate for himself and his family. The SEC said it would try to recover any financial gains made by Bankman-Fried in the alleged fraud. Investigations into the FTX collapse have revealed that Bankman-Fried runs the company like his personal fiefdom.

We allege Bankman-Fried built a house of cards on a foundation of deception while telling investors it was one of the safest buildings in the cryptocurrency industry, said SEC Chairman Gary Gensler. . The SEC complaint also notes that Bankman-Fried had raised more than $1.8 billion from investors since May 2019 by promoting FTX as a safe and responsible platform for trading digital assets. Instead, the complaint says that Bankman-Fried diverted client funds to Alameda Research without informing them.

Bankman-Fried then used Alameda Research as his personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments, among other uses. None of this has been disclosed to FTX stock investors or clients of the exchange. Alameda Research did not separate funds from FTX investors and Alameda Research investments, using that money to indiscriminately fund its trading operations, as well as other Bankman-Fried businesses, the complaint reads. filed with the United States SEC.

During his plea in December, Ellison a dclar prosecutors that it had colluded with Bankman-Fried to conceal from FTX investors, lenders and clients that Alameda Research could borrow unlimited amounts from the cryptocurrency exchange. Thus, many analysts find it difficult, if not impossible, to believe in Bankman-Fried’s innocence. According to them, pleading not guilty would be neither more nor less than a defense strategy on his part. “I have a feeling he’s going to have to serve a pretty heavy sentence,” said Nick Akerman, former assistant US attorney.

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See as well

FTX founder Sam Bankman-Fried faces up to 115 years in prison in the United States if convicted of the charges against him, he faces 8 counts in total

Sam Bankman-Fried comps plead guilty in FTX fraud case. FTX Co-Founder Gary Wang and Former Alameda CEO Caroline Ellison Face Up to 50 and 110 Years in Prison

The founder of crypto platform FTX allegedly secretly transferred $10 billion in client funds to his company Alameda Research, much of which has since disappeared

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