Former crypto titan Sam Bankman-Fried pleads not guilty to fraud

The 30-year-old FTX founder, formerly worth an estimated $26bn, could face a sentence of up to 115 years in US prison.

Sam Bankman-Fried arrives for a court hearing.
FTX founder Sam Bankman-Fried, centre, has been accused of embezzling billions of dollars from investors [File: Julia Nikhinson/AP Photo]

In the United States, the former cryptocurrency magnate Sam Bankman-Fried has pleaded not guilty to charges of fraud, denying allegations that he cheated investors out of billions of dollars.

On Tuesday, lawyers for the 30-year-old Bankman-Fried, founder of the now-insolvent FTX cryptocurrency exchange, entered a plea of not guilty at an arraignment hearing before US District Judge Lewis Kaplan in New York City.

Prosecutors have accused Bankman-Fried of committing fraud on an enormous scale, alleging that he diverted billions of dollars of investor funds to buy real estate, make political donations and prop up his cryptocurrency trading hedge fund, Alameda Research.

Bankman-Fried faces charges including wire fraud and conspiracy to commit money laundering. He could face a 115-year sentence if convicted. Judge Kaplan has set a tentative trial date for October 2 of this year.

Before his chaotic downfall, Bankman-Fried was lauded as a mover and shaker in the emerging digital currency scene, amassing a fortune that once reached an estimated $26bn and using his wealth to become an influential donor in US politics.

In early November, however, FTX experienced a collapse amid concerns that the cryptocurrency exchange was insolvent. Investors raced to withdraw their money, wiping out Bankman-Fried’s fortune.

Without adequate funds, FTX was forced to stop processing the withdrawals, leaving some investors unsure if they would ever receive their money. The company declared bankruptcy on November 11.

Bankman-Fried was extradited from the Bahamas in December, where he lived and where FTX was located. He was released on a $250m bond on December 22 and has been living at home with his parents in Palo Alto, California, under electronic monitoring as he awaits trial.

“If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” US Attorney Damian Williams said in a statement, encouraging others involved in the scandal to step forward. “We are moving quickly and our patience is not eternal.”

Ahead of Tuesday’s arraignment, Williams announced the creation of a federal probe into FTX’s business dealings, called the Southern District of New York (SDNY) FTX Task Force. It would be charged with investigating and prosecuting any further improprieties stemming from the scandal.

“It is an all-hands-on-deck moment. We are launching the SDNY FTX Task Force to ensure that this urgent work continues, powered by all of SDNY’s resources and expertise, until justice is done,” Williams said in a press statement.

Last month, Alameda’s former chief executive Caroline Ellison and FTX’s former chief technology officer Gary Wang agreed to cooperate with prosecutors and pleaded guilty to numerous charges, including fraud.

During a plea hearing on December 19, Ellison said that Bankman-Fried and other FTX executives had received billions of dollars in secret loans from Alameda Research.

“We prepared certain quarterly balance sheets that concealed the extent of Alameda’s borrowing and the billions of dollars in loans that Alameda had made to FTX executives and to related parties,” Ellison told US District Judge Ronnie Abrams in a Manhattan federal court, according to a transcript.

Ellison and Wang also settled civil charges brought by the US Securities and Exchange Commission and the Commodity Futures Trading Commission.

The implosion of FTX and growing scrutiny over Bankman-Fried have renewed questions about the future of cryptocurrency, which has attracted frenzied interest from investors large and small as well as scepticism and accusations of grift.

Source: Al Jazeera and news agencies