Bankman-Fried faces more criminal charges, allegedly hid political donations

[February 24, 2023]  By Luc Cohen and Jonathan Stempel

NEW YORK (Reuters) - Sam Bankman-Fried was hit with new criminal charges on Thursday, in an expanded indictment accusing the founder of the now-bankrupt FTX cryptocurrency exchange of conspiring to make more than 300 illegal political donations.

Bankman-Fried now faces 12 criminal charges, including four for fraud and eight for conspiracy, up from eight charges in an earlier indictment, to which he has pleaded not guilty.

Prosecutors have accused Bankman-Fried of stealing billions of dollars in FTX customer funds to plug losses at Alameda Research, his crypto-focused hedge fund.

The new charges add to pressure on the 30-year-old former billionaire, who has seen two of his former top lieutenants plead guilty.

Bankman-Fried is also trying to stay out of jail, after his online activity since his arrest prompted U.S. District Judge Lewis Kaplan, who oversees the case, to signal a willingness to revoke his $250 million bail package.

A spokesman for Bankman-Fried declined to comment.

Bankman-Fried's trial is slated for October. Kaplan on Thursday extended a temporary ban on Bankman-Fried's contacting FTX and Alameda employees to March 3 from Feb. 24.

The new indictment said Bankman-Fried conspired with two former FTX executives to donate tens of millions of dollars in order to influence lawmakers to pass legislation favorable to the company.

Those donations were unlawful because they were made with "straw" donors or corporate funds, enabling Bankman-Fried - one of the largest donors to Democrats in the 2022 midterm elections - to evade contribution limits, prosecutors said.

LGBTQ DONATION

Prosecutors said Bankman-Fried directed one executive to donate primarily to left-leaning candidates and organizations and the other to Republicans, with many donations funded by Alameda and including FTX customer funds.

The indictment said a political consultant working for Bankman-Fried told one of the executives, identified as CC-1, that "you being the center left face of our spending will mean you giving to a lot of woke shit for transactional purposes."

That executive gave more than $1 million to a pro-LGBTQ group at Bankman-Fried's direction, the indictment said.

Federal Election Commission records show that Nishad Singh, FTX's former engineering chief, contributed $1.1 million on July 7, 2022 to the LGBTQ Victory Fund, a national organization dedicated to electing openly LGBTQ people.

Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, exits the Manhattan federal court in New York City, U.S. February 16, 2023. REUTERS/Eduardo Munoz

In a statement, the group said it has "set aside funds and will take appropriate action once we receive guidance from authorities."

A lawyer for Singh did not immediately respond to a request for comment.

After founding FTX in 2019, Bankman-Fried rode a boom in the value of Bitcoin and other digital assets to attain an estimated $26 billion fortune.

His exchange collapsed in November amid a flurry of customer withdrawals over concerns the exchange was commingling assets with Alameda.

'DREAD OF THIS DAY'

When it became clear FTX could not meet withdrawal demands, Bankman-Fried directed Alameda to sell assets to pay the exchange's customers, prosecutors said.

The indictment said that on Nov. 6, five days before FTX's bankruptcy filing, Bankman-Fried forwarded CC-1 a message from Caroline Ellison, then Alameda's chief executive.

"I just had an increasing dread of this day that was weighing on me for a long time," Ellison wrote, "and now that it's actually happening it just feels great to get it over with one way or another."

Ellison and former FTX technology chief Gary Wang pleaded guilty to fraud charges in December and agreed to cooperate with prosecutors.

The new charges against Bankman-Fried include conspiracies to commit bank fraud and operate an unlicensed money transmitting business.

Prosecutors said Bankman-Fried told a unnamed California bank he wanted to open an account for a trading company, but intended the account to process deposits and withdrawals for FTX customers.
 

The bank had previously told Bankman-Fried it was unwilling to process such transactions, the indictment read.

(Reporting by Luc Cohen and Jonathan Stempel in New York; Editing by Mark Porter and Anna Driver)

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