Bankman-Fried charges should not be tossed, prosecutors say

[May 30, 2023]  By Luc Cohen

NEW YORK (Reuters) - Prosecutors urged a Manhattan federal court judge on Monday to deny a request by FTX founder Sam Bankman-Fried to dismiss criminal charges accusing him of stealing billions of dollars from customers to plug losses at his hedge fund.

Bankman-Fried, the 31-year-old former cryptocurrency billionaire, has pleaded not guilty to 13 counts of fraud, conspiracy, making illegal campaign contributions and foreign bribery.

On May 8, Bankman-Fried urged U.S. District Judge Lewis Kaplan to dismiss most of the counts, saying prosecutors charged him in a "rush to judgment" following a broad crash in 2022 where several prominent crypto companies went bankrupt, including his own Alameda Research.

In a filing late Monday, prosecutors described motions to dismiss the charges as "meritless", rebutting Bankman-Fried's argument that the indictment's allegations were insufficient and legally defective.

"The Indictment sufficiently alleges that the defendant and his co-conspirators made false and misleading representations to lenders relating to Alameda's financial condition. No more specificity is required," prosecutors wrote.
 

Kaplan will hear oral arguments on June 15.

Bankman-Fried has said FTX's risk management was subpar, but has denied stealing funds. He has sought to distance himself from the collapse of Alameda, the crypto-focused hedge fund he owned. Its former chief executive, Caroline Ellison, has pleaded guilty and agreed to cooperate with prosecutors.

Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, arrives at the Manhattan federal court in New York City, U.S. March 30, 2023. REUTERS/Amanda Perobelli

He has also argued that some of the fraud charges he faces were based on a theory that the U.S. Supreme Court invalidated on May 11.

The theory, known as "right to control," centers around depriving a victim of economically-valuable information rather than tangible property.

The Supreme Court called the theory "inconsistent" with how federal fraud laws had been written and historically applied, when it overturned a bid-rigging conviction of a Buffalo, New York, construction executive, earlier this month.

Legal experts have said Bankman-Fried faces long odds of getting the charges tossed, because prosecutors can point to tangible money that his customers lost.

Bankman-Fried rode a boom in digital currency values to a $26 billion net worth, and became an influential political and philanthropic donor, before FTX sought Chapter 11 protection in November.

Since his December extradition from the Bahamas, Bankman-Fried has largely been under house arrest at his parents' Palo Alto, California, home on $250 million bond. His trial is scheduled for Oct. 2.

(Reporting by Luc Cohen in New York; Additional reporting by Maria Ponnezhath in Bengaluru; Editing by Simon Cameron-Moore)

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