Bankman-Fried released on $250m bond in FTX cryptocurrency fraud case

Sam Bankman-Fried was released on a $250 million (€236 million) bail package after making his first US court appearance to face fraud charges over the collapse of FTX, the cryptocurrency exchange he cofounded.

Shackled and wearing a blue suit, Mr Bankman-Fried appeared Thursday before a magistrate judge for the bail hearing in Manhattan federal court. He did not enter a plea, which will take place later before the judge presiding over his case.

The bail package includes a $250 million personal recognisance bond secured by his parents’ house in California. Its terms require him to stay with them and submit to electronic monitoring.

Financial crimes

US magistrate judge Gabriel Gorenstein said that the risk that Mr Bankman-Fried would flee was small and said he presented no danger to the public in terms of future financial crimes.

Mr Bankman-Fried (30) was charged in an indictment unsealed on December 13th by Manhattan federal prosecutors with orchestrating a years-long fraud in which he used billions of dollars of FTX customer funds for personal expenses and high-risk bets through the exchange’s sister trading house, Alameda Research.

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FTX’s collapse reverberated across an already-embattled cryptocurrency industry, prompting calls for further regulation as well as accountability for those who led the exchange. It was a stunning downfall for Mr Bankman-Fried, a leading industry figure who was once estimated to be worth more than $25 billion and had emerged as major political donor.

In numerous media interviews following FTX’s November bankruptcy filing, Mr Bankman-Fried has tried to argue the exchange’s collapse was due to management missteps, rather than intentional fraud.

That defence may be harder to maintain after Manhattan US attorney Damian Williams announced on Wednesday night that two of Mr Bankman-Fried’s closest associates, former Alameda chief executive Caroline Ellison and former FTX chief technology officer Gary Wang, had pleaded guilty to fraud and were co-operating with the prosecution.

Mr Bankman-Fried’s New York court appearance caps a roughly week-long drama over his return to the US to face trial. Arrested on December 12th in the Bahamas at the request of US authorities, he initially indicated he would fight extradition.

After he was denied bail in Nassau and sent to the notorious Fox Hill prison, Mr Bankman-Fried changed his mind. But his return to the US was delayed amid confusion in the Bahamas Magistrate’s Court until he finally left the island on a US government-chartered flight Wednesday night.

Mr Williams announced Ms Ellison and Mr Wang’s pleas while Mr Bankman-Fried was in the air.

Multiple charges

Ms Ellison pleaded guilty to seven offences, including wire fraud and conspiracy to commit money laundering, in an agreement she signed on December19th. Mr Wang pleaded guilty to four charges. They face decades in prison on those counts but will almost certainly receive leniency recommendations from the government based on their co-operation.

Legal experts have said the money being transferred to Alameda is very hard to explain as mismanagement rather than fraud and his former associates’ testimony could be devastating for Mr Bankman-Fried. Confronted by such witnesses, defendants in other cases have tried to turn the tables and cast them as the true bad actors.

Mr Bankman-Fried could try to make a deal himself, but he may not get much leniency since he’s likely at the top of the prosecution’s target list. Meanwhile, more co-operators could emerge. Mr Williams issued a warning to potential witnesses in a statement on Wednesday night.

“If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” said Mr Williams. “We are moving quickly and our patience is not eternal.” – Bloomberg