NASSAU, Bahamas/NEW YORK, Dec 13 (Reuters) – A Bahamian decide denied FTX founder Sam Bankman-Fried bail on Tuesday, hours after U.S. prosecutors accused the 30-year-old of misappropriating billions of {dollars} and violating marketing campaign legal guidelines in what has been described as considered one of America's largest monetary frauds.
The previous CEO of the collapsed cryptocurrency alternate, wearing a blue swimsuit with no tie, lowered his head and hugged his dad and mom after the decide mentioned his danger of flight was too “nice” and ordered that he be despatched to a Bahamas correctional facility till Feb. 8.
The day's occasions capped a surprising fall from grace in current weeks for Bankman-Fried, who amassed a fortune valued over $20 billion as he rode a cryptocurrency increase to construct FTX into one of many world's largest exchanges earlier than it abruptly collapsed this yr.
In an indictment unsealed on Tuesday morning, U.S. prosecutors mentioned Bankman-Fried had engaged in a scheme to defraud FTX's clients by misappropriating their deposits to pay for bills and money owed and to make investments on behalf of his crypto hedge fund, Alameda Analysis LLC.
He additionally defrauded lenders to Alameda by offering false and deceptive details about the hedge fund's situation, and sought to disguise the cash he had earned from committing wire fraud, prosecutors mentioned.
They accused Bankman-Fried of utilizing the stolen cash to make “tens of thousands and thousands of {dollars} in marketing campaign contributions.”
U.S. Legal professional Damian Williams in New York mentioned that the investigation was “ongoing” and “shifting shortly.”
“Whereas that is our first public announcement, it is not going to be our final,” he mentioned.
Williams described the collapse as one of many “largest monetary frauds in American historical past.”
‘SHORTS AND T-SHIRTS'
Previous to his arrest, Bankman-Fried, who based FTX in 2019, was an unconventional determine who sported wild hair, t-shirts and shorts on panel appearances with statesmen like former U.S. President Invoice Clinton. He grew to become one of many largest Democratic donors, contributing $5.2 million to President Joe Biden's 2020 marketing campaign. Forbes pegged his internet price a yr in the past at $26.5 billion.
“You may commit fraud in shorts and t-shirts within the solar. That is potential,” lawyer Williams informed reporters.
Bankman-Fried has beforehand apologized to clients and acknowledged oversight failings at FTX, however mentioned he doesn't personally suppose he has any prison legal responsibility.
He faces as much as 115 years in jail if convicted on all eight counts, prosecutors mentioned, although any sentence would rely on a spread of things.
Williams declined to say whether or not prosecutors would carry prices in opposition to different FTX executives and whether or not any FTX insiders have been cooperating with the investigation.
[1/16] Sam Bankman-Fried, who based and led FTX till a liquidity crunch compelled the cryptocurrency alternate to declare chapter, is escorted out of the Justice of the Peace Court docket constructing after his arrest, in Nassau, Bahamas December 13, 2022. REUTERS/Dante Carrer
Each the U.S. Securities and Trade Fee (SEC) and the Commodity Futures Buying and selling Fee (CFTC) additionally filed swimsuit on Tuesday.
The CFTC sued Bankman-Fried, Alameda and FTX, alleging fraud involving digital commodity property.
Since at the least Could 2019, FTX raised greater than $1.8 billion from fairness traders in a years-long “brazen, multi-year scheme” during which Bankman-Fried hid FTX was diverting buyer funds to Alameda Analysis, the SEC alleged.
Tuesday's court docket listening to in The Bahamas, the place FTX is predicated and the place Bankman-Fried was arrested at his gated group within the capital, marked his first in-person public look for the reason that cryptocurrency alternate's collapse.
Bankman-Fried appeared relaxed when he arrived on the closely guarded Bahamas court docket. He informed the court docket he might combat extradition to america.
Bahamian prosecutors had requested that Bankman-Fried be denied bail if he fights extradition.
“Mr. Bankman-Fried is reviewing the fees along with his authorized workforce and contemplating all of his authorized choices,” his lawyer, Mark S. Cohen, mentioned in an earlier assertion.
Bankman-Fried is anticipated to seem in court docket once more within the Bahamas on Feb. 8.
‘BRAZEN' SCHEME
FTX filed for chapter on Nov. 11, leaving an estimated 1 million clients and different traders going through losses within the billions of {dollars}. The collapse reverberated throughout the crypto world and despatched bitcoin and different digital property plummeting.
Bankman-Fried resigned as FTX's CEO the identical day because the chapter submitting. FTX's liquidity crunch got here after he secretly used $10 billion in buyer funds to help his proprietary buying and selling agency Alameda, Reuters has reported. No less than $1 billion in buyer funds had vanished.
The collapse was considered one of a collection of bankruptcies within the crypto business this yr as digital asset markets tumbled from 2021 peaks. A crypto alternate is a platform on which traders can commerce digital tokens comparable to bitcoin.
FTX's present CEO, John Ray, informed lawmakers that FTX misplaced $8 billion of shopper cash, saying the corporate confirmed “absolute focus of management within the arms of a small group of grossly inexperienced, nonsophisticated people.”
As authorized challenges mount, U.S. Congress is crafting laws to rein within the loosely regulated business.
FTX has shared findings with the SEC and U.S. prosecutors, and is investigating whether or not Bankman-Fried's dad and mom have been concerned within the operation.
Further reporting by Jack Queen in New York and Hannah Lang, Chris Prentice and Susan Heavey in Washington
Writing by Nick Zieminski and Deepa Babington
Modifying by Noeleen Walder, Megan Davies, Anna Driver, Matthew Lewis and Sam Holmes
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