by Sam Bankman-Fried is expected to answer in person soon to the criminal and civil charges brought against him by US regulators investigating the unexpected bankruptcy of his cryptocurrency empire.
The 30-year-old former trader is specifically accused of fraud and conspiracy to defraud customers and investors of cryptocurrency exchange FTX and its sister company Alameda Research, a hedge fund that also served as a trading platform.
FTX and Alameda were the two main companies in the Bankman-Fried empire.
Bankman-Fried lives in the Bahamas, where FTX also had its headquarters. He was arrested on 12 December. He was refused bail the next day.
“From at least in or about 2019, until and including in or about November 2022,” Bankman-Fried “and others known and unknown, combined, conspired, confederated and agreed together and with each other to commit wire. fraud,” prosecutors in the US Department of Justice’s Southern District of New York claimed.
“Bankman-Fried orchestrated a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the SEC alleges in its civil complaint.
Mark Cohen, an attorney for Bankman-Fried, said his client is “reviewing the allegations with his legal team and considering all of his legal options.”
A hearing on his extradition was set for February 8, 2023.
A big meeting on 19 December
But it is now likely that this hearing will not take place, because Bankman-Fried has changed his mind and no longer wishes to challenge his extradition to the United States.
He will appear Dec. 19 before a court in the Bahamas to say he is waiving his extradition challenge, according to multiple reports. The main consequence of this decision is that it will remove a major obstacle to the extradition request from the US authorities.
It’s hard to know what made Bankman-Fried change her mind. The collective prison term he risks from a possible conviction on all charges is 115 years.
US regulators want to move very quickly. But to achieve this, it will be necessary to extradite Bankman-Fried so that he can be brought to justice on American soil.
There is an existing extradition treaty between the United States and the Bahamas, but the process could take months, because Bankman-Fried told the judge he would not waive his right to an extradition hearing.
Bankman-Fried used client funds to “make undisclosed venture investments, lavish real estate purchases and large political donations,” the complaint said.
As a crypto exchange, FTX executed orders for clients, took cash and bought cryptocurrencies on their behalf. FTX acted as a custodian and held customers’ crypto.
FTX then used its clients’ crypto assets, through its sister company’s trading arm Alameda Research, to generate cash through loans or market making. The money that FTX borrowed was used to bail out other crypto institutions in the summer of 2022.
At the same time, FTX used the cryptocurrency it issued, FTT, as collateral on the balance sheet. This was a significant exposure due to the concentration risk and volatility of FTT.
The insolvency of FTX stemmed from a liquidity deficit as clients tried to withdraw money from the platform. The shortfall appears to have been the result of Bankman-Fried allegedly transferring $10 billion in client funds from FTX to Alameda Research.
