NEW YORK (AP) – For federal prosecutors, Sam Bankman-Fried may be the gift that keeps on giving.
Following the November collapse of FTX, the cryptocurrency exchange he founded in 2019, Bankman-Fried unexpectedly gave a series of interviews aimed at presenting his version of events. He was indicted in December and accused of perpetrating one of the biggest frauds in American history — and he’s still talking about it, either in person or on the Internet.
Gossip unusual for a criminal defendant is likely to leave Bankman-Fried’s attorneys scratching their heads, or worse. Prosecutors can use any statements, tweets or other communications against him at his trial, which is set for October.
Watch: Sam Bankman-Fried pleads not guilty to fraud charges related to FTX collapse
“Prosecutors love it when defendants keep their mouths shut,” Daniel R. Alonso, a former federal prosecutor who is now a white-collar criminal defense attorney, said. If Bankman-Fried’s public comments before trial could be proven false during trial, it could undermine her credibility with the jury, he said.
However, Bankman-Fried’s most immediate concern lately has been private communications. Prosecutors say he sent an encrypted message on the Signal texting app on January 15 to General Counsel of FTX US, a potential witness for the government. Bankman-Fried will be back in a New York court on Thursday where a judge could impose new bail restrictions over what was seen as an attempt to influence a witness.
Before its collapse, FTX was the second largest crypto exchange in the world and Bankman-Fried, 30, was its CEO and a billionaire, at least on paper. Celebrities and politicians alike advocated for FTX and its founder, and Bankman-Fried was considered a leading figure in the crypto world.
However, the widespread collapse of cryptocurrencies last year has caused severe financial stress for many companies in the crypto universe, from lenders to exchanges focused on investing in digital assets. FTX sought bankruptcy protection in November after customers pulled their money out in the crypto equivalent of a bank run.
Federal prosecutors have stated that Bankman-Fried has devised a scheme and tactic since FTX’s inception to defraud customers and investors of FTX. They say he illegally diverted his money to cover expenses, loans and risky trades at Alameda Research, a crypto hedge fund he started in 2017, and to make real estate purchases and large political donations.
Watch: Judge sets $250M bond, house arrest for FTX crypto exchange founder Sam Bankman-Fried
In interviews and Twitter posts, Bankman-Fried has stated that she never intended to defraud anyone. He has said that running FTX took up his full time and that he was unaware of the financial problems at the hedge fund until it was too late.
Those claims are likely to be contradicted by one of the government’s key witnesses. Former Alameda CEO Carolyn Ellison has agreed to plead guilty to her role in the collapse of FTX and testify against Bankman-Fried. At a plea hearing in December, Ellison said she knew FTX used billions in customer funds to make loans to Alameda and accused Bankman-Fried and others of taking steps to conceal the nature of the loans. had agreed with.
Gary Wang, who co-founded FTX with Bankman-Fried, also struck a deal for the collaboration. At his own plea hearing, Wang said he made changes to computer code to enable FTX customer funds to be transferred to Alameda.
Another claim often made by Bankman-Fried is that he has been trying to help recover funds for FTX customers, but that FTX’s new management cut him off and filed for bankruptcy protection. have taken steps including, which may prevent the customers from getting their money back.
For example, Bankman-Fried states that when FTX collapsed, outside parties had offered funding totaling billions of dollars, and that if given a few weeks the company would have been “sufficiently perfect to perfect the clients”. Could raise enough money. Instead, it was “strong-armed” into filing for bankruptcy protection by its main law firm, Sullivan & Cromwell, a claim the firm denies.
Bankman-Fried has frequently taken issue with decisions made by FTX’s new CEO John Ray. Bankman-Fried has often claimed that FTX’s US operation, which was quite small compared to international operations, was solvent at the time of the bankruptcy filing, a contention that Ray disputes.
“I’m still waiting for him to finally admit that FTX US is solvent and give customers their money back,” Bankman-Fried tweeted on January 19.
Bankman-Fried was scheduled to testify under oath before Congress in December with Ray, but that appearance was canceled because of his arrest in the Bahamas, where FTX is based.
Jeff Linehan, a former prosecutor with New York’s Department of Financial Crimes, said, “The real risk Bankman-Fried runs in ‘explaining’ to public comments what happened is that they could be seen as continued efforts by regulators and prosecutors to mislead investors.” could.” State Attorney General’s Office. Linehan is now a criminal defense attorney.
Bankman-Fried’s comments at the time of FTX’s collapse may also come back to haunt him. On November 7th, as customers demanded their money back, he tweeted “FTX is fine. Property is fine. The next day he deleted the tweet. On November 11, FTX filed Chapter 11.
Through a spokeswoman, Bankman-Fried declined to comment for this article.
Some defendants will go through their entire legal process without saying anything that their attorneys haven’t previously approved. Even subpoenaing defendants as witnesses during trial has long been viewed by defense attorneys as a last resort because it opens them up to questioning by prosecutors and often does more harm than good. .
“As the prosecution prepares their case, it’s really important to figure out what the defense’s strategy might be, and a defense wants to keep that strategy under wraps as much as possible,” said Alonso, the former federal prosecutor. .
Bankman-Fried faces the possibility of decades in prison if convicted on all counts. Even if he agrees to a plea bargain, a judge will have complete discretion as to what sentence to impose. Legal experts say that if the judge does not believe that Bankman-Fried is truly sorry for her actions, partly based on her public statements, she may ignore prosecutors’ recommendations and impose a harsher sentence. Could
Before the collapse of FTX, Bankman-Fried had built up a huge public persona. He frequently spoke to reporters, testified before Congress, and appeared at conferences to advocate for cryptocurrencies and his firm. He has given millions of dollars to political candidates and advocated for charitable causes such as food issues in the Bahamas. It can be difficult to leave that kind of public impression.
“Some people just can’t help themselves,” said Alonso.