Federal prosecutors announced four new criminal charges against Sam Bankman-Fried, the founder of crypto trading platform FTX, expanding his potential liability in what authorities allege is a billion-dollar fraud.
The new charges, unsealed in a superseding indictment on Thursday, add to the already serious charges facing the so-called Crypto King.
“We are hard at work and will remain so until justice is done,” said Damian Williams, the US attorney for the Southern District of New York, whose office is investigating the collapse of FTX.
Bankman-Fried was charged in December in an eight-count indictment. Thursday’s 12-count indictment added four new charges, including conspiracy to operate an unlicensed money transmitting business, conspiracy to commit bank fraud, securities fraud, and fraud in the connection of the purpose or sale of a derivative.
Prosecutors alleged Bankman-Fried and others misused customer accounts at the trading platform FTX to bolster sister hedge fund Alameda Research’s business operations, enrich himself, make venture investments, and try to buy influence with US politicians. Prosecutors say Bankman-Fried raised at least $1.8 billion from investors.
“The defendant, well knew FTX – which by early 2022 claimed to handle approximately $15 billion in daily trading volume on its platforms – was not focused on investor or client protection, nor was it the legitimate business that Bankman-Fried claimed it was,” the indictment alleges.
Bankman-Fried, who is released on a $250 million bond and under home confinement at his parent’s Palo Alto, Calif. home, pleaded not guilty to the charges announced in December. At the time he was charged with multiple counts of conspiracy, wire fraud and conspiring to violate US campaign finance laws by making illegal political donations.
Bankman-Fried will be arraigned on the new charges at a future date. He now faces a maximum of 155 years in prison, if convicted on all counts. Two of his top lieutenants, Gary Wang and Caroline Ellison, have pleaded guilty to numerous charges and are cooperating with investigators.
The 39-page superseding indictment lays out the alleged fraud in greater detail than the 14-page indictment unsealed in December when Bankman-Fried was arrested in the Bahamas where he lived.
Among the new details are how FTX insiders reacted after a news organization reported what appeared to be Alameda’s balance sheet, indicating that billions of dollars in assets were concentrated in FTX’s digital token FTT, prompting concerns about the stability of FTX and Alameda.
Bankman-Fried and Ellison, at his direction, tweeted allegedly false statements to prevent the collapse of FTT and try to stop customer withdrawals from FTX.
Those efforts failed and FTX faced a run on the bank. As customers were withdrawing funds from their FTX accounts, Ellison messaged Bankman-Fried, “I just had an increasing dread of this day that was weighing on me for a long time, and now that its actually happening it just feels great to get it over with one way or another.”
On November 8, three days before FTX filed for bankruptcy, the general counsel demanded, in a message over Signal, the encrypted messaging platform, to Bankman-Fried and other associates, “I need to know the f**king truth about FTX US right now.” That day, prosecutors allege, FTX suspended customer withdrawals. Despite the suspension, prosecutors allege, Bankman-Fried allowed customers in the Bahamas, where he lived, to make withdrawals that totaled millions of dollars.
Prosecutors allege Bankman-Fried sought to conceal his activities as FTX was unraveling by communicating with his employees over Signal. He directed employees to use Signal and set it to auto-delete messages after a period of time.
FTX’s general counsel warned employees to preserve records and posted in a company Slack channel that FTX would need to be shut down. Bankman-Fried, prosecutors allege, deleted that Slack message from the general counsel, continued to use Signal, and deleted some tweets.
In the waning days of the company, Bankman-Fried discussed with one in-house lawyer the possible legal explanation for the use of customer funds. They considered claiming that Alameda borrowed money from customers who opted into FTX’s peer-to-peer borrow program. The idea was dismissed, according to the indictment, because Alameda’s borrowing exceeded the amount of money lent through the program. Prosecutors allege Bankman-Fried later publicly embraced that explanation despite privately admitting it wasn’t supported by the facts.
The indictment also sheds more light on the political donations made in the name of FTX employees.
Bankman-Fried made more than 300 illegal political contributions totaling tens of millions of dollars through straw donors using corporate money, according to prosecutors. The donations were made in the names of two FTX employees identified in the indictments as CC-1 and CC-2. The individuals were used to give Bankman-Fried “cover” from appearing too left-leaning or attach himself to Republicans, and to conceal that the donations were coming from Alameda and FTX, the indictment alleges. It also allowed Bankman-Fried to evade contribution limits on individual donations he had already made to candidates.
SBF wanted to keep Republican contributions “dark,” according to the indictment, so those donations were made via an FTX executive identified as CC-2 in the indictment, who publicly aligned themselves with conservatives.
CC-1 was selected to be the face of the left-leaning donations, the indictment alleges. Bankman-Fried conspired to contribute “at least a million dollars” to a super PAC that was supporting a candidate running for a United States Congressional seat and appeared to be affiliated with pro-LGBTQ issues, the indictment says.
A political consultant working for Bankman-Fried asked CC-1 to make the contribution, telling him, “In general, you being the center left face of our spending will mean you giving to a lot of woke sh*t for transactional purposes.”
CC-1 expressed discomfort, the indictment alleges, but agreed there was not anyone “trusted at FTX [who was] bi/gay” in a position to make the contribution, the new indictment says.
In another instance shortly before the 2022 midterm elections, an FTX employee was directed to wire $107,000 from Bankman-Fried’s account to the New York State Democratic Committee but asked to update it to state it was coming from CC-1.
The executive ultimately became in name one of the largest Democratic donors in the 2022 midterm elections, furthering Bankman-Fried’s agenda with donations the executives wouldn’t have made on their own accord, the filing says.
To conceal the donations, the indictment alleges, money was transferred from Alameda to the FTX employees’ accounts and then paid out in political donations.
In November 2022 as FTX was suffering customer withdrawals, CC-1 voiced concern to SBF in chat messages about “maybe 80m” of “donations/personal/etc” that went through his bank account in his name. The two discussed plans to conceal the wire transfers but ultimately never made the transactions that would have further concealed the campaign finance scheme, the indictment says.
FTX filed for bankruptcy on November 11.