The soap opera of Sam Bankman-Fried continues, and the latest developments show the script might be going off the rails.
Federal prosecutors petitioned Wednesday (July 26) that the founder of the failed FTX fiefdom be jailed in advance of his scheduled October trial.
During the same court hearing, those prosecutors also dropped the criminal campaign finance charge from Bankman-Fried’s laundry list of legal woes.
Bankman-Fried and other FTX executives have been accused of using customer deposits to make over $90 million in campaign contributions to some 300 political candidates or political action committees. Many of those other executives have already pleaded guilty to their role in the campaign finance crimes and are cooperating with the government in its case against Bankman-Fried.
It has been nearly nine months since Bankman-Fried’s cryptocurrency empire, centered around his FTX trading exchange and sister hedge fund Alameda Research, imploded — losing billions of dollars in misappropriated customer funds.
So far, around $7 billion has been recovered, although none of the exchange’s clients or customers have yet to be made whole.
Lawyers and vendors working on the bankruptcy case have, for their part, billed hundreds of millions of dollars to date.
The cryptocurrency sector more broadly, but particularly in the United States, remains crippled from the impact of FTX’s implosion, which saw both consumer and federal trust in the sector recede as regulatory scrutiny and enforcement actions over digital asset offerings heightened.
The crypto industry’s supposed change-the-game, real-world utility, more than a decade into its commercialization, still bears the onus of proof.
Read also: Why Crypto Needed Celebrity Influencers and Generative AI Does Not
In December, U.S. authorities brought Bankman-Fried back to American soil from the Bahamas via extradition, and he has been under house arrest at his parents’ home in California on a $250 million bail bond since then.
Now, U.S. prosecutors want him to be thrown in jail.
The federal team has alleged that Bankman-Fried has been using the relative freedom of his house arrest to undertake a media tour.
Per Wednesday’s court hearing, Bankman-Fried has sent around 100 emails and made 1,000 phone calls to reporters, an amount that prosecutors have called “extensive.”
Over 100 of those phone calls were made in communication with the writer of a recent New York Times (NYT) article that involved parts of a diary written by former Alameda Research CEO and FTX co-conspirator Caroline Ellison, who has admitted guilt to all seven of the criminal fraud charges levied against her.
Bankman-Fried, who was formerly in a romantic relationship with Ellison, has been hoping to pin the blame for Alameda’s tattered balance sheet on his former lover, and prosecutors allege that his communications with the press represent attempts to “discredit and intimidate” witnesses in his case.
“The government has every reason to believe that he is the source for that article,” Assistant U.S. Attorney Danielle Sassoon told the judge, emphasizing that the article represented “an escalation of an ongoing campaign.”
There was no immediate decision made by Judge Lewis A. Kaplan regarding the revocation of Bankman-Fried’s bail.
Bankman-Fried’s lawyer argued that his client did not receive enough of a heads-up about the prosecution’s plans to prepare a counterargument.
“…I say to the defendant, Mr. Bankman-Fried: You better take it seriously,” Kaplan said.
Read also: FTX Starts to Claw Back $93M in Political Donations to 200 Lawmakers
As FTX’s fortunes soared alongside mainstream global crypto adoption, the exchange and its executives quickly emerged as powerful political players seeking to influence domestic regulatory oversight of the relatively murky cryptocurrency sector.
According to Open Secrets, a platform dedicated to following money in politics, Bankman-Fried was the seventh-largest political contributor in 2022 with a total of $40,115,757 donated.
Overall, Bankman-Fried, along with his colleagues, gave money to more than a third of active legislators. Recipients included Speaker of the House Kevin McCarthy and Senate Majority Leader Chuck Schumer, among many others.
The only problem? The donations were allegedly made with misappropriated and stolen customer funds — not the exchange or its executive’s personal profits.
But now, officials in the Bahamas have informed U.S. prosecutors that the nation’s government did not intend to extradite Bankman-Fried on the criminal campaign finance charge, forcing the hand of the legal team to drop the charge.
“In keeping with its treaty obligations to the Bahamas, the government does not intend to proceed to trial on the campaign contributions count,” the court filing submitted Wednesday said.
By dropping these charges, the individuals who received money from Bankman-Fried and other executives are spared from exposure and payback requirements.
It comes after federal prosecutors agreed to temporarily drop five charges this June, including an accusation that Bankman-Fried bribed a foreign government.
The FTX founder, for his part, has so far maintained his innocence. He will face seven criminal charges this October.
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