Sam Bankman-Fried prepares for a legal battle
The FTX founder Sam Bankman-Fried pleaded not guilty to fraud charges related to the collapse of his crypto exchange. (His trial is set to begin on Oct. 2.) The back-and-forth on Tuesday between his lawyers and federal prosecutors in a Manhattan courtroom suggests that he is gearing up for a potentially titanic legal fight.
Here are the highlights from Tuesday’s hearing:
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Prosecutors asked the presiding judge for a new bail condition that would block Mr. Bankman-Fried from transferring any funds from FTX or its trading affiliate, Alameda Research. (The judge authorized the request.)
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Mr. Bankman-Fried’s lawyers requested that the names of two other co-signers for his bond, aside from his parents, remain sealed to protect their privacy. (This was also approved.)
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Prosecutors also described what they said was a growing body of evidence, including documents provided by banks, employees, political campaigns, internet service providers and FTX’s new leaders.
A fight over frozen crypto assets
The fallout from the collapse of Sam Bankman-Fried’s FTX empire is still reverberating across the crypto sector as it confronts angry investors and new lawsuits, and executives turn on each other. Cameron Winklevoss, a co-founder of the crypto exchange Gemini, has blamed Barry Silbert, the founder of Digital Currency Group, the crypto conglomerate, for his own customers’ troubles.
“This mess is entirely of your own making,” Mr. Winklevoss wrote in an open letter published on Twitter. He said that 340,000 customers were owed a total of about $900 million on Gemini Earn, a product that allowed customers to earn up to 8 percent interest on their digital coins by lending them to Genesis Global Capital, a DCG subsidiary. Genesis, which has about $175 million frozen on FTX, halted withdrawals in November following FTX’s collapse, ultimately leaving Earn users out of pocket.
Mr. Winklevoss accused Mr. Silbert of borrowing from Gemini customers. “You hide behind lawyers, investment bankers and process,” he wrote, and accused him of “bad faith stalling tactics.” Mr. Silbert fired back that Gemini had not responded to its latest resolution offer and denied claims about DCG’s finances.
Late last month, Earn investors filed a proposed class action in New York federal court, naming Gemini and its founders Cameron and Tyler Winklevoss. The lawyers behind the suit, Hee-Jean Kim and James Serritella, told DealBook that they regard the Winklevoss letter as an attempt to shift the blame for investor losses in Earn, which Gemini had marketed as risk-free and akin to a “crypto savings bank.”
Gemini faces one of crypto’s existential questions: When is a crypto product a security? The suit alleges that Gemini failed to register Earn with the S.E.C. and didn’t disclose material information to investors. (In previous cases, BlockFi, the bankrupt crypto lender, settled charges with the regulator last year after failing to register a similar product, and the agency blocked a proposed interest offering from the crypto exchange Coinbase in 2021.)
