Sam Bankman-Fried has pleaded not guilty to US criminal charges in connection with the dramatic implosion of FTX, the crypto exchange he founded.
Bankman-Fried entered the plea in a Manhattan federal court on Tuesday, just weeks after his December 13 arrest in the Bahamas at the request of US federal prosecutors. The former FTX chief was subsequently extradited to the US to face the charges and released on $250mn bond.
The eight charges against Bankman-Fried include wire fraud, conspiracy to commit commodities and securities fraud, conspiracy to commit money laundering, and campaign finance violations.
The catastrophic collapse of his crypto trading shop FTX — once valued at $32bn — has sent shockwaves through the crypto industry and potentially caused losses for as many as 1mn creditors in its Chapter 11 bankruptcy proceedings. Damian Williams, US attorney for the Southern District of New York, has described the alleged crimes as “one of the biggest financial frauds in American history”.
“The case and its wider fallout has certainly boosted regulatory activity, but we need much more scrutiny, not just from the US but from global market regulators before crypto markets can be viewed as safe for ordinary investors,” said Carol Alexander, professor of finance at the University of Sussex.
Bankman-Fried is also facing a civil case brought by the Securities and Exchange Commission, which last month accused the former FTX chief of defrauding investors who pumped $1.8bn into the company since its founding in 2019. The Commodity Futures Trading Commission also brought claims against Bankman-Fried, FTX and its trading affiliate Alameda Research for fraud and material misrepresentations.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto”, SEC chair Gary Gensler said at the time.
Bankman-Fried’s plea also comes shortly after several of his former top associates at FTX entered guilty pleas last month.
Caroline Ellison, former chief executive of Alameda Research, and Zixiao “Gary” Wang, a co-founder of FTX, both pleaded guilty to fraud last month and have agreed to co-operate with US authorities. Ilan Graff, a lawyer for Wang, said at the time that he had “accepted responsibility for his actions and takes seriously his obligations as a co-operating witness”.
Peter Fox, a partner at Scoolidge, Peters, Russotti & Fox, said Bankman-Fried’s not guilty plea was “not very surprising since it seems unlikely that prosecutors have offered him much, if any, leniency in exchange for a guilty plea. It’s not clear that the prosecutors would want co-operation — which is often a principal motivating factor for plea offers — from Bankman-Fried, because Bankman-Fried is almost certainly their top target in this investigation.”