Prosecutors have accused Bankman-Fried of engaging in a years-long “fraud of epic proportions,” by using customer deposits to support his Alameda Research hedge fund firm, buy real estate and make political contributions. Bankman-Fried will be arraigned on the afternoon of Jan. 3, 2023, before US District Judge Lewis Kaplan in Manhattan federal court.
On December 27, Kaplan was appointed to take over the case after Judge Ronnie Abrams withdrew from the proceedings. Her husband’s law firm worked for FTX before the exchange collapsed.
Bankman-Fried was accused of committing fraud for many years. The founder of FTX used customer deposits to support the Alameda Research investment fund, real estate purchases, and political donations.
FTX lawyers said the company spent $300 million to buy real estate in the Bahamas for senior employees. A separate review of Reuters’ property records estimated that FTX leadership and the Bankman-Fried family have purchased at least 19 properties in the Bahamas in the past two years.
Bankman-Fried faces two counts of fraud and six counts of conspiracy to commit fraud, including money laundering and financial misconduct. Bankman-Fried’s maximum sentence is expected to be 115 years. Before his arrest on December 12, Bankman-Fried admitted his failure to manage FTX risks. However, he didn’t think he should be held criminally responsible.
On the other hand, two of his confidants, Caroline Ellison, former CEO of Alameda, and Gary Wang, co-founder of FTX, confessed and agreed to cooperate with the prosecutor. As MarginATM reported, Ellison revealed Bankman-Fried concealed the use of customers’ funds with fake financial statements.
In addition, Alameda is always prioritized to have the highest credit limit and does not need to mortgage any assets. The fund’s assets are also never liquidated.
Bankman-Fried’s lawyer remained silent about the above information.
On December 22, Bankman-Fried was released to his parent’s home in Palo Alto (California) on a $250 million bail agreement. Security forces are in charge of monitoring the house. Bankman-Fried may not engage in financial transactions worth more than $1,000 and open a new line of credit. He is also not allowed to leave his area except for exercise.
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