FTX founder and former CEO Sam Bankman-Fried will be released on $250 million bond and must be confined to his parents' California home, a federal judge ordered Thursday. After being extradited from the Bahamas late Wednesday, Bankman-Fried made first appearance in a U.S. courtroom. Meanwhile, federal prosecutors are working to build their case against him.
Hours after the disgraced crypto mogul landed in the U.S. Wednesday, he entered a New York federal court Thursday. It was expected Bankman-Fried would enter a plea Thursday. However, that was pushed to a later date, the Wall Street Journal reported.
Bankman-Fried's first court appearance follows two top associates pleading guilty Wednesday to charges related to the collapse of the cryptocurrency exchange.
With Bankman-Fried back in the U.S., federal prosecutors announced late Wednesday that former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang pleaded guilty to charges tied to the fall of FTX. Ellison and Wang are both cooperating with the federal investigation.
On Wednesday, the Securities and Exchange Commission and Commodity Futures Trading Commission also announced charges against the pair.
"Ellison, at the direction of Bankman-Fried, furthered the scheme by manipulating the price of FTT, an FTX-issued exchange crypto security token, by purchasing large quantities on the open market to prop up its price," the SEC alleges.
Federal Charges Against SBF
Last week, the Justice Department charged Sam Bankman-Fried with stealing billions of dollars from FTX customers to shore up losses at his hedge fund, Alameda Research.
The federal charges include money laundering, wire fraud, wire fraud conspiracy, securities fraud and securities fraud conspiracy. The SEC has filed its own civil complaint, charging Bankman-Fried with securities violations and orchestrating a scheme to defraud investors.
"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 in the announcement.
Authorities arrested Bankman-Fried last week in the Bahamas. Bankman-Fried lives there and it is also where FTX is based. Alameda Research is based in Hong Kong.
On Wednesday morning, Bankman-Fried appeared in Bahamas court in which he agreed to his extradition. Bankman-Fried told the court he had "a desire to make the relevant customers whole," according to the Wall Street Journal.
Bankman-Fried had ridden the cryptocurrency wave to becoming a billionaire. He founded and ran FTX, an exchange to buy and sell digital currencies. During the spring and summer, as many other crypto operations came under pressure, FTX and Bankman-Fried offered rescue buyouts.
However, in November, reports emerged that FTX used customer funds for Alameda. This prompted a slew of withdrawals which led FTX to declare bankruptcy. FTX had a value of about $32 billion in January 2022.
The Case Against Bankman-Fried
Last week, newly appointed FTX Chief Executive John Ray III fielded questions from House Financial Service Committee members, as Congress investigates the FTX situation. Bankman-Fried was a major donor to the Democratic Party and Democratic politicians.
The financial trouble began at FTX "months or years" ago, it didn't start overnight, according to Ray. Federal authorities allege Bankman-Fried engaged in widespread fraud since the founding of FTX in 2019.
Ray told members of Congress last Tuesday it will be difficult to recover the more than $7 billion in lost funds from FTX. He told Congress that FTX is struggling to piece together account information and track funds due to the lack of proper record-keeping.
"We're dealing with a literal paperless bankruptcy," Ray said.
Bahamian officials haven't been very collaborative during the process, according to Ray. The day after FTX filed for bankruptcy on Nov. 11, Bahamian authorities moved funds with the aid of former employees, which they say was in the interest of Bahamian creditors.
Ray also alleged that Sam Bankman-Fried is trying to undermine the scope of U.S. federal bankruptcy law by moving assets into accounts under the control of Bahamian authorities.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
