US charges Sam Bankman-Fried with bribing Chinese official
Charges part of a wider crackdown in the sector
28 March 2023 - 21:06
byLuc Cohen and Jonathan Stempel
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
New York — US prosecutors on Tuesday unveiled a new indictment against Sam Bankman-Fried, accusing the founder of the now-bankrupt FTX cryptocurrency exchange of paying a $40 million bribe to Chinese officials so they would unfreeze his hedge fund’s accounts.
The new bribery conspiracy charge adds the pressure on the former billionaire, who now faces a 13-count indictment over the November collapse of FTX.
Prosecutors had previously accused Bankman-Fried of stealing billions of dollars in customer funds to plug losses at his Alameda Research hedge fund, and orchestrating an illegal campaign donation scheme to buy influence in Washington, DC.
A spokesperson for Bankman-Fried declined to comment.
Bankman-Fried is expected to be arraigned on Thursday before US district judge Lewis Kaplan in Manhattan federal court.
Separately on Tuesday, Kaplan approved modifications to Bankman-Fried’s $250m bail package that are designed to prevent the defendant from tampering with witnesses.
The indictment said Bankman-Fried ordered the $40m cryptocurrency payment to a private wallet from Alameda’s main trading account, to persuade Chinese government authorities to unfreeze Alameda accounts with more than $1bn of cryptocurrency.
Prosecutors said the Alameda accounts had been frozen as part of an investigation into an unnamed Alameda counterparty, and Bankman-Fried's prior efforts to lobby Chinese officials to lift the freeze were unsuccessful.
They also said Bankman-Fried around November 2021 authorised a transfer of tens of millions of dollars of additional cryptocurrency to “complete” the bribe.
China's foreign ministry could not immediately be reached for comment after business hours in Beijing. The Chinese embassy in Washington, D.C. did not immediately respond to a request for comment.
Bankman-Fried has pleaded not guilty to eight of the 13 counts he faces, and not yet been arraigned on the campaign finance or bribery conspiracy charges.
He has acknowledged inadequate risk management at FTX, but has denied stealing money.
Three onetime members of his inner circle — former Alameda CEO Caroline Ellison, former FTX technology chief Zixiao “Gary” Wang, and former FTX engineering director Nishad Singh — have pleaded guilty and agreed to co-operate with prosecutors.
Escalating crackdown
Bankman-Fried’s case is part of an escalating crackdown on alleged abuses at digital asset exchanges by US prosecutors and regulators, after last year's plunge in the values of bitcoin and other tokens as central banks raised interest rates.
Last Thursday, Do Kwon, whose Terraform Labs developed the TerraUSD and Luna coins that crashed last May, was arrested in Montenegro while carrying alleged bogus travel documents, as a Manhattan grand jury indicted him on fraud charges.
And on Monday, the Commodity Futures Trading Commission sued Binance, the world’s biggest crypto exchange, and its founder Changpeng Zhao for executing unauthorised transactions. Zhao called the complaint “unexpected and disappointing.”
The US Securities and Exchange Commission has separately threatened to sue Coinbase Global over that crypto exchange’s products.
Prosecutors’ newest charge accuses Bankman-Fried of conspiring to violate the Foreign Corrupt Practices Act, which makes it illegal for US citizens to bribe foreign government officials to win business.
Bankman-Fried is confined to his parents’ Palo Alto, California home ahead of his scheduled October 2 trial.
His revised bail conditions prevent him from using most electronics, apart from a phone with no internet capability and a basic laptop with limited functions. The laptop will have monitoring software to track user activity.
Concerns that Bankman-Fried might tamper with witnesses, prompted Kaplan to threaten jailing him unless tighter restrictions could be worked out.
Lawyers for Bankman-Fried have said their client contacted current FTX executives to offer help, not to interfere, but nonetheless agreed to restrictions on his use of electronics.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
US charges Sam Bankman-Fried with bribing Chinese official
Charges part of a wider crackdown in the sector
New York — US prosecutors on Tuesday unveiled a new indictment against Sam Bankman-Fried, accusing the founder of the now-bankrupt FTX cryptocurrency exchange of paying a $40 million bribe to Chinese officials so they would unfreeze his hedge fund’s accounts.
The new bribery conspiracy charge adds the pressure on the former billionaire, who now faces a 13-count indictment over the November collapse of FTX.
Prosecutors had previously accused Bankman-Fried of stealing billions of dollars in customer funds to plug losses at his Alameda Research hedge fund, and orchestrating an illegal campaign donation scheme to buy influence in Washington, DC.
A spokesperson for Bankman-Fried declined to comment.
Bankman-Fried is expected to be arraigned on Thursday before US district judge Lewis Kaplan in Manhattan federal court.
Separately on Tuesday, Kaplan approved modifications to Bankman-Fried’s $250m bail package that are designed to prevent the defendant from tampering with witnesses.
The indictment said Bankman-Fried ordered the $40m cryptocurrency payment to a private wallet from Alameda’s main trading account, to persuade Chinese government authorities to unfreeze Alameda accounts with more than $1bn of cryptocurrency.
Prosecutors said the Alameda accounts had been frozen as part of an investigation into an unnamed Alameda counterparty, and Bankman-Fried's prior efforts to lobby Chinese officials to lift the freeze were unsuccessful.
They also said Bankman-Fried around November 2021 authorised a transfer of tens of millions of dollars of additional cryptocurrency to “complete” the bribe.
China's foreign ministry could not immediately be reached for comment after business hours in Beijing. The Chinese embassy in Washington, D.C. did not immediately respond to a request for comment.
Bankman-Fried has pleaded not guilty to eight of the 13 counts he faces, and not yet been arraigned on the campaign finance or bribery conspiracy charges.
He has acknowledged inadequate risk management at FTX, but has denied stealing money.
Three onetime members of his inner circle — former Alameda CEO Caroline Ellison, former FTX technology chief Zixiao “Gary” Wang, and former FTX engineering director Nishad Singh — have pleaded guilty and agreed to co-operate with prosecutors.
Escalating crackdown
Bankman-Fried’s case is part of an escalating crackdown on alleged abuses at digital asset exchanges by US prosecutors and regulators, after last year's plunge in the values of bitcoin and other tokens as central banks raised interest rates.
Last Thursday, Do Kwon, whose Terraform Labs developed the TerraUSD and Luna coins that crashed last May, was arrested in Montenegro while carrying alleged bogus travel documents, as a Manhattan grand jury indicted him on fraud charges.
And on Monday, the Commodity Futures Trading Commission sued Binance, the world’s biggest crypto exchange, and its founder Changpeng Zhao for executing unauthorised transactions. Zhao called the complaint “unexpected and disappointing.”
The US Securities and Exchange Commission has separately threatened to sue Coinbase Global over that crypto exchange’s products.
Prosecutors’ newest charge accuses Bankman-Fried of conspiring to violate the Foreign Corrupt Practices Act, which makes it illegal for US citizens to bribe foreign government officials to win business.
Bankman-Fried is confined to his parents’ Palo Alto, California home ahead of his scheduled October 2 trial.
His revised bail conditions prevent him from using most electronics, apart from a phone with no internet capability and a basic laptop with limited functions. The laptop will have monitoring software to track user activity.
Concerns that Bankman-Fried might tamper with witnesses, prompted Kaplan to threaten jailing him unless tighter restrictions could be worked out.
Lawyers for Bankman-Fried have said their client contacted current FTX executives to offer help, not to interfere, but nonetheless agreed to restrictions on his use of electronics.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.