Sam Bankman-Fried, the founder of one of the largest cryptocurrency exchanges in the world, FTX, pleaded not guilty Tuesday to fraud charges brought by federal prosecutors.
The plea comes two weeks after Bankman-Fried, 30, was released on a $250 million bond and ordered to stay at his parents Palo Alto, Calif. home.
The disgraced crypto executive was charged with defrauding investors, wire as well as securities fraud, and conspiracy to circumvent campaign-finance regulations.
Bankman-Fried allegedly spent customer’s funds irresponsibly, accumulating a luxurious real-estate portfolio in the process, according to the Southern District of New York. Lawyers from the Bahamas asserted that Bankman-Fried, and his associate Ryan Salame, spent over $250 million acquiring 35 properties across the island nation.
Bankman-Fried was arrested in one of these properties, a luxury penthouse, in early December.
“The Southern District of New York is working around the clock to respond to the implosion of FTX,” attorney Damian Williams said in a statement released Tuesday. The previous week Williams called the case “one of the biggest financial frauds in American history.”
The federal indictment reportedly relied heavily on the testimony of two former FTX allies turned state’s witnesses, Caroline Ellison and Gary Wang. Ellison was the CEO of Alameda Research, FTX’s sister company and trading arm, and the girlfriend of Bankman-Fried. In exchange, the two will only face civil charges from the SEC and Commodity Futures Trading Commission.
“The cooperation deals make it significantly harder for Bankman-Fried to argue that he didn’t know what was going on at FTX,” a former assistant district attorney told the New York Times.
The firm’s collapse was triggered by reporting from CoinDesk, a cryptocurrency news outlet, that suggested the firm’s balance sheets were misleading.
FTX had a market cap of $32 billion before its spectacular and unexpected collapse in November 2022, with Bankman-Fried personally boasting a net worth of $25 billion.
Revelations publicized in the wake of FTX’s collapse reveal the extent of the mismanagement that plagued the firm many envisioned to be one of the industry leaders.
James Bromley, a lawyer representing the crypto exchange during its subsequent bankruptcy hearings, accused Bankman-Fried of running FTX like a “personal fiefdom” though its demise ultimately showed that “the emperor had no clothes.”
“Unfortunately, the FTX debtors were not particularly well run, and that is an understatement…We have probably witnessed one of the most abrupt and difficult corporate collapses in the history of corporate America,” Bromley said in the aftermath.
Under Bankman-Fried’s leadership, FTX disbursed millions of dollars to politicians across the political spectrum. During the 2020 presidential campaign, he was the second-largest Democratic donor, contributing $5 million, behind only George Soros.
FTX’s influence-peddling scheme also included senior Republican figures. The company donated $1 million to a Super PAC aligned with Senate minority leader Mitch McConnell (R., Ky.) just weeks before declaring bankruptcy.