For federal prosecutors, Sam Bankman-Fried could be the gift that keeps on giving.
After the , the cryptocurrency exchange he founded in 2019, Bankman-Fried unexpectedly intended to present his version of events. He was and charged with perpetrating one of the biggest frauds in U.S. history 鈥� and he鈥檚 still talking, either in person or on the internet.
The atypical chattiness for a criminal defendant is likely causing Bankman-Fried鈥檚 attorneys to scratch their heads, or worse. Prosecutors can use any statements, tweets or other communications against him at his trial, which is scheduled for October.
鈥淧rosecutors love when defendants shoot their mouths off,鈥� said Daniel R. Alonso, a former federal prosecutor who is now a white-collar criminal defense attorney. If Bankman-Fried鈥檚 public comments before trial can be proven false during the trial, it may undermine his credibility with a jury, he said.
Bankman-Fried鈥檚 most immediate concern, however, is a recent private communication. Prosecutors say he over the Signal texting app on Jan. 15 to the general counsel of FTX US, a likely witness for the government. Bankman-Fried will be back in a New York court Thursday, where a judge could impose new bail restrictions because of what could be seen as an attempt to influence a witness.
Before its collapse, FTX was the world鈥檚 second-largest crypto exchange and Bankman-Fried, 30, was its CEO and a billionaire several times over, at least on paper. Celebrities and politicians alike vouched for FTX and its founder, and Bankman-Fried was considered a leading figure in the crypto world.
However, the broad collapse of cryptocurrencies last year caused severe financial stress for numerous companies in the crypto universe, from lenders to exchanges to firms focused on investing in digital assets. FTX sought bankruptcy protection in November after customers pulled out their money in the crypto equivalent of a bank run.
Federal prosecutors have said Bankman-Fried devised 鈥渁 scheme and artifice to defraud鈥� FTX鈥檚 customers and investors right from FTX鈥檚 inception. They say he illegally diverted their money to cover expenses, debts and risky trades at Alameda Research, the crypto hedge fund he started in 2017, and to make lavish real estate purchases and large political donations.
In interviews and Twitter posts, Bankman-Fried has said he never intended to defraud anyone. He鈥檚 maintained that running FTX took up all his time and that he was unaware of the financial problems at the hedge fund until it was too late.
Those assertions are likely to be refuted by one of the government鈥檚 key witnesses. Caroline Ellison, the former CEO of Alameda, has agreed to plead guilty for her role in FTX鈥檚 collapse and to testify against Bankman-Fried. in December, Ellison said she knew FTX had used billions in customer funds to make loans to Alameda and agreed with Bankman-Fried and others to take steps to conceal the nature of the loans.
Gary Wang, who co-founded FTX with Bankman-Fried, also struck a deal for cooperation. At his own plea hearing, Wang said that he made changes to computer code to enable FTX customer funds to be transferred to Alameda.
Another claim made often by Bankman-Fried is that he鈥檚 trying to help recover funds for FTX customers, but that FTX鈥檚 new management has cut him off and has taken steps, including filing for bankruptcy protection, that could inhibit customers from getting their money back.
For instance, Bankman-Fried says that when FTX collapsed, outside parties had made funding offers totaling billions of dollars, and if given a few weeks the company could have raised enough money 鈥渢o make customers substantially whole.鈥� Instead, it was 鈥渟trong-armed鈥� into filing for bankruptcy protection by its main law firm, Sullivan & Cromwell, a claim the firm denies.
Bankman-Fried has also frequently taken issue with decisions made by FTX鈥檚 new CEO, John Ray. Bankman-Fried has often claimed that FTX鈥檚 U.S. operation, which was considerably smaller than the international operations, was solvent at the time of the bankruptcy filing, a contention that Ray disputes.
鈥淚鈥檓 still waiting for him to finally admit that FTX US is solvent and give customers their money back,鈥� Bankman-Fried tweeted on Jan. 19.
Bankman-Fried was scheduled to testify under oath in front of Congress in December with Ray, but that appearance was cancelled because of his arrest in the Bahamas, where FTX is based.
鈥淭he real risk Bankman-Fried runs in making public comments 鈥榚xplaining鈥� what happened is they could be seen as continuing efforts to mislead investors by regulators and prosecutors,鈥� said Jeff Linehan, a former prosecutor in the financial crimes division of the New York State Attorney General鈥檚 Office. Linehan is now a criminal defense attorney.
Bankman-Fried鈥檚 comments at the time of FTX鈥檚 collapse could also come back to haunt him. On Nov. 7, as customers furiously demanded their money back, he tweeted 鈥淔TX is fine. Assets are fine.鈥� He deleted the tweet the next day. On Nov. 11, FTX filed Chapter 11.
Through a spokesman, Bankman-Fried decline to comment for this article.
Some defendants will go through their entire legal ordeal without saying anything that isn鈥檛 first cleared by their attorneys. Even putting defendants on the witness stand at trial has long been seen by defense attorneys as a last-resort option because it opens them up to interrogation by prosecutors and often does more harm than good.
鈥淎s the prosecution prepares their case, it鈥檚 really important to figure out what the defense鈥檚 strategy could be, and a defense wants to keep that strategy under wraps as much as possible,鈥� said Alonso, the former federal prosecutor.
Bankman-Fried faces the possibility of decades in prison if convicted on all counts. Even if he were to agree to a plea bargain, a judge would have full discretion on what sentence to impose. If the judge does not believe Bankman-Fried is truly sorry for his actions, based partly on his public statements, he could ignore the prosecution鈥檚 recommendations and imposing a stricter sentence, legal experts say.
Before FTX collapsed, Bankman-Fried had built up a gigantic public persona. He spoke often to reporters, testified in front of Congress, and appeared at conferences to advocate for cryptocurrencies and his firm. He gave millions of dollars to political candidates and advocated for charitable causes such as food issues in the Bahamas. It could be difficult to give up that sort of public influence.
鈥淪ome people simply can鈥檛 help themselves,鈥� Alonso said.
