Sam Bankman-Fried, the founder of bankrupt crypto exchange FTX, has pleaded not guilty to criminal charges, setting up a high-stakes legal battle that pits him against two of his closest former business partners.
The 30-year-old entrepreneur, who has $250 million bail, was arraigned in federal court in Manhattan on Tuesday, flanked by lawyers and with his mother, Barbara Fried, seated behind him. Attorney Mark Cohen has pleaded not guilty to all counts.
The judge set a trial date for October 2.
Bankman-Fried, once hailed as the public face of the crypto industry, was charged with two counts of wire fraud and six counts of conspiracy last month for his role in what a federal prosecutor called it “fraud of epic proportions.”
Authorities have accused Bankman-Fried of stealing funds from FTX clients to cover loans taken out by Alameda Research, the FTX-affiliated crypto hedge fund. They also say he used those funds to invest in other businesses and donate to the campaigns of politicians from both parties to influence public policy.
In public statements following FTX’s November filing for bankruptcy, Bankman-Fried insisted he had not committed fraud and was unaware that client funds were being misused.
Two senior executives from Bankman-Fried’s crypto business – Gary Wang, the co-founder of FTX, and Caroline Ellison, who served as CEO of Alameda — have pleaded guilty to multiple criminal charges and are cooperating with federal prosecutors.
Ellison apologized when entering her plea last month, telling the court that she “agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of the relationship between Alameda and FTX, including Alameda’s credit agreement”.
Prosecutor Danielle Sassoon told the court on Tuesday that there could be more than a million victims of the FTX collapse. Prosecutors plan to file a motion asking to notify victims via a website, instead of notifying them individually, Sassoon said.
As part of his release, Bankman-Fried is under house arrest at his parents’ home in Palot Alto, California. He is wearing a tracking device and has surrendered his passport.
He could face up to 115 years in prison if convicted on all counts.
Last month, a US judge released him on $250 million bail in his first appearance on US soil since his arrest in the Bahamas, where he lived and ran his businesses.
Bankman-Fried’s parents, both Stanford law professors who co-signed his bond, “became the target of intense media scrutiny, harassment, and threats,” defense attorneys wrote in a letter to the court. court, while asking to delete the names of two other co-signers, known as “guarantors”.
“There are serious grounds for concern that the two additional sureties will face similar invasions of their privacy as well as threats and harassment if their names do not appear redacted on their bonds or if their identities are otherwise publicly disclosed,” the letter read.
Judge Lewis A. Kaplan ruled those names and addresses could be redacted at this time, but said he could review the decision if the media or other interested parties file motions to make the information public. .
Prosecutors allege Bankman-Fried orchestrated “one of the biggest financial frauds in American history,” stealing billions of dollars from FTX clients to cover losses at its sister hedge fund, Alameda Research.
FTX and Alameda both filed for bankruptcy in December after investors rushed to withdraw their deposits from the exchange, triggering a liquidity crunch and trigger contagion in the crypto industry.
New FTX CEO John Ray III, who made a name for himself overseeing the liquidation of Enron in the early 2000s, told a congressional hearing that customer funds deposited on the FTX site were mixed with funds from Alameda, which made a number of speculative transactions, – risky bets.
Ray described the situation at both companies as “old-fashioned embezzlement” at the hands of a small group of “grossly inexperienced and unsophisticated individuals”.
Separately on Tuesday, US regulators issued a statement warning market participants of the particular risks posed by the cryptocurrency market due to the prevalence of fraud, volatility, misrepresentation and poor risk management.
“It is important that risks in the crypto-asset industry that cannot be mitigated or controlled do not migrate to the banking system,” reads the statement, issued jointly by the Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.
– CNN’s Allison Morrow, Nicki Brown and Samantha Murphy Kelly contributed to this report.