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Prosecutors have requested a Manhattan federal court judge to deny FTX founder Sam Bankman-Fried’s motion to dismiss criminal charges brought against him.
SBF is accused of embezzling billions of dollars from clients to cover losses at his hedge fund. He filed pretrial motions in early May seeking the dismissal of most charges brought against him by US prosecutors.
His defense team based their arguments on procedural issues, the applicability of specific US laws considering FTX’s non-US location, and claims that the charges exceeded the agreed terms of his extradition.
The defense did not contest the securities fraud and money laundering charges.
Regarding Bankman-Fried’s contention that the Bahamas must approve any charges before his extradition, prosecutors countered that the extradition treaty between the United States and the Caribbean nation allows for post-extradition payments with the consent of the extraditing country. They clarified that any charges presented in new indictments post-extradition do not violate this rule.
Bribery allegations and FTX trade impact hold strong
One of the charges filed in March alleges that Bankman-Fried violated the Foreign Corrupt Practices Act (FCPA) by allegedly offering $40 million to undisclosed Chinese officials to persuade them to unfreeze certain accounts.
Bankman-Fried argued that the allegations of commodity fraud are invalid due to extraterritorial enforcement. However, US prosecutors contended that the accusations should stand since the impact of FTX’s trades was felt in the cryptocurrency markets within the United States.
Additionally, prosecutors addressed the allegations of campaign finance law violations, which revolve around Bankman-Fried’s purported donation of money in the names of FTX executives. They dismissed his arguments, pointing out that the indictment provides explicit details of how he allegedly worked to obscure the true source of funds for these donations.
The court filing also mentioned that Bankman-Fried’s defense had requested further discovery documents, contending that the FTX estate should be considered part of the “prosecution team” due to its cooperation with the US Department of Justice.
Although Bankman-Fried acknowledged inadequate risk management at FTX, he denied any wrongdoing or misappropriation of funds. He has sought to distance himself from the failure of his crypto-focused hedge fund, Alameda.
Caroline Ellison, the former CEO of Alameda, has pleaded guilty and agreed to cooperate with authorities.
Law experts suggest that Bankman-Fried stands a good chance of having the charges dropped since prosecutors can show concrete money that his clients lost.
Recently, the Supreme Court, while overturning a bid-rigging conviction of a construction executive in Buffalo, New York, deemed the “right to control” approach inconsistent with established federal fraud statutes and their traditional enforcement.