Attorneys who represent former FTX CEO Sam Bankman-Fried are attempting to dismiss 10 of the 13 charges filed against the disgraced cryptocurrency entrepreneur.
Several firms controlled by Bankman-Fried imploded at the end of last year after customers and investors learned that FTX had improperly commingled funds with sister trading company Alameda Research. Lawyers for Bankman-Fried asserted in a Monday court filing that the original indictment levied against the entrepreneur came from a “classic rush to judgment” and that the case involved “civil and regulatory issues” rather than federal crimes.
“Rather than wait for traditional civil and regulatory processes following their ordinary course to address the situation, the government jumped in with both feet,” the filing asserted. “Each of the charges contained boilerplate recitals of statutory language, followed by literally one sentence purportedly describing the basis for the charge.”
Bankman-Fried was detained in the Bahamas and extradited to the United States in December, nearly one month after FTX collapsed and bankruptcy procedures were initiated. Attorneys contended that officials violated the extradition treaty between the two nations since the Bahamian government issued a warrant of surrender “specifying that he be tried on seven of the eight counts” in the original indictment, even as American officials later brought additional charges without the consent of authorities in the island nation.
Bankman-Fried was initially charged in December with crimes such as conspiracy to commit wire fraud, conspiracy to commit securities fraud, and conspiracy to defraud the Federal Election Commission through campaign finance violations. Another superseding indictment unveiled in February added four new charges, including conspiracy to commit bank fraud and conspiracy to operate an unlicensed money transfer business. Bankman-Fried was also charged in March with paying bribes to one or more members of the Chinese Communist Party.
Bankman-Fried faces the charges in the Southern District of New York, which often oversees high-profile financial fraud cases. The entrepreneur, who has pleaded not guilty to all charges and currently resides with his parents in northern California, is expected to appear for trial in early October.
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Lawyers for the entrepreneur meanwhile claimed that the collapse of FTX occurred in the context of broader difficulties in the cryptocurrency sector. “As with a traditional bank run, numerous customers simultaneously sought to withdraw their assets, thus feeding fears that a collapse was inevitable,” the court filing said. “The market crash took down many of the major players in this sector, not just FTX.”
Current FTX CEO John Ray III, a bankruptcy lawyer appointed to recover lost funds on behalf of customers and investors, nevertheless contended that the firm imploded as a result of mismanagement from senior executives, who reportedly discharged more than $5 billion on imprudent business investments, including advertisements with celebrities such as quarterback Tom Brady and investor Kevin O’Leary.
“Despite the public image it sought to create of a responsible business, the FTX Group was tightly controlled by a small group of individuals who showed little interest in instituting an appropriate oversight or control framework,” the attorney wrote. “These individuals stifled dissent, commingled and misused corporate and customer funds, lied to third parties about their business, joked internally about their tendency to lose track of millions of dollars in assets, and thereby caused the FTX Group to collapse as swiftly as it had grown.”