NEW YORK: Sam Bankman-Fried pleaded not guilty on Tuesday (Jan 3) to criminal charges that he cheated investors in his now-bankrupt FTX cryptocurrency exchange and caused billions of dollars in losses in what prosecutors have called an epic fraud.
The 30-year-old defendant entered his plea to eight criminal counts, including wire fraud and conspiracy to commit money laundering and violate campaign finance laws, before US District Judge Lewis Kaplan in Manhattan federal court.
Bankman-Fried is accused of looting FTX customer deposits to support his Alameda Research hedge fund, buy real estate and make millions of dollars in political contributions.
"Customer funds were also used and laundered through political donations, charitable donations and a variety of venture investments," Danielle Sassoon, a federal prosecutor, said at the hearing. She accused Bankman-Fried of "lulling FTX customers with false information" that their assets were safe after the exchange collapsed.
Sassoon suggested that the government has a deep well of evidence against Bankman-Fried, saying prosecutors plan to turn over hundreds of thousands of documents in coming weeks so the defence can prepare for trial. The government has already won guilty pleas from two former top associates of Bankman-Fried's, who are cooperating with prosecutors and may testify at trial.
Kaplan set an Oct 2 trial date. Sassoon estimated that a trial could take four weeks, though Bankman-Fried's lawyer said he expected it to last two to three weeks.
It is common for criminal defendants to initially plead not guilty. They may change their pleas later.
Bankman-Fried, now clean-shaven, wore a blue suit, white shirt and dotted blue tie and carried a backpack into the courthouse - a far cry from the shorts and t-shirts that were his preferred attire while he ran FTX from the Bahamas.
He did not speak to the judge during the hearing, but conferred privately with his lawyers. He shook hands with one of the prosecutors before the hearing, and once the arraignment concluded, he approached the handful of courtroom sketch artists and commented on their work.
The Massachusetts Institute of Technology graduate could face up to 115 years in prison if convicted.
Bankman-Fried rode a boom in the value of bitcoin and other digital assets to build a net worth of an estimated US$26 billion and become an influential political donor in the United States.
FTX collapsed in early November after a wave of withdrawals and declared bankruptcy on Nov 11, wiping out Bankman-Fried's fortune. He later said he had $100,000 in his bank account.
PARENTS RECEIVE THREATS
Bankman-Fried was extradited last month from the Bahamas, where he lived and where the exchange was based.
Since his release on a US$250 million bond on Dec 22, Bankman-Fried has been subject to electronic monitoring and required to live with his parents, Joseph Bankman and Barbara Fried, both professors at Stanford Law School in California.
Fried attended her son's court hearing on Tuesday.
On Tuesday, Kaplan granted Bankman-Fried's request not to publicise the names of two additional co-signers for the bond.
Lawyers for Bankman-Fried have said his parents, who co-signed the bond, have received physical threats since FTX's collapse, and that other co-signers might face similar harassment unless their names were kept secret.
The judge also imposed a new bail condition, saying Bankman-Fried cannot access FTX or Alameda assets. That came after Sassoon said her office was investigating reports late last month that additional funds were transferred out of Alameda cryptocurrency wallets.
"Mr Bankman-Fried did not make those transfers," his lawyer said in court.
Bankman-Fried on Dec 30 posted a link on Twitter to an article on a crypto industry news website about the purported transfers and said, "None of these are me."
Prosecutors' case was strengthened by last month's guilty pleas of two of Bankman-Fried's closest associates.
Caroline Ellison, who was Alameda's chief executive, and Gary Wang, FTX's former chief technology officer, pleaded guilty to seven and four criminal charges, respectively, and agreed to cooperate with prosecutors.
FTX's new chief executive, John Ray, known for his work on energy company Enron Corp's bankruptcy, has said FTX was run by "grossly inexperienced" and unsophisticated people.