FTX’s Bankman-Fried could face a long road to fraud prosecution

by Jack Quinn

(Reuters) – FTX founder Sam Bankman Fried has been swiftly indicted after the collapse of his crypto empire, but the trial in New York is likely to take more than a year as prosecutors build their case and the two sides wrestle over evidence.

The abstract indictment against Bankman-Fried — which can be amended with more detail and the other defendants as the case progresses — indicates that prosecutors have a long way to go in piecing together what they describe as one of the largest financial frauds in American history. Pretrial litigation can also be a lengthy process as the two sides argue about the admissibility of evidence, what can and cannot be argued at trial, and whether a case should be dismissed.

“The trial could take 14 to 18 months,” said Michael Weinstein, a white-collar criminal defense attorney and former federal prosecutor.

On Tuesday, US Attorney Damien Williams said in Manhattan that a grand jury indicted Bankman-Fried on wire fraud, securities fraud, commodity fraud, campaign finance law violations and conspiracy charges. Williams said the investigation is “ongoing” and that more announcements are to come.

The indictment came just weeks after the $32 billion Bankman-Fried stock market crash, and it’s a very quick turnaround for prosecutors.

Bankman-Fried apologized to the clients, but said he was not guilty of any crime. A representative for the crypto entrepreneur declined to comment.

Bankman Fried was arrested in the Bahamas on Monday but has indicated he will fight extradition to the United States. He is behind bars in a correctional center in the Bahamas and will not plead until he is put on trial in the United States. His absence is likely to keep pre-trial litigation pending for years.

complications

Legal experts doubt Bankman-Fried will win the extradition fight, though he may relent in the coming months after a Bahamian judge denied him bail. Lawyers for Bankman Fried filed a new bail request on Thursday.

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No matter where Bankman-Fried is being held, prosecutors will spend the coming months examining evidence and interviewing witnesses before filing a so-called quashed indictment with new details or the other defendants. The limited information in the indictment unsealed on Tuesday indicates there is a lot of work to be done, according to legal experts.

“The indictment does not contain details like emails and documents that you are used to seeing in fraud cases,” said Renato Mariotti, a former federal prosecutor with experience in financial fraud cases. “This suggests that they put this together quickly, but they wouldn’t file high-level charges like this if they didn’t think they had the goods.”

The executive involved in the restructuring described FTX as a chaotic process that switched assets without basic accounting or record-keeping protocols, which will likely complicate prosecutors’ efforts to build their case further.

Securing help from former FTX employees who can make sense of incomplete records can take a long time, especially if there are negotiations about immunity or plea deals in exchange for cooperation.

“They would need a knowledgeable person who was part of the decision-making process or was familiar with how things worked internally,” Weinstein said.

On Tuesday, US Attorney General Williams clearly addressed people who may have information about the FTX downfall.

“If you haven’t reached out to talk to us, I encourage you to do so, and do it quickly.”

(Reporting by Jack Quinn in New York; Editing by Noelene Walder and Matthew Lewis)