U.S. federal prosecutors have laid out their evidence against Sam Bankman-Fried (SBF) but at least he won’t have to suffer in prison without his prescription pick-me-ups.
On Monday, Department of Justice prosecutors filed yet another superseding indictment accusing SBF of stealing “billions of dollars” from customers of his collapsed FTX digital asset exchange. SBF used some of these stolen funds to make “over a hundred million dollars in campaign contributions to Democrats and Republicans to seek to influence cryptocurrency regulation.”
Last month, prosecutors dropped the campaign finance charge from their previous indictment(s) of SBF. The move came after the Bahamas government complained that this specific charge wasn’t among the lengthy list of fraud and money laundering charges SBF was facing when he agreed to be extradited to the United States last December. Prosecutors later revealed their intention to bring a separate campaign-related case against SBF and, well, here we are.
The new indictment details how SBF wired “misappropriated customer money” into the personal bank accounts of his underlings—including FTX engineering director Nishad Singh and “another FTX executive”—in order to “evade restrictions on certain types of political contributions, and thereby maximize FTX’s political influence.”
This unnamed FTX executive is a reference to Ryan Salame, the former co-CEO of FTX Digital Markets (FTXDM). Salame donated over $23 million to U.S. politicians in 2022, most of them Republicans, while donations made in SBF’s name primarily went to Democrats.
Salame’s home was raided by Federal Bureau of Investigation agents in April and Bloomberg reported last week that Salame was negotiating some kind of deal with prosecutors. Among the recipients of Salame’s donations was his girlfriend Michelle Bond—a former FTX consultant—who failed to secure a GOP primary win last year for a House of Representatives district in New York.
Kicking in Crooklyn
For the record, there may be further charges coming SBF’s way, and we’re not talking about the separate trial on bank fraud and bribery of foreign officials that’s set to get underway in March 2024. No, we’re talking about a federal charge of attempted witness tampering.
SBF is currently sweating it out in Brooklyn’s notorious Metropolitan Detention Center (MDC) after U.S. District Judge Lewis Kaplan revoked SBF’s bail last Friday. Kaplan lost patience with SBF’s ongoing efforts to intimidate and/or collude with witnesses against him, including Caroline Ellison, his ex-girlfriend and the former CEO of FTX’s affiliated market-maker Alameda Research.
Last month, SBF shared Ellison’s diaries with a New York Times reporter in an apparent bid to undercut her credibility. That was the last straw for Kaplan, who agreed with prosecutors that “there is no condition or combination of conditions of release that will assure that the defendant will not pose a danger to other persons or the safety of the community.”
There was some confusion as to whether SBF would be sent to Putnam County Correctional Facility, where he would have access to a prosecutor-configured laptop that would let him coordinate with his defense team before the first trial gets underway on October 3 (previously, the start date was October 2, but this appears to have changed). But prosecutors did say it could take “weeks” to install the necessary tracking/blocking software to prevent future SBF shenanigans.
With SBF having been so rudely deprived of the creature comforts he enjoyed under house arrest at his parents’ home in California, SBF’s attorneys filed a request Monday to ensure he had access to the pharmaceutical crutches to which he’s become, er, accustomed.
Specifically, the court wants SBF to keep taking his daily 9mg Ersam transdermal patch, which reportedly treats SBF’s depression. SBF also takes 3-4 10mg tablets of Adderall per day to treat his ADHD. Without these medical interventions, SBF “will experience a return of his depression and ADHD symptoms, which will severely impact his ability to assist in his own defense.”
A doctor’s note filed with this request notes that SBF “has a history of Major Depressive Disorder” as well as ADHD. When deprived of his fixes, SBF has “exhibited symptoms of depression, including lethargy, anhedonia [inability to feel pleasure], low motivation, and increased ruminations.”
Kaplan granted this pharmaceutical request but it remains to be seen whether SBF’s bunkmate won’t simply take this candy from this baby under the ‘house rules’ of SBF’s new accommodations.
Last week, SBF’s team asked Kaplan to give them until Wednesday (16) to submit a list of expert witnesses they plan to call on SBF’s behalf. This request included a hint of SBF’s “intention to present an ‘advice of counsel’ defense or a defense based on mental condition or defect.” Could SBF be prepping a Krusty the Klown Percodan Defense?
Witnesses for the prosecution
Monday also saw prosecutors file in limine motions regarding the admissibility of the evidence they intend to use in court against SBF. The filing confirms that Ellison, Singh and FTX co-founder Zixiao ‘Gary’ Wang—all of whom previously reached plea deals with the feds—“will testify at trial about conspiring to commit, and committing, fraud with the defendant.”
Among the other witnesses the government plans to call are “multiple former employees of Alameda and FTX, several of the defendant’s customer, lender, and investor victims, and an expert witness whose financial analysis will show the nature and extent of the fraud.”
Now how much would you pay?
The filing confirms last week’s declaration that prosecutors would introduce evidence of SBF’s “illegal campaign finance scheme” even though this specific charge isn’t part of the October trial. “The making of political contributions using Alameda funds and doing so unlawfully in the names of straw donors [Singh and Salame] is direct proof of wire fraud and money laundering conspiracy,” charges that are part of October’s trial.
The feds go on to claim that the lengths to which SBF went to ensure he maximized his campaign contributions “demonstrates the strength of his desire to purchase political clout—a desire so great that he stole customer funds to satisfy it.”
Salame takes the fifth
The filing says Ryan Salame is “unavailable as a witness” in SBF’s upcoming trial, as his attorney has informed prosecutors that “if subpoenaed, Salame would invoke his Fifth Amendment right against self-incrimination.” Prosecutors nonetheless expect to use Salame’s private communications to illustrate his role as SBF’s straw donor.
In a November 2021 private message to “a trusted family member,” Salame said SBF “want[ed] to donate to both democtratic [sic] and republican candidates in the US.” However, SBF wouldn’t do so “cause the worlds frankly lost its mind if you dontate [sic] to a democrat no republicans will speak to you and if you donate to a republican then no democrats will speak to you.”
Salame went on to say that the bipartisan donations were intended “to weed out anti crypto dems for pro crypto dems and anti crypto repubs for pro crypto repubs.” Salame clarified that SBF would “route money through me to weed out that republican side.”
The China syndrome
While SBF won’t face his foreign bribery trial until next spring, prosecutors plan to introduce evidence into October’s trial of SBF’s alleged payment of “at least $40 million” to Chinese government officials in 2021. The payments were made to regain control of Alameda accounts containing over $1 billion worth of digital assets that had been frozen on two Chinese digital asset exchanges.
SBF “involved” Ellison in the process to regain these assets and she will testify as to the directions she received. Ellison’s role in the bribery scheme “is covered by her cooperation agreement, and among the information Ellison voluntarily provided to the Government.”
The feds say all this will poke holes in SBF’s “anticipated defense that he was not involved in Alameda decision-making” or that he “was in the dark about the criminal actions of others at Alameda and FTX.”
Oh, say can you thieve…
The feds will also introduce evidence that, as FTX/Alameda crumbled, SBF “took several steps that prioritized certain creditors at the expense of FTX customers as a whole and that were for the benefit of the defendant personally.”
The feds single out directions SBF gave Ellison to “prioritize repaying loans to a particular lender that was a U.S.-based entity in order to minimize the prospect of U.S. regulatory scrutiny.” As the walls came down, SBF “discovered an approximately $45 million hole at [U.S.-registered exchange] FTX.US, which the defendant then informed his associates he had filled with a transfer of Alameda assets.”
The feds say SBF’s efforts to keep his U.S. house in order “demonstrates consciousness of guilt and therefore provides highly relevant evidence of the defendant’s intent, which is expected to be centrally in dispute.”
The tale of the tape
Ellison apparently never learned Stringer Bell’s maxim that one doesn’t take notes at a criminal conspiracy. Ellison’s notes at meetings involving SBF and other co-conspirators “include entries such as a list titled ‘Things Sam is Freaking Out About,’ which delineates Ellison’s understanding, from conversations with the defendant, of what remained the defendant’s top business concerns, such as Alameda’s trading hedges, bad press about the relationship between Alameda and FTX, and fundraising.”
Ellison also recorded audio of herself speaking to Alameda staff at the “all-hands meeting” on November 9, 2022, two days before FTX filed for bankruptcy protection. At the time, FTX was pinning its hopes on a proposed bailout by rival exchange Binance, a deal that ultimately fell through.
During Ellison’s rambling speech, she admits Alameda “ended up borrowing a bunch of funds on FTX which led to FTX having a shortfall in user funds.” When an employee asks who all had been aware of FTX’s fund shortfall, Ellison says “I guess I talked about it with, like, Sam, Nishad and Gary.” Pressed further on who made the decision to access FTX user funds, Ellison replies: “Um… Sam, I guess.”
The feds note that Ellison cleared her general comments re Alameda’s likely plan to wind down operations with SBF beforehand. SBF suggested adding “something about there being a future of some sort for those who are excited but that you cant know for sure what it is?” The feds say this indicates that Ellison was acting “as the defendant’s agent” in the meeting.
Docudrama
SBF is reportedly stonewalling prosecutors on authenticating certain internal FTX/Alameda documents, but prosecutors say they will instead call team members of the FTX Debtors, the post-bankruptcy entity established to make sense of SBF’s tangled financial web.
Prosecutors want the court to limit SBF’s attorneys’ ability to cross-examine witnesses the feds may call to corroborate certain documents—including loan agreements with companies such as BlockFi—to prevent SBF from implying that the due diligence performed by these companies was inadequate.
Prosecutors also want to prevent SBF from claiming that other ‘crypto’ entities were engaged in their own misconduct. Claiming that everyone is doing it is “not a defense to the crime of wire fraud or conspiracy to commit wire fraud; just as ‘everyone speeds’ is not a defense if your car happens to get picked up on the radar.”
SBF should also be prevented from claiming that he planned to repay FTX/Alameda customers and therefore he isn’t guilty because he never expected anyone to be harmed. “Even temporary misappropriation of money or property is sufficient for conviction under the wire fraud statutes.” And by lying to Alameda’s lenders to secure additional loans, SBF “obtained money or property based on false representations, which is sufficient to establish a scheme to defraud a victim of money or property.”
Kill all the lawyers
Prosecutors want the court to preclude SBF from claiming that he lacked criminal intent because attorneys were present or involved in “certain decision-making.” An ‘advice of counsel’ defense requires the defendant to provide evidence that “before acting, he in good faith sought the advice of counsel, conveyed all material facts to the attorney, and acted strictly in accordance with the attorney’s advice.”
Prosecutors note that SBF has previously claimed that FTX and Alameda “regularly consulted attorneys at Fenwick [& West] on legal issues.” Fenwick & West’s partners included Daniel Friedberg, who served as attorney for both the FTX Group and as SBF’s personal lawyer.
A recent FTX Debtors’ report laid bare the criminal role that Friedberg played in SBF’s rise and fall, including bribing Bahamian officials, lying to U.S. banks, covering up the illegal commingling of funds between FTX and Alameda, backdating financial documents to legitimize improper transactions, paying off whistleblowers to keep quiet and firing staff who refused to play ball.
SBF shouldn’t lean too hard on Friedberg, who is likely to face his own charges any day now. Besides, the extent and nature of the communications between the two is likely sufficient to blow holes in all their threadbare alibis.
SBF was nowhere near Dealey Plaza in November 1963
Meanwhile, SBF’s attorneys filed their own in limine motion, which seek, among other things, to prevent prosecutors from introducing evidence produced to the defense after July 1.
This demand is based on the defense’s claims that the government has been slow-rolling the discovery process, including “a production just three days ago of nearly three-quarters of a million pages of Slack messages from Gary Wang’s laptop that the Government originally promised to produce by the end of March.”
Prosecutors must also not be allowed to introduce any evidence regarding the bankruptcies of FTX/Alameda because it’s “irrelevant to the issues in the present case.” Allowing this evidence will cause the jury to “improperly infer that the bankruptcy itself is proof that FTX and Alameda collapsed because of fraud, as opposed to outside market forces, and that [SBF] committed the crimes of which he is accused.” Similarly, SBF’s resignation shouldn’t be introduced, because it makes him look guilty. (Sense a thread yet?)
Also, SBF’s comments re FTX.US shouldn’t be permitted, because the charges relate to FTX.com document metadata should be off-limits, because SBF doesn’t trust it. Also, SBF shouldn’t have to discuss evidence related to the charges that won’t be prosecuted until the March trial, cuz he’s already having enough trouble feeling pleasure, alright?
Don’t do what Donny Don’t does
We’ll close on a fittingly bizarre note that sums up the surreality of this whole debacle. The Stanford Daily reported Sunday that—prior to his epic downfall last November—SBF had been scheduled to give a talk to a Stanford class. The subject? ‘Tech ethics.’
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of group—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
