FTX founder
Sam Bankman-Fried
is likely to plead not guilty to fraud and other charges at his arraignment next week, according to people familiar with the matter.
The U.S. attorney’s office for the Southern District of New York earlier this month charged Mr. Bankman-Fried with engaging in criminal conduct that contributed to the cryptocurrency exchange’s collapse, alleging that he oversaw one of the biggest financial frauds in American history. Mr. Bankman-Fried is likely to appear in person in New York to enter his plea on Jan. 3, one of the people said.
Before his arrest, Mr. Bankman-Fried blamed the loss of customer funds on sloppy record-keeping and a bank-account issue that allowed Alameda Research, an affiliated trading firm, to cover large losses with money destined for FTX. His not guilty plea was widely expected.
Mr. Bankman-Fried stands at odds with his associates—
Caroline Ellison,
the former chief executive of Alameda Research, and
Gary Wang,
FTX’s former chief technology officer—who both pleaded guilty to criminal offenses similar to those Mr. Bankman-Fried was charged with. Both are cooperating with federal investigators.
The collapse of FTX and its sister trading firm Alameda have rattled the nascent world of crypto. Prosecutors allege that Mr. Bankman-Fried took billions of dollars of FTX.com customer money to pay the expenses and debts of his trading firm Alameda Research. Both companies filed for bankruptcy last month. Individual traders who entrusted FTX with their crypto are likely facing lengthy bankruptcy proceedings before they have a chance at seeing any of their funds back.
Mr. Bankman-Fried was released on a $250 million bond last week and has been ordered to stay in his parent’s Palo Alto, Calif., home after his appearance in a New York federal court following his extradition from the Bahamas.
Prosecutors say that from 2019 through November, Mr. Bankman-Fried conspired with unnamed individuals to defraud customers and lenders. He provided false and misleading information to lenders on the financial condition of Alameda, according to the indictment by the U.S. attorney’s office.
Mr. Bankman-Fried is also accused of defrauding the Federal Election Commission starting in 2020 by conspiring with others to make illegal contributions to candidates and political committees in the names of other people.
He and his associates contributed more than $70 million to election campaigns in recent years, The Wall Street Journal previously reported. He personally made $40 million in donations ahead of the 2022 midterm elections.
Mr. Bankman-Fried also faces allegations from the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The SEC alleged in a civil lawsuit that Mr. Bankman-Fried diverted customer funds from the start of FTX to support Alameda and to make venture investments, real-estate purchases and political donations. The CFTC filed a lawsuit linking his allegedly fraudulent conduct at Alameda and FTX to markets that the CFTC regulates.
On Friday afternoon, Mr. Bankman-Fried returned to Twitter for the first time since Dec. 12 to defend himself against rumors that he has been moving funds out of several crypto wallet addresses associated with Alameda.
Cryptocurrency prices have cratered this year amid rising central bank rates and the collapses of a once-prominent hedge fund and crypto lenders, with bitcoin and ether plunging 64% and 67%, respectively, according to CoinDesk data. The total market cap of all digital tokens fell to $795 billion, compared with $2.2 trillion at the start of year, per CoinMarketCap data.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com
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