Disgraced crypto mogul Sam Bankman-Fried’s plan to plead not guilty to criminal charges will lay the foundation for one of the most high-profile white collar fraud trials in recent years.
While the plea, which is likely to be entered later on Tuesday, was not unexpected, it buys the 30-year-old more time, legal experts say. Bankman-Fried will get a better idea on the evidence prosecutors have against him and plan his next move — negotiate or fight. The plea puts the case on track for a lengthy trial, which could span several weeks and not start for at least a year.
Ahead of the arraignment, Bankman-Fried’s lawyers asked a judge to keep confidential the identities of two people who will help secure his bail to protect them from public scrutiny and potential harassment. His lawyers filed a letter seeking redactions of the names of the two people who intend to sign on as sureties to his $250m bail package, which a judge granted Bankman-Fried in December, one of the largest in US history.
“All the machinations of getting to trial will start rolling after the arraignment,” Andrew Jennings, a law professor and former white collar defence attorney, said. “But it doesn’t mean the government and Bankman-Fried can’t negotiate a plea.”
Bankman-Fried is expected to travel from his parents’ house in California to New York to appear in US District Court on Tuesday. He plans to enter pleas of not guilty to eight charges, including wire fraud and campaign finance violations, Bloomberg previously reported.
Jennings, now a professor at Brooklyn Law School, said Bankman-Fried would likely be considering whether he could and should negotiate a plea bargain. In that case, prosecutors may be willing to budge on what sentencing recommendations — the time they believe Bankman-Fried should spend in prison — they submit to a judge or drop one or more charges.
“Even if you have a strong evidential case going to trial, it does carry some risks,” Jennings said. “If the case is going to take weeks, it does take a very serious commitment of government resources. So the government, in general, is always open to reaching some agreement if it avoids the cost of trial.”
Pleading not guilty also opens up discovery channels. Bankman-Fried and his legal team, led by defense attorney Mark S Cohen, will get a better insight into what evidence prosecutors have, including any exculpatory material.
US attorney Damian Williams previously revealed the government had spoken to dozens of FTX employees and had tens of thousands of pages of material, including emails, financial statements and Signal messages.
The government’s star witnesses are some of Bankman-Fried’s closest associates — former Alameda Research CEO Caroline Ellison and FTX chief technology officer Gary Wang. They have pleaded guilty to fraud charges in cooperation agreements carved out with the government while Bankman-Fried was still in the Bahamas.
While negotiating a plea is one thing, Bankman-Fried’s overall value as co-operator is somewhat diminished by the fact he is at the top of the FTX hierarchy.
“Even if Bankman-Fried wanted to co-operate,” the US attorney’s office for the southern district of New York “would only agree to do so if he brought substantial value”, defence attorney Tim Howard, a former prosecutor, said. “SDNY does not like to cooperate down, and Bankman-Fried is likely at the top of their pyramid, so it’s unlikely.”
Only a fraction of criminal cases in the US end up going to trial. The FTX founder was arrested in the Bahamas on December 12 after US prosecutors filed an indictment accusing him of spearheading a years-long fraud through the cryptocurrency exchange.
Bankman-Fried fraudulently raised $1.8bn from investors under the guise of FTX having appropriate controls and risk management measures, authorities allege. FTX’s catastrophic collapse in November, and subsequent bankruptcy filing, shattered trust in the cryptocurrency industry.
He also is accused of misusing customers’ funds at FTX to cover personal expenses, real estate purchases and trading at Alameda Research, the hedge fund he established in 2017. In media interviews before his arrest, Bankman-Fried conceded being a poor manager with lapses in oversight but denied knowingly committing fraud.