Federal prosecutors are scrutinizing a growing array of people tied to Sam Bankman-Fried’s collapsed cryptocurrency empire, including his father, his brother and former colleagues, as part of a rapidly expanding investigation into one of the biggest American financial crime cases in more than a decade, according to 13 people with knowledge of the inquiry.
The U.S. attorney’s office in Manhattan has created a special task force to pursue its investigation into the collapse of FTX, the crypto exchange founded by Bankman-Fried.
More than half a dozen prosecutors, led by Damian Williams, the U.S. attorney for the Southern District of New York, are building the criminal case and tracking down the billions of dollars in customer money that Bankman-Fried has been charged with misappropriating.
In recent weeks, prosecutors have had talks with lawyers representing a dozen former executives and employees at FTX and Alameda Research, the hedge fund Bankman-Fried also founded, 11 people with knowledge of the inquiry said. Prosecutors have also examined the role of Bankman-Fried’s family members in his business empire, six people with knowledge of the matter said.
The collapse of FTX has forced virtually everyone in Bankman-Fried’s immediate orbit to seek legal counsel as the investigation intensifies and prosecutors weigh bringing more charges. Defense lawyers at the law firms Mayer Brown, Steptoe & Johnson, and Covington & Burling each represent multiple former FTX executives who may have information to contribute.
“As people begin flipping or cooperating with the government, it can lead to new lines of inquiry and new people of interest,” said Daniel Hawke, a lawyer for the firm Arnold & Porter who was a former director of the Securities and Exchange Commission’s market abuse unit.
The FTX investigation could also ensnare companies that either received money from the exchange or lent it funds. The collapse of FTX last year set off a crisis at the crypto lending firm Genesis, which was recently charged with securities law violations by the SEC. And in late January, a bipartisan group of senators sent a letter to Silvergate, a bank that did business with FTX, asking company officials whether they were aware of the exchange’s misuse of customer money.
In addition to tracking down customer funds, prosecutors are trying to recover hundreds of millions of dollars that were stolen from the exchange by a hacker around the time FTX filed for bankruptcy in November. And they are scrutinizing the more than $90 million in campaign contributions that FTX employees and others close to the company gave to congressional candidates and political action committees.
Much of the criminal case against Bankman-Fried could hinge on testimony from his former colleagues. Two of his closest advisers, Caroline Ellison and Gary Wang, pleaded guilty to fraud in December and have been cooperating with prosecutors for months. Now, the investigators are focusing their attention on other former FTX executives.
Prosecutors have had conversations with a lawyer for Sam Trabucco, a former co-CEO of Alameda Research, according to three people with knowledge with the matter. They have also met in person with Daniel Friedberg, who was a top in-house lawyer at FTX, two people said.
And in court filings, prosecutors have said they are in contact with Ryne Miller, the general counsel of FTX’s U.S. subsidiary who helped manage the crisis in the frantic final days before FTX’s bankruptcy.
The authorities have also had discussions with a lawyer for Nishad Singh, a former top engineer at FTX who had a minority stake in the exchange, about whether he would cooperate as part of a potential plea agreement, according to three people with knowledge of the conversations. Singh, a major donor to Democratic politicians, has not been charged with any wrongdoing, but government documents claim that he had been aware that FTX misused customer money and that he had received a $543 million loan from Alameda.
The talks between prosecutors and Singh were first reported by Bloomberg, and Friedberg’s contact with prosecutors was earlier reported by Reuters.
As they’ve spoken with witnesses and lawyers, prosecutors have also asked questions about Ryan Salame, a former FTX executive who donated tens of millions of dollars to Republican politicians, according to three people with knowledge of the matter.
Conversations between defense lawyers and prosecutors do not necessarily indicate a person is under investigation. It’s common for the authorities to engage in such conversations to determine whether people have information that would make them helpful to the case as witnesses.
Bankman-Fried, 30, has pleaded not guilty to charges of fraud, money laundering and campaign finance violations. A federal judge has granted him bail under strict conditions, requiring him to remain confined to his parents’ home in Palo Alto, California, as he awaits a criminal trial scheduled for October.
A spokesperson for the U.S. attorney’s office in Manhattan declined to comment.
One aspect of the investigation that could soon expand is the inquiry into FTX’s campaign finance activities. Prosecutors are particularly interested in whether FTX engaged in an illegal scheme to funnel tens of millions of dollars to so-called straw donors who made disguised campaign contributions on behalf of the company, as it sought political influence in Washington.
Soon after Bankman-Fried was arrested in December, federal prosecutors began reaching out by email to some of the campaigns and political action committees that had received donations from FTX employees to seek information about those contributions, The New York Times has reported.
The authorities are also looking into whether Bankman-Fried’s younger brother, Gabe Bankman-Fried, played any role in the suspected campaign finance scheme, said four people briefed on the investigation.
Gabe Bankman-Fried ran an advocacy group, Guarding Against Pandemics, that was bankrolled by FTX. The organization donated to other groups and opened a headquarters in a nearly $3.3 million town house in Washington, D.C. The town house, a few blocks from the Capitol, is now listed for sale.
This story first appeared in New York Times or c.2022 The New York Times Company
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