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Bankman-Fried loses bid to dismiss cryptocurrency fraud indictment

With no objection from the Bahamian authorities who extradited him, the FTX wunderkind lacks standing to challenge superseding fraud charges.

MANHATTAN (CN) — Paving the way for the founder of now-bankrupt cryptocurrency exchange FTX to face trial this fall, a federal judge on Tuesday rejected challenges from Sam Bankman-Fried to the criminal charges against him in New York.

Bankman-Fried, 31, is accused of cheating investors and looting customer deposits on FTX to make lavish real estate purchases, donate money to politicians and make risky trades at Alameda crypto hedge fund, Alameda Research, of which he was a co-founder and majority share owner.

The court held a hearing earlier this month, however, where Bankman-Fried fought to dismiss 10 of the 13 charges against him. U.S. District Judge Kaplan concluded Tuesday that each of his challenges were “either moot or without merit.”

Among such arguments, the defense team focused on the five counts brought in superseding indictments after Bankman-Fried was extradition to the United States from the Bahamas: substantive commodities fraud count, bank fraud, unlicensed money transmitting, and Foreign Corrupt Practices Act conspiracy charges,

Bankman-Fried insisted that these charges could not survive under the rule of specialty, absent the affirmative consent from the Bahamas, because they were not among the offenses specified in the Warrant of Surrender.

Judge Kaplan ruled Tuesday, however, that Bankman-Fried lacks standing to invoke the rule of specialty.

“The Extradition Treaty here at issue does not provide that it may be enforced by an individual. Nor is there any language indicating that The Bahamas and the United States intended it to be so enforceable,” the 41-page opinion states. “Accordingly, under the Second Circuit’s binding precedent, the rule of specialty may be invoked here only by The Bahamas.”

Unless the Bahamas does end up objecting to any of the charges, the judge said Bankman-Fried has no basis to argue for dismissal.

Judge Kaplan also rejected and found “meritless” arguments from the Bankman-Fried federal prosecutors failed to state an offense in 10 of the 13 charges.

Dismissal of charges at this stage is "an 'extraordinary remedy' reserved only for extremely limited circumstances implicating fundamental rights,” he wrote.

Kaplan previously ruled to sever Bankman-Fried’s case into two separate trials. In October, the defendant will be tried on the eight counts of his initial indictment. Regardless of the verdict that fall, Bankman-Fried will have to return for a second trial in March 2024 on five counts brought after his extradition. 

Bankman-Fried had been living in the Bahamas, where his business was headquartered, at the time of his December indictment. U.S. Attorney Damian Williams says the former billionaire conducted one of the biggest frauds in U.S. history.

After authorities arrested him at his palatial island compound, the crypto executive consented to extradition pursuant to the provisional U.S. arrest request. Later, however, Bankman-Fried signed an affidavit in which he purportedly limited such consent to the eight counts listed in a diplomatic note and arrest warrant.

Williams’ office brought new charges in a superseding indictment three months later, alleging that Bankman-Fried violated the anti-bribery provisions of the Foreign Corrupt Practices Act by directing the payment of $40 million in bribes to a Chinese official or officials to free up $1 billion in cryptocurrency assets were frozen in early 2021.

Attorneys for Bankman-Fried argued that the superseding counts run afoul of the extradition deal.

“It’s the warrant of surrender that controls,” Cohen said, insisting that prosecutors needed to have obtained the express consent of the Bahamian government before adding subsequent charges.

The Department of Justice is seeking a specialty waiver from the “executive authority” of the Bahamas on an offer to drop the five charges of foreign bribery, bank fraud and conspiracy if Bahamian authorities oppose them. The Southern District of New York says there is ample time for Bahamian authorities to respond to that request ahead of the October 2023 trial date.

Prosecutors have told Judge Kaplan they expect a trial on the just the eight counts of the original indictment would last four to five weeks.

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Categories / Business, Criminal, Technology

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