MANHATTAN (CN) — The former CEO of failed crypto exchange FTX will face two separate trials in New York, a federal judge ruled Thursday, severing the counts of Sam Bankman-Fried's original indictment from superseding charges filed later.
U.S. District Judge Lewis Kaplan issued the single-page order Thursday afternoon, hours after a hearing in Manhattan that brought a rare appearance by Bankman-Fried, 31, who has been confined of late to his parents' home in California on house arrest. Bankman-Fried was represented by Mark Cohen and Christian Everdell with the firm Cohen & Gresser.
The order says he will stand trial in October on the eight counts of his initial indictment and return for a second trial in March 2024 on five additional counts.
The U.S. Justice Department brought its original indictment back in December while Bankman-Fried was living in the Bahamas where his business was headquartered. U.S. Attorney Damian Williams has accused the former billionaire of conducting one of the biggest frauds in U.S. history, cheating investors and looting customer deposits on FTX to make lavish real estate purchases, donate money to politicians and make risky trades at Alameda Research, his cryptocurrency hedge fund trading firm.
Bankman-Fried consented to be extradited after authorities arrested him at his palatial island compound, pursuant to the United States’ provisional arrest request, but he 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.
Fighting to get those five post-extradition charges dismissed as they prepare for trial this fall, attorneys for Bankman-Fried argued in court Thursday 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.
Wednesday's hearing before Judge Kaplan followed a request by prosecutors late Wednesday to sever five out of the 13 counts and try them separately next year, assuming that a related waiver dispute in the Bahamas resolves in its favor.
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.
A court in the Bahamas agreed earlier this week that Bankman-Fried can apply for judicial review of his motion. While that motion is pending, Bahamian executive authorities are enjoined from responding to the U.S. Department of Justice's request for a specialty waiver.
Judge Kaplan signaled skepticism this morning of whether such a measure was necessary and whether Bankman-Fried had grounds to have the charges dismissed.
Bankman-Fried’s defense also asked the judge to dismiss, or alternatively sever, one count from the original indictment that accuses Bankman-Fried of violating campaign finance laws, arguing that count also violated the Bahamian extradition treaty.
The charge says Bankman-Fried improperly donated tens of millions of dollars to mainly Democratic and some Republican candidates.
Everdell, a former fraud and cybercrime prosecutor for the Southern District of New York, argued on Thursday that several charges should be thrown out in the wake of two recent decisions by the U.S. Supreme Court that overturned the corruption convictions of Joseph Percoco, a former top aide to New York Governor Andrew Cuomo, and Louis Ciminelli, a Cuomo donor.
Prosecutors told Judge Kaplan that severing the five new counts against Bankman-Fried “would shorten the trial, although not significantly.” They suggested a trial on all of the charges in the superseding indictment could go longer than six weeks, while a trial on the just the counts of the original indictment would last four to five weeks.
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