Federal prosecutors are scrutinizing a wide range of people connected to Sam Bankman-Fried’s crumbling crypto empire, including his father, brother, and former colleagues. , as part of a rapidly expanding investigation into one of America’s largest financial crime cases in more than a decade, according to 13 people with knowledge of the investigation.
The United States Attorney’s office in Manhattan has formed a task force to pursue the investigation into the collapse of FTX, the cryptocurrency exchange founded by Bankman-Fried.
More than half a dozen prosecutors, headed by Damian Williams, US attorney for the Southern District of New York, are building the criminal case and tracing billions of dollars in client funds to which Mr. embezzlement crime.
In recent weeks, prosecutors spoke with attorneys representing dozens of former executives and employees at FTX and Alameda Research, the hedge fund Bankman-Fried also founded, 11 people know. about the investigation said. Prosecutors have also looked into the role of Bankman-Fried family members in his business empire, six people with knowledge of the matter said.
The collapse of FTX has forced virtually everyone in Mr Bankman-Fried’s direct orbit to seek legal advice as the investigation intensifies and prosecutors consider bringing more charges. . The defense attorneys at the law firms Mayer Brown, Steptoe & Johnson, and Covington & Burling each represent numerous former FTX executives who may have information to contribute.
Daniel When people start to expose or cooperate with the government, it can lead to new directions of investigation and new people of interest, said Daniel Hawke, a lawyer for the firm Arnold & Porter, who served as a director. market by the Securities and Exchange Commission. abuse unit
The FTX investigation could also trap companies that receive money from the exchange or lend it money. The collapse of FTX last year caused a crisis at crypto lender Genesis, recently charge with the SEC securities law violations And in late January, a bipartisan group of senators sent a letter to Silvergate, a bank that did business with FTX, asked company officials if they were aware of the exchange’s misuse of customer funds.
In addition to tracking customer funds, prosecutors are trying to recover hundreds of millions of dollars that were stolen from the exchange by hackers around the time FTX filed for bankruptcy in November. scrutinized the campaign contributions of more than $90 million that FTX employees and others close to the company gave to congressional candidates and political action committees.
Much of the criminal case against Mr Bankman-Fried can hinge on testimony from his former colleagues. His two closest advisers, Caroline Ellison and Gary Wang, pleaded guilty to fraud in December and have cooperated with prosecutors for months. Now, investigators are focusing their attention on other former FTX executives.
Things to know about the collapse of FTX
Prosecutors spoke with attorneys for Sam Trabucco, the former co-CEO of Research Alameda, according to three people with knowledge of the matter. They also met face-to-face with Daniel Friedberg, a top in-house attorney at FTX, the two said.
And in court records, prosecutors said they are in contact with Ryne Miller, the general counsel of the US subsidiary of FTX, who helped manage the crisis in the final frenetic days before FTX went bust.
Authorities also discussed with lawyers for Nishad Singh, a former top FTX engineer who has a minority stake in the exchange, about whether he would cooperate as part of a plea agreement. Potential or not, according to three people familiar with the conversation. . Mr Singh, a major donor to Democratic politicians, has not been charged with any wrongdoing, but government document request that he was aware that FTX had misused customer funds and that he had received a $543 million loan from Alameda.
When they spoke to witnesses and lawyers, prosecutors also questioned about Ryan Salamea former FTX executive who has donated tens of millions of dollars to Republican politicians, according to three people with knowledge of the matter.
A conversation between a defense attorney and a prosecutor does not necessarily indicate that a person is under investigation. Often, authorities engage in such conversations to determine if people have information useful to the case as witnesses.
Bankman-Fried, 30, has pleaded not guilty to fraud, money laundering and campaign finance violations. A federal judge granted him bail under strict conditions, requiring him to stay at his parents’ home in Palo Alto, Calif., while he awaits a scheduled criminal trial. takes place in October.
A spokesman for the US attorney’s office in Manhattan declined to comment.
One aspect of the investigation that could soon expand is an investigation into FTX’s campaign funding practices. Prosecutors are particularly interested in whether FTX was involved in an illegal scheme to divert tens of millions of dollars to so-called straw donors who made disguised campaign contributions on behalf of the government. on behalf of the company or not, as they seek political influence in Washington.
Shortly after Mr. Bankman-Fried was arrested in December, federal prosecutors began reach via email to a number of political action campaigns and committees that have received donations from FTX staff to seek information about those donations, The New York Times previously reported.
Authorities are also looking into whether Mr Bankman-Fried’s younger brother, Gabe Bankman-Fried, played any role in the scheme to fund the suspected campaign, four people briefed on the investigation said. investigation said.
In a filing with bankruptcy court on January 25, lawyers for FTX’s new management claimed that the townhouse was “bought with embezzled client money.” FTX’s lawyers also said Mr Bankman-Fried’s brother had largely ignored their requests for information.
Another person being watched by prosecutors is Mr. Bankman-Fried’s father, Joe Bankman, a Stanford Law School professor who was a salaried employee of FTX and a enthusiastic cheers of the public for company.
Federal investigators have questioned Mr. Bankman’s role in his son’s vast business empire, according to four people familiar with the investigation. Mr Bankman and his wife, Barbara Fried, often stay in a $16.4 million home in the Bahamas that Mr Bankman-Fried has said is “considered as corporate property.”
About a year ago, they received a $10 million gift from their son, according to four people familiar with the matter. One of those people said prosecutors were looking into the transaction. A spokesman for the Bankman-Fried family declined to comment.
John P. Fishwick Jr., a former U.S. attorney for the West Virginia District, said prosecutors often put pressure on criminal defendants by hunting down family members who may be responsible. their own legal responsibilities.
Mr Fishwick said: “The ultimate pressure the DOJ exerts on criminal defendants is the threat to prosecute family members. “That doesn’t guarantee the defendant’s family members won’t be prosecuted, but it usually means they could get a more lenient sentence if the defendant pleads early.”
Kenneth P. Vogel contributed reporting from Washington.