FTX founder Bankman-Fried charged with paying $40 million bribe

FTX founder Sam Bankman-Fried was charged with directing $40 million in bribes to one or more Chinese officials to unfreeze assets relating to his cryptocurrency business in a rewritten indictment unsealed Tuesday.

The charge of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act means Bankman-Fried faces now faces a total of 13 charges after being arrested in the Bahamas last December and brought to the United States soon thereafter.

FTX filed for bankruptcy on November 11, when it ran out of money after experiencing the cryptocurrency equivalent of a bank run. Bankman-Fried has remained free on a $250 million personal recognizance bond that lets him stay with his parents in California. He has pleaded not guilty to charges that he cheated investors out of billions of dollars before his business collapsed.

Since Bankman-Fried's arrest, FTX's new CEO John J. Ray III has told federal lawmakers that the crypto exchange's collapse was due to a "very small group of grossly inexperienced and unsophisticated individuals" who were running the company and "failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people's money or assets." 

Carolyn Ellison, who led FTX's hedge fund Alameda Research; and Gary Wang, who co-founded FTX, have already pleaded guilty to charges including wire fraud, securities fraud and commodities fraud.

According to court documents, the alleged bribes stemmed from the operation of Alameda Research, which is affiliated with FTX, Bankman-Fried's global cryptocurrency exchange.

Bribe made in cryptocurrency

The indictment said Chinese law enforcement authorities in early 2021 froze certain Alameda crypto-trading accounts on two of China's largest cryptocurrency exchanges. The accounts, it said, contained about $1 billion worth of crypto.

Bankman-Fried understood that the accounts had been frozen by Chinese authoritIes as part of an ongoing probe of a particular Alameda trading counterparty, the indictment said.

After Bankman-Fried failed several attempts to unfreeze the accounts through the use of lawyers and lobbying, the 31-year-old ultimately agreed to direct a multimillion dollar bribe to try to unfreeze the accounts, the indictment said.

"Bankman-Fried and others sought to regain access to the assets to fund additional Alameda trading activity, in order to assist Bankman-Fried and Alameda in obtaining and retaining business," court documents state. 

The bribe payment of cryptocurrency — then worth about $40 million — was moved from Alameda's main trading account to a private cryptocurrency wallet in November 2021 and the frozen accounts were unfrozen at about the same time, the indictment said.

Meanwhile Tuesday, Bankman-Fried's lawyers also sent Judge Lewis A. Kaplan a new bail package to limit him to a laptop and a phone and block him from using any other cellphones, tablets, computers, video games or "smart" devices with internet access other than electronic devices owned by his lawyers that he might need to prepare for trial.

Kaplan set a Thursday hearing in the case.