U.S. prosecutors said they agreed to Bankman-Fried’s release only because he agreed to be extradited from the Bahamas. It’s an important step in a landmark case that has unfolded with surprising speed since FTX collapsed last month, sending shock waves through an already-battered crypto industry and raising questions about its future.
The 30-year-old, clad in a charcoal suit and sporting stubble along with his trademark unkempt hair, came into the courtroom in leg shackles, as his parents looked on from the third row. He spoke only a few words during the hearing. When asked by the judge if he understood that if he broke any of the terms of his release, his parents will forfeit $250 million and he would be charged with bail jumping, he said, “Yes, I do.”
Bankman-Fried “perpetrated a fraud of epic proportions,” Assistant U.S. Attorney Nicholas Roos said at his initial court appearance in New York Thursday afternoon, in front of a courtroom packed with around 100 spectators.
Federal prosecutors last week charged him with multiple crimes, including fraud, conspiracy, money laundering and campaign finance violations. They allege he defrauded investors and diverted billions of dollars in FTX customer money to his hedge fund, which he then tapped for huge real estate purchases, risky investments and political donations.
Roos described a “very strong” case with a number of people in Bankman-Fried’s circle. At a trial, there would be testimony from “multiple cooperating witnesses,” he said, and over a dozen employees of FTX and Alameda Research, a crypto hedge fund that Bankman-Fried founded.
The case also involves “tens of thousands of records and documents.”
Roos called the pre-negotiated release deal executed in court a “highly restrictive bail package” and noted that Bankman-Fried’s wealth has tanked, as the crypto industrialist’s reign came to a spectacular end. “His financial assets, which were once in the billions, have diminished significantly,” Roos said.
Bankman-Fried left the courthouse shortly after his afternoon appearance ended, surrounded by a mob of photographers in the rain. He and his parents were ushered into a black SUV after pretrial services staff affixed a GPS monitoring device to his ankle, which will help ensure he is only leaving his parents’ home and for approved exercise.
Under the terms of the bond agreement, Bankman-Fried cannot open any new businesses or new lines of credit and cannot make any financial transactions over $1,000 except to pay his attorneys. If he wants to do any of those things, he’ll need approval from the judge or the U.S. attorney. His release conditions also require him to undergo mental health treatment. His attorneys have asked for him to be allowed to continue sessions with his current private therapist.
U.S. Magistrate Judge Gabriel Gorenstein said he was comfortable that Bankman-Fried would not be able to conduct any new business because he’s such a known figure. It would also be hard for him to flee, Gorenstein said. He can leave his parents’ area only for court appearances in New York.
“It would be very difficult for this defendant to hide without being identified,” Gorenstein said as he approved Bankman-Fried’s bond package.
The Securities Exchange Commission and the Commodity Futures Trading Commission have also brought civil charges against Bankman-Fried, alleging he orchestrated a years-long scheme to siphon off FTX customer funds he pledged to safeguard for personal use instead.
Bankman-Fried was taken into U.S. custody on Wednesday and flown to New York under FBI supervision after waiving his rights to formal extradition from the Bahamas, which had been his home-base. Bahamian authorities arrested the former multibillionaire last Monday at his luxury condo in Nassau, and he spent the next nine nights in the island nation’s only prison.
Bankman-Fried’s appearance comes as two of his closest former colleagues pleaded guilty to criminal fraud charges. The two associates — Caroline Ellison, the former chief executive of Alameda Research, Bankman-Fried’s hedge fund, and Gary Wang, co-founder of FTX and its former chief technology officer — are cooperating with federal prosecutors, a development that spells deepening legal peril for Bankman-Fried.
“We continue to work around-the-clock and we are far from done,” Manhattan U.S. Attorney Damian Williams said in a prerecorded video message announcing the pleas Wednesday evening.
Ellison, who was at times romantically linked to Bankman-Fried, pleaded guilty to seven counts that mirror a significant portion of Bankman-Fried’s indictment. Her charges include conspiracies to commit wire fraud, securities fraud, commodities fraud and money laundering. She faces up to 110 years in prison. Wang pleaded guilty to four conspiracy and fraud-related counts. He faces up to 50 years in prison.
Williams, in his video message, encouraged other FTX insiders to come forward. “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” he said. “We are moving quickly and our patience is not eternal.”
Bankman-Fried’s court appearance offered another compelling scene in a downfall that has unfolded even faster than his meteoric rise. Until months ago, he was one of the youngest self-made billionaires in the world, with an estimated $16 billion personal fortune. In the wake of FTX’s collapse, Bankman-Fried has said he is down to about $100,000 and one working credit card.
The roughly $40 million he spent on political donations helped him forge ties to a key financial regulator and opened doors to committee chairmen and leaders on Capitol Hill. That money has since become an albatross for those who received it and now face questions about how they intend to pay it back.
Bankman-Fried’s effort to pitch cryptocurrency as a mainstream tool for everyday investors to build wealth — a campaign backed by hundreds of millions of dollars in marketing by FTX — has similarly boomeranged. The value of the global crypto market has shed roughly a quarter of its value, or about $250 billion, since the company imploded last month, according to data from CoinMarketCap. And its failure is continuing to reverberate through the crypto economy, with other companies that had exposure to FTX filing for bankruptcy or teetering.
Newmyer reported from Washington.