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On Friday, July 28, FTX founder Sam Bankman-Fried had his bail revoked in a Manhattan court after he was accused of intimidating a witness. Bankman-Fried was accused of leaking the private diaries of his ex-girlfriend, Caroline Ellison, supposedly in an attempt to dissuade her from testifying.
Bankman-Fried is currently on trial for allegedly using FTX for various schemes which entailed wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. Ellison, who was also formerly affiliated with FTX, has now become a witness in Bankman-Fried's trial, claiming that he conspired to steal billions from customers of FTX.
The details of the allegations against Sam Bankman-Fried
Fox Business reported that on December 12, 2022, Sam Bankman-Fried was arrested for various fraud related charges. Bankman-Fried was accused by a New York court of defrauding customers of FTX, a crypto-currency exchange which allegedly lured investors by misrepresenting the returns that they would receive. Prominent Institutional Investors such as Sequoia Capital reportedly lost over $200 million after investing with the company.
As noted by the US Securities and Exchange commision, FTX was reportedly involved in various fraud schemes. They also claimed that the investments would be risk free, as they claimed they had a system for optimizing the use of funds.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, outlined the accusations levelled against the disgraced entrepeneuer.
Grewal said:
"FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service. But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent."
On December 18, 2022, former FTX affiliate Caroline Ellison pleaded guilty to charges of fraud, money laundering and conspiracy. Ellison was the CEO of Alameda Research, a crypto-currency trading firm that was also founded by Sam Bankman-Fried. Ellison agreed to co-operate with the government against Bankman-Fried, stating that he was guilty of the charges, and that he had also received billions of dollars of illegal loans from Alameda research.
On Wednesday, July 26, prosecutors met Bankman-Fried's team after it was revealed that he supposedly leaked the contents of Ellison's diary to a New York Times reporter. Federal prosecutors said that due to the timing of the leak, they have reason to believe this is a case of witness tampering.
In an official statement, the prosecutors condemned Sam Bankman-Fried's alleged actions.
They said:
"What the defendant may not do, and what he has now done repeatedly, is seek to corruptly influence witnesses and interfere with a fair trial through attempted public harassment and shaming."
CNN reported that there is currently a gag-order issued against Bankman-Fried in the lead up to the trial.
