FTX founder's bid to get his fraud charges dropped are 'meritless,' prosecutors say

Prosecutors have claimed that FTX founder Sam Bankman-Fried's bid to have his fraud charges dropped are 'meritless.' 

In papers filed in Manhattan federal court on Monday, prosecutors responded to early May filings in which Bankman-Fried's lawyers insisted that the United States overreached in its case against Bankman-Fried, making federal crimes out of regulatory issues.

'These motions are meritless,' prosecutors wrote in a nearly 100-page filing. 'The charges track the relevant statutes and the defendant's alleged misconduct falls within the heartland of what these statutes prohibit.'

Bankman-Fried, 31, has been living with his parents in Palo Alto, California, after posting a $250million personal recognizance bond after his December extradition from the Bahamas.

Bankman-Fried has pleaded not guilty to charges that he cheated investors and looted 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. 

Sam Bankman-Fried, 31, (pictured in March) bid to have his federal fraud charges dropped earlier this month, insisting that the US overreached in the case However, federal prosecutors called the bid 'meritless' in a 100-page filing on Monday, saying the charges 'track the relevant statues' 

US Attorney Damian Williams has called it one of the biggest frauds in America's history.

In March, new charges added to the indictment alleged that Bankman-Fried violated the anti-bribery provisions of the Foreign Corrupt Practices Act by directing the payment of $40million in bribes to a Chinese official or officials to free up $1billion in cryptocurrency that was frozen in early 2021.

In requesting all charges be dismissed, defense lawyers said eight counts in the original indictment were too vague and non-specific to proceed to trial and that additional charges were barred by an Extradition Treaty between the US and the Bahamas that prohibited charges not approved at the time of extradition.

Prosecutors, though, asked Judge Lewis A. Kaplan to let all charges proceed. They said the claims against the original charges were legally sufficient and that permission is being sought from the Bahamas to permit the newest charges.

Prosecutors wrote that they expect Bankman-Fried's lawyers to argue at trial that their client was not involved in Alameda's day-to-day activities and was unaware that Alameda borrowed large sums from FTX to repay its lenders.

'The defendant's spending of misappropriated funds on political donations is probative of the defendant's motive for defrauding FTX´s customers and investors: the defendant wanted access to capital that he could use, in part, for political donations that would burnish his own image and improve the regulatory prospects of his business in the United States,' prosecutors wrote.

Bankman-Fried (pictured in March) has pleaded not guilty to charges that he cheated investors and looted 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. 

In March, new charges added to the indictment alleged that Bankman-Fried violated the anti-bribery provisions of the Foreign Corrupt Practices Act by directing the payment of $40million in bribes to a Chinese official or officials to free up $1billion in cryptocurrency that was frozen in early 2021

FTX entered bankruptcy in November when the global exchange ran out of money after the equivalent of a bank run. A trial is tentatively set for the fall.

Earlier this month, federal prosecutors have assembled one of the largest troves of evidence ever seen in a white-collar fraud case, according to a new report.

The evidence includes more than six million pages of emails, Slack messages and other digital records, as well as the handwritten diary of Bankman-Fried's lieutenant and sometimes-girlfriend, Caroline Ellison, The New York Times reported on Tuesday.

Ellison also recorded observations about Bankman-Fried in electronic records that have circulated among lawyers in the case, and at times expressed personal and professional resentment toward the FTX founder, people familiar with the matter told the Times.

The sheer volume of the government's evidence, which is not part of the public court record but would have to be shared with the defense team before trial, underlines the complexity of the case against Bankman-Fried.

Earlier this month, federal prosecutors have assembled one of the largest troves of evidence ever seen in a white-collar fraud case. The evidence includes more than six million pages of emails, Slack messages and other digital records, as well as the handwritten diary of Bankman-Fried's lieutenant and sometimes-girlfriend, Caroline Ellison (pictured)

Bankman-Fried has pleaded not guilty to 13 criminal counts stemming from allegations that he misappropriated billions in FTX client funds prior to the crypto exchange's collapse in November.

Other evidence gathered in the case is said to include 2.5million pages from Bankman-Fried's Google accounts, along with devices such as phones and laptops.

One prosecutor on the case, Nicholas Roos, said at a hearing in March that the state had obtained one laptop crammed with so much material that FBI analysts were struggling to sift through it all.

Roos also said the government had given the defense team copies of nearly one million documents obtained from witnesses and other third parties in the case.

However, Bankman-Fried’s lawyers have argued that prosecutors are dragging their feet in handing over evidence, after using the law firm Sullivan & Cromwell to gather most of the corporate records in the case.

Sullivan & Cromwell, which took control of FTX after it entered bankruptcy, has control of most of the company's corporate records, including emails, Slack messages and transaction logs.

Trial in the case is set to begin in October, and Ellison, who lived with Bankman-Fried in his Bahamas penthouse, is expected to be a key witness for the prosecution.