CNN New York –
Sam Bankman-Fried, the founder of bankrupt crypto exchange FTX, has pleaded not guilty to criminal charges, setting up a high-stakes legal battle that pits him against two of his closest former business partners.
The 30-year-old businessman, who is being held on $250 million bail, was arraigned Tuesday in Manhattan federal court, flanked by lawyers and with his mother, Barbara Fried, sitting behind him. Attorney Mark Cohen pleaded not guilty to all charges.
The judge has set the trial date for October 2.
Bankman-Fried, once hailed as the public face of the crypto industry, was indicted on two counts of wire fraud and six counts of conspiracy last month for his role in what a federal prosecutor called “a fraud of epic proportions.”
Authorities have accused Bankman-Fried of stealing FTX customer funds to cover loans taken out by Alameda Research, the crypto hedge fund affiliated with FTX. They also say he used those funds to make investments in other companies and donate to the campaigns of politicians from both parties to influence public policy.
In public statements after FTX filed for bankruptcy in November, Bankman-Fried has insisted it committed no fraud and was unaware that customer funds were being used improperly.
Two top executives in Bankman-Fried’s crypto businesses, Gary Wang, the co-founder of FTX, and Caroline Ellison, who served as Alameda’s CEO, have pleaded guilty to multiple criminal charges and are cooperating with federal prosecutors .
Ellison apologized as he entered his plea last month, telling the court that he “agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of the relationship between Alameda and FTX, including the Alameda Credit Agreement.”
Prosecutor Danielle Sassoon told the court on Tuesday that there could be more than 1 million victims from the FTX collapse. Prosecutors plan to file a motion requesting that the victims be notified through a website, instead of notifying them all individually, Sassoon said.
As part of her release, Bankman-Fried is under house arrest at her parents’ home in Palot Alto, California. He is wearing a monitoring device and has surrendered his passport.
He could face up to 115 years in prison if convicted on all charges.
Last month, a US judge released him on $250 million bail in his first appearance on US soil since his arrest in the Bahamas, where he lived and ran his businesses.
Bankman-Fried’s parents, both Stanford law professors who co-signed their bond, have “become the target of intense media scrutiny, harassment and threats,” wrote lawyers for the defense in a letter to the court, while requesting that the names of the other two co-signatories, known as “sureties,” be redacted.
“There are serious concerns that the two additional endorsers will face similar invasions of their privacy, as well as threats and harassment if their names appear without redaction in their bonds or their identities are publicly revealed by another way,” the letter states.
The judge, Lewis A. Kaplan, ruled that those names and addresses can be redacted for now, but said he may review the ruling if the media or other interested parties file motions to make the information public.
Prosecutors allege that Bankman-Fried orchestrated “one of the largest financial frauds in American history,” stealing billions of dollars from FTX clients to cover the losses of its sister hedge fund, Alameda Research.
FTX and Alameda filed for bankruptcy in December after investors rushed to withdraw their deposits from the exchange, causing a liquidity crisis and causing contagion in the crypto industry.
FTX’s new CEO, John Ray III, who made his name overseeing the winding-up of Enron in the early 2000s, told a congressional hearing that customer funds deposited on the FTX site were combined with the funds in Alameda, which led to a series of risky bets.
Ray described the plight of the two companies as “old fashioned embezzlement” at the hands of a small group of “inexperienced and unsophisticated people”.
Separately on Tuesday, US regulators issued a statement warning market participants about the particular risks posed by the cryptocurrency market due to the prevalence of fraud, volatility, misrepresentation and faulty risk management.
“It is important that risks related to the cryptoasset sector that cannot be mitigated or controlled do not migrate to the banking system,” said the statement, issued jointly by the Federal Reserve, the Federal Deposit Insurance Corporation and the Comptroller’s Office. currency
— CNN’s Allison Morrow, Nicki Brown and Samantha Murphy Kelly contributed to this report.