A House of Cards: From Co-inhabitants to Cooperators

Posted On Friday, January 13, 2023

The United States continues its investigation into the now bankrupt FTX and its founder, Sam Bankman-Fried. Mr. Bankman-Fried was extradited from his luxurious Bahamas penthouse to the Southern District of New York. Now that he is back state-side, Mr. Bankman-Fried faces an 8-Count Indictment for FTX’s shortcomings, and his alleged mismanagement and overindulgence. Mr. Bankman-Fried, once at the top of the cryptocurrency world, is set to live with his parents on electronic home monitoring while out on bail, also paid for by his parents.

The Judge has set a tentative trial date of October 2, 2023. Mr. Bankman-Fried and his legal team will have to work quickly to defend against the charges, which are now being bolstered by the government’s cooperating witnesses.

Caroline Ellison, the on-again and off-again girlfriend of Mr. Bankman-Fried, and Gary Wang, the co-founder of FTX, will cooperate with the prosecution. Even though both Ms. Ellison and Mr. Wang lawyered up quickly, they both accepted plea deals pleading guilty to fraud last month. This move signals that Ms. Ellison and Mr. Wang provided the government with substantial assistance against Mr. Bankman-Fried.

Ms. Ellison’s cooperation is particularly critical for the government because she was not only Mr. Bankman-Fried’s sporadic love interest, but she was the CEO of the highly controversial Alameda Research, having just assumed the role in August of last year. Ms. Ellison and Mr. Wang have the unique perspective of the inner workings of FTX’s short lived empire. Both Ms. Ellison and Mr. Wang, along with other individuals connected with FTX, lived in the luxurious Bahamas penthouse with Mr. Bankman-Fried.

Nishad Singh, FTX’s chief engineer, is the most recent member of Mr. Bankman-Fried’s inner circle to meet with the government. Mr. Singh, who has not been named by the government in any indictment, met with the prosecution last week for a proffer session. Whether Mr. Singh joins Ms. Ellison and Mr. Wang to provide information against Mr. Bankman-Fried is yet to be seen, however, Mr. Bankman-Fried and his legal team have not seen the last cooperator. On December 21, 2022, shortly after negotiating plea deals with Ms. Ellison and Mr. Wang, US Attorney Damian Williams issued a caution to others connected to FTX, “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it, we are moving quickly, and our patience is not eternal.”

Stay tuned as this matter develops.

Pietragallo Gordon Alfano Bosick & Raspanti, LLP has a robust white-collar practice that includes involvement at all stages of a criminal or civil investigation. Our office and seasoned defense attorneys are well versed in compliance matters at the local, state, and federal level. If your company is under investigation, or you are a person of interest in an investigation, our attorneys can guide you through the process.