Bankman-Fried charges should not be tossed, prosecutors say

© Reuters. FILE PHOTO: Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, arrives at the Manhattan federal court in New York City, U.S. March 30, 2023. REUTERS/Amanda Perobelli

By Luc Cohen

NEW YORK (Reuters) - U.S. prosecutors on Monday said they opposed a motion by former cryptocurrency billionaire Sam Bankman-Fried to dismiss criminal charges accusing him of stealing billions of dollars from customers to plug losses at his hedge fund.

Bankman-Fried, the 31-year-old founder of FTX Trading, has pleaded not guilty in Manhattan federal court to 13 counts of fraud, conspiracy, making illegal campaign contributions and foreign bribery.

On May 8, Bankman-Fried urged U.S. District Judge Lewis Kaplan to dismiss most of the counts, saying prosecutors charged him in a "rush to judgment" after several prominent crypto companies went bankrupt in 2022, including his own Alameda Research.

In a filing late Monday, prosecutors with the U.S. Attorney's office in Manhattan described Bankman-Fried's motions as "meritless."

"The defendant's alleged misconduct falls within the heartland of what these statutes prohibit," prosecutors wrote

Kaplan will hear oral arguments on June 15.

Bankman-Fried has said FTX's risk management was subpar, but has denied stealing funds. He has sought to distance himself from the collapse of Alameda, the crypto-focused hedge fund he owned. Its former chief executive, Caroline Ellison, has pleaded guilty and agreed to cooperate with prosecutors.

He has also argued that some of the fraud charges he faces were based on a theory that the U.S. Supreme Court invalidated on May 11.

The theory, known as "right to control," centers around depriving a victim of economically valuable information rather than tangible property.

On Monday, prosecutors said their charges were not based on the "right to control" theory because Bankman-Fried was seeking to defraud his victims of tangible property.

"The ultimate object of the scheme was money," prosecutors wrote.

Bankman-Fried rode a boom in digital currency to a $26 billion net worth and became an influential political and philanthropic donor before FTX sought Chapter 11 protection in November.

Since his December extradition from the Bahamas, Bankman-Fried has largely been under house arrest at his parents' Palo Alto, California, home on $250 million bond. His trial is scheduled for Oct. 2.

PROSECUTORS REQUEST WAIVER FROM BAHAMAS

Bankman-Fried had requested Kaplan throw out several charges that prosecutors brought after he was extradited including allegations he bribed officials in China to unfreeze Alameda assets there. He said the new charges should be dismissed because the Bahamas did not approve them.

Prosecutors said on Monday that they requested approval from the Bahamas for the later charges and would drop those charges if the Bahamas did not agree.

Prosecutors also pushed back on Bankman-Fried's request that Kaplan order them to turn over any documents in FTX's possession that could help the defense. Bankman-Fried said the company he once ran was part of the "prosecution team" because it was only handing over materials that helped the government.