In a statement that was widely expected, Sam Bankman-Fried, the disgraced co-founder and CEO of the now-bankrupt FTX cryptocurrency exchange, has pleaded not guilty to all criminal charges in federal court. The one-time billionaire entered his plea to eight criminal counts ranging from wire fraud to conspiracy to pursue money laundering before U.S. District Judge Lewis Kaplan in Manhattan. Kaplan was said to have set an Oct. 2 trial date and a federal prosecutor noted that the SBF trial could last about four weeks.
Bigger picture: The news comes shortly after two of Bankman-Fried’s associates, Gary Wang, FTX’s former CTO and co-founder, and Caroline Ellison, the former CEO of Bankman-Fried’s trading firm, pleaded guilty to fraud charges and agreed to cooperate with U.S. prosecutors to build a case against SBF. In her plea hearing on Dec. 19, Ellison admitted that she conspired with others to use billions of dollars of customers’ funds from Bankman-Fried’s failed trading platform. If convicted, SBF, who has been accused of defrauding investors and FTX customers, could face up to 115 years in prison.
Meanwhile, U.S. financial regulators, in their first statement since the FTX meltdown, advised banks exposed to the cryptocurrency sector to ensure that their activities were “legally permissible.” The Federal Reserve, FDIC, and the Office of the Comptroller of the Currency said in a joint announcement they believe that issuing/holding cryptos on an open, public and/or decentralized network is “highly likely to be inconsistent with safe banking practices.” The regulators also raised safety and soundness concerns about the business models of crypto-related firms.
Outlook: While they said banking organizations are “neither prohibited nor discouraged from providing banking services to customers of any specific class or type,” the group is reviewing how banks can engage in crypto activities while ensuring safety, consumer protection, and compliance with laws. “The agencies are supervising banking organizations that may be exposed to risks stemming from the crypto-asset sector and carefully reviewing any proposals from banking organizations to engage in activities that involve crypto-assets.”