What Sam Bankman-Fried’s Swift Indictment Says About DOJ’s Case

The sweeping criminal indictment of former FTX CEO Sam Bankman-Fried, along with civil charges from the Securities and Exchange Commission and the Commodity Futures Trading Commission, came many months—if not years—earlier than anyone could have expected.

Although the filings leave many questions unanswered, the speed and breadth of the federal government’s response to the FTX collapse speaks volumes about its confidence in the evidence it has to secure a conviction.

‘Very, Very Fast’

Shortly after unveiling eight criminal charges against Bankman-Fried, Manhattan US Attorney Damian Williams said the SBF indictment came “very, very fast.” The speed of the government’s response is noteworthy and unprecedented. Typically, a case of this size and scope would take many months to investigate and charge.

Proof of a defendant’s intent to defraud often appears in smoking-gun emails, texts, chats, or recordings. Fraud indictments usually set forth those communications, along with analyses of financial records and other evidence proving guilt beyond a reasonable doubt. The indictment of Bankman-Fried does not do so, which suggests the US Attorney’s office is going through the evidence.

It’s unclear why the DOJ brought criminal charges so early in its investigation, putting itself on a legal clock given speedy trial rights for defendants. Williams dismissed speculation that the indictment timing was related to Bankman-Fried’s impending congressional testimony.

The DOJ moved quickly perhaps due to flight risk, to prevent him from spreading misinformation, or to counter perception he would evade charges because of political donations.

Shows DOJ’s Confidence

Whatever the reason, the DOJ appears confident it will secure a conviction at trial.

The DOJ charged Bankman-Fried with wide-ranging charges. Extradition provides the DOJ with an incentive to bring any charge that potentially could be filed, because new charges cannot be added after extradition.

Bankman-Fried is charged with eight criminal counts, including wire fraud, money laundering, securities fraud, commodities fraud, and conspiracy to violate campaign finance laws. A conviction on any of those counts is enough for a very substantial prison sentence because under US law, federal judges are required to consider all the circumstances surrounding an offense. A judge can consider SBF’s actions even if a jury convicted him of the particular count relating to those actions.

I can’t remember another complex, high-profile white-collar case that was charged before prosecutors went through all the evidence. This suggests the alleged fraud in this case—described by the government as “one of the biggest financial frauds in American history”—is so brazen and fundamental to the FTX business model that prosecutors are comfortable charging now and filling in details later.

The fraud’s sweeping nature, combined with Bankman-Fried’s many public admissions that can be used against him by prosecutors—created a strong case for the DOJ.

Theranos Case

A guilty verdict at trial means a substantial prison sentence for Bankman-Fried, given the fraud’s reach and high number of losses and victims.

In dozens of statements, tweets, and interviews in the weeks following FTX’s collapse, Bankman-Fried apologized for losing $8 billion in customer funds and acknowledged that he commingled funds between FTX customers and Alameda Research, a trading operation he controlled.

Those transactions are central to the wire fraud charges against him. The government will scour all his public statements and choose which to use against him at his criminal trial. The Federal Rules of Evidence allow the government to use defendant statements against them.

On the other hand, Bankman-Fried cannot rely on any of his public statements, including those that make the events leading up to FTX’s collapse sound like business mistakes rather than a calculated fraud. These are hearsay and inadmissible in his defense.

The only way to refute his own prior statements that the prosecution presents to the jury is for him to take the stand. That choice would be unwise because prosecutors would use all his prior statements to impeach him.

Any inconsistency, or a failure to explain his prior statements, would appear deceptive to the jury.

The recent Theranos fraud case suggests the length of prison sentence he might ultimately face. Prosecutors sought 15 years for Theranos CEO Elizabeth Holmes, who was found guilty of four counts of fraud. The judge sentenced her to 11 years and three months in prison.

At the time of sentencing, Holmes was pregnant with her second child. Bankman-Fried is a less sympathetic defendant and caused much higher losses to his alleged victims. He should consider the possibility of decades in prison.

Agency Coordination

Other agency charges will be stayed during the course of the criminal case. If Bankman-Fried is convicted of criminal charges, he will likely capitulate in the civil cases. If he fights the criminal case, he will likely adopt positions that help him in the criminal case but hurt him in the SEC and CFTC cases.

The SEC and CFTC closely coordinated their cases with the DOJ and filed them at the same time. This collaboration shows the depth of the federal government’s investigation.

The DOJ appears to have assembled a massive team to investigate the FTX debacle, and strongly suggests that everyone involved in the alleged fraud should come forward and cooperate.

Given the significant liability he faces, Bankman-Fried may want to assist the government as a route to more lenient sentencing.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Renato Mariotti is a partner at Bryan Cave Leighton Paisner. A former federal prosecutor, he represents individuals and companies who are the subjects of criminal and regulatory investigations.