Former FTX CEO Sam Bankman-Fried has pleaded not guilty to charges of bribery and campaign finance violations, while a U.S. bankruptcy court has ordered Three Arrows Capital founder Kyle Davies to respond to a subpoena in two weeks.
Bankman-Fried’s attorney Mark Cohen entered a not guilty plea to bribery and campaign finance charges on behalf of the former FTX chief during a hearing before Judge Lewis Kaplan. Cohen stated that he would fight the charges as they were filed after Bankman-Fried was deported from the Bahamas.
SBF Blames Others
Prosecutors filed a superseding indictment against Bankman-Fried in February 2023, adding four charges filed in December 2022. Reports emerged yesterday regarding a revised indictment, including a new charge of bribing Chinese officials for access to frozen trading accounts linked to Alameda Research.
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—Accordingly, Sam Bankman-Fried has now pleaded not guilty to thirteen criminal counts, blaming poor risk management for the collapse of the exchange he led.
He is out on a bail of $250 million and awaits his trial on October 2, 2023, at his parents’ home in Palo Alto.
FTX filed for bankruptcy in November 2022 after lacking liquidity for customer withdrawals. At the same time, Sam Bankman-Fried resigned, handing over the reins to bankruptcy trustee John Ray.
Crypto Executives Fail to Fulfill Grand Promises
Due to the crypto collapse in 2022, many executives of failed companies made generous statements about compensating lost customer funds. However, many of those claims have not materialized, leaving creditors wondering when they will receive the funds they held on the crypto platform.
Sam Bankman-Fried stated that the company could have compensated all customer funds within a month instead of filing for bankruptcy. He later claimed that FTX.US had sufficient funds for all users. This claim contradicted findings from FTX’s bankruptcy attorneys Sullivan & Cromwell. Ray later refuted the claims during a Congressional hearing and attempted to recover funds from several sources.
Recent reports revealed that FTX’s attorneys secured approximately $400 million from a little-known Bahamian hedge fund in which Sam Bankman-Fried invested.
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—Co-founder of the defunct Singaporean hedge fund Three Arrows Capital, Su Zhu, recently launched a new exchange for trading bankruptcy claims. Liquidators appointed to oversee the hedge fund’s liquidation complained in February 2023 that Zhu and co-founder Kyle Davies had not cooperated. The lack of cooperation stems from Zhu’s earlier commitment to resolving insolvency issues.
Silence has also delayed the return of funds to creditors, bankruptcy administrators claimed, and represented a neglect of Davies’ fiduciary duties.
Yesterday, a U.S. bankruptcy court gave Davies two weeks to respond to a subpoena served to him in January 2023. The subpoena requires financial data from the hedge fund, among other things.
Kwon Arrested in Montenegro
Following the collapse of the stablecoin terraUSD in May 2022, Do Kwon, co-founder of Terraform Labs, promised the community that he would work together to compensate users for their lost funds.
Similar to Davies and Zhu, who remained active on Twitter after the collapse of 3AC, Kwon primarily used the platform to discuss new developments on Terra instead of providing answers to terraUSD holders regarding many questions.
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—His last tweet on the matter came on November 16, 2022, where he described the audit of Luna Foundation Guard, which attempted to maintain the value of terraUSD at $1.
LFG stated on Twitter on October 7, 2022, that it could not provide a timeline for when investors in terraUSD and its sister token Luna might be ‘compensated.’
Kwon is currently in Montenegro, where he faces passport fraud charges. Both the U.S. and South Korea have requested the founder’s extradition. Kwon must face trial for his crime in Montenegro before prosecutors consider where to extradite him, unlike Sam Bankman-Fried, who voluntarily agreed to deportation from the Bahamas last year.
