In December 2022, the Department of Justice announced criminal charges against Samuel Bankman-Fried arising from an “alleged wide-ranging scheme by [him] to misappropriate billions of dollars of customer funds deposited with FTX, the international cryptocurrency exchange [he] founded …, and mislead investors and lenders to FTX and to Alameda Research, the cryptocurrency hedge fund [he] also founded.”
Specifically, Bankman-Friend was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to defraud the Federal Election Commission and commit campaign finance violations.
Yesterday, the DOJ filed a superseding indictment adding a Foreign Corrupt Practices Act conspiracy charge to the criminal charges Bankman-Fried is facing.
As alleged by the DOJ:
“In or about 2021, Bankman-Fried authorized and directed a bribe of at least $40 million to one or more Chinese government officials. The purpose of the bribe was to influence and induce one or more Chinese government officials to unfreeze certain Alameda trading accounts containing over $1 billion in cryptocurrency, which had been frozen by Chinese authorities. Bankman-Fried and others sought to regain access to the assets to fund additional Alameda trading activity, in order to assist Bankman-Fried and Alameda in obtaining and retaining business.”
According to the DOJ:
“After the accounts were frozen, Bankman-Fried and others operating at his direction, considered and tried numerous methods to unfreeze the Accounts or otherwise to regain access to the cryptocurrency in the Accounts including retaining attorneys to lobby or otherwise advocate in China for Alameda’s funds to be unfrozen; communicating with the Chinese Exchanges; and opening new accounts on the Chinese Exchanges using the personal identifying information of several individuals unaffiliated with FTX or Alameda (the “Fraudulent Accounts”) and attempting to transfer the cryptocurrency from the frozen accounts to the Fraudulent Accounts in an effort to circumvent the Chinese authorities’ freeze orders.
After months of failed attempts to unfreeze the Accounts, Bankman-Fried discussed with others and ultimately agreed to and directed a multi-million dollar bribe to seek to unfreeze the accounts. In particular, Bankman-Fried authorized and directed the illicit transfer of cryptocurrency intended to induce and influence one or more Chinese government officials to unfreeze the accounts. Following Bankman-Fried’s authorization and direction, an Alameda employee sent cryptocurrency payment instructions for a least a portion of the bribe payment to other Alameda employees, including at least one employee located in the United States. As a result, in or about November 2021, Bankman-Fried caused a bribe payment of cryptocurrency then worth approximately $40 million to be transferred from Alameda’s main trading account to a private cryptocurrency wallet. At or around the time of the $40 million bribe payment, the Accounts were unfrozen. After confirmation that the Accounts were unfrozen, Bankman-Fried authorized the transfer of additional tens of millions of dollars in cryptocurrency to complete the bribe.
After the accounts were unfrozen, at the direction of Bankman-Fried, Alameda used the unfrozen cryptocurrency to fund additional Alameda trading activity.”
Based on the above allegations, Bankman-Fried is charged with conspiracy to violate the FCPA’s anti-bribery provisions.
See here for a 2018 FCPA Professor post regarding cryptocurrency and the FCPA.