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.
As highlighted in this prior post, in March 2023 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.”
As highlighted in this prior post, in May 2023 Bankman-Fried filed numerous pre-trial motions including a motion to dismiss the FCPA conspiracy charge.
In pertinent part, the motion stated:
“Count 13 charges Mr. Bankman-Fried with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (“FCPA”) by alleging his participation in a scheme to pay officials in the Chinese government to “regain access to Alameda trading accounts that had been frozen” by Chinese law enforcement. This count must be dismissed because the Government has failed to properly allege that payments were made “in order to assist [a] domestic concern in obtaining or retaining business,” which is an essential element of an anti-bribery violation.
[…]
Count 13 Should Be Dismissed for Failure to Allege a Conspiracy to Violate the FCPA’s Anti-Bribery Provision and Improper Venue
Count 13 … attempts to allege that Mr. Bankman-Fried conspired with others to violate the anti-bribery provisions of the FCPA. Mr. Bankman Fried is alleged to have participated in an effort to make payments to “Chinese government officials” to “regain access to Alameda trading accounts that had been frozen by Chinese law enforcement authorities.” The … Indictment is silent as to the identities, positions, agencies, and official duties of the alleged recipients of the payments or how they were able to unfreeze Alameda’s assets. The … Indictment is also vague at best as to which Chinese authorities issued the “freeze orders,” and on what basis, or the purported grounds on which they were issued. (alleging only that the assets were frozen “as part of an ongoing investigation of a particular Alameda trading counterparty.”)
[T]he Government has failed to properly allege an essential element of an anti-bribery violation, namely, that any alleged payments were made “in order to assist [a] domestic concern in obtaining or retaining business.” Instead, the … Indictment alleges that payments were made to unfreeze assets that belonged to Alameda—not to secure or retain a contract with a foreign government agency, gain an unfair advantage, or achieve an objective of the sort addressed in the FCPA’s text or legislative history or in relevant caselaw. As such, the alleged payment did not violate the FCPA, and Mr. Bankman-Fried’s alleged agreement with others to effect the payment could not have been a conspiracy to violate the FCPA. Accordingly, Count 13 should be dismissed for failure to state an offense pursuant to Fed. R. Crim. P. 12(b)(3)(B)(v).
In a separate motion, Bankman-Fried argued that the FCPA conspiracy charge (as well as the Bank Fraud and Unlicensed Money Transmitting charges) “are offenses separate from the offenses specified in the Warrant of Surrender and thus violate the rule of specialty, unless the Bahamas affirmatively consents to the addition of those charges under Article 14 of the Extradition Treaty.”
In pertinent part, the motion stated:
“In the defense’s understanding, the Bahamas has not provided such consent. Moreover, the Bahamas is likely unable to provide its consent because the Government has failed to provide it with sufficient information for it to determine that Counts 9, 10 and 13 satisfy the dual criminality requirement. Indeed, there is clear authority that the conduct underlying the FCPA conspiracy charge is not considered criminal in the Bahamas and thus cannot satisfy the dual criminality requirement.”
In response to the motion to dismiss the FCPA conspiracy charge, the DOJ essentially argued that the charge was good enough for now given the stage of the proceedings. (See here for the prior post).
In June 2023, the DOJ asked that the court sever the FCPA (and other counts) in the superseding indictment.
The DOJ stated:
“As the Court is aware, when the Government obtained the superseding indictment, it promptly notified The Bahamas of its intention to seek a specialty waiver so that the “executive authority” of The Bahamas would be able to respond to that request well in advance of the trial date. See Extradition Treaty, Article 14(1)(b) (the “executive authority” of the extraditing country may consent to trial on new charges post-extradition). However, the defendant has since filed a motion in Bahamian court, apparently seeking the right to “make representations” to the Bahamian executive authorities on whether they should consent to the Government’s specialty request. On Tuesday of this week, a court in The Bahamas granted the defendant leave to file an “application for judicial review” of his motion, and enjoined the Bahamian executive authorities from responding to the Government’s request for a specialty waiver while that motion is pending. Regardless of the merits of the defendant’s motion in The Bahamas, then, it now appears that litigation of that motion will take some time and may not be resolved until near or even after the trial date.
In light of the uncertainty concerning when The Bahamas will render a decision with respect to specialty, and to simplify the proof at trial and decrease the burden of trial preparation on the defendant, the Government is prepared to proceed to trial as scheduled on the counts contained in the original Indictment, and to consent to discretionary severance under Federal Rule of Criminal Procedure 14 of the additional counts contained in the S5 Indictment. The Government respectfully requests that the Court schedule trial on these counts for the first quarter of 2024, or the nearest time thereafter convenient to the Court, pending resolution of the Government’s request for a specialty waiver.
Accordingly, the Government requests that the Court deny the defendant’s motion to dismiss on specialty grounds, and order Counts Four, Six, Nine, Ten, and Thirteen severed from the remaining counts in the Indictment. In light of the Government’s agreement to sever these counts, the defendant’s motions to dismiss these counts are not ripe and should be denied without prejudice until The Bahamas responds to the Government’s waiver request. The Government also submits that the defendant’s motion for severance of Count Thirteen is moot.”
The court’s order granting the request stated:
“The government has requested a specialty waiver from The Bahamas with respect to the prosecution of the defendant on charges first interposed after the date of defendant’s extradition, specifically Counts Four, Six, Nine, Ten and Thirteen of the Fifth Superseding Indictment. In view of the uncertainty of when The Bahamas will render a decision on that request, the government has requested that those counts be severed and scheduled for separate trial from the trial of the pre-extradition charges.
Accordingly, Counts Four, Six, Nine, Ten and Thirteen of the Fifth Superseding Indictment are severed and scheduled for trial, unless otherwise ordered, commencing on March 11, 2024.”
Recently, Judge Lewis Kaplan (S.D.N.Y.) ruled on the motion to dismiss the FCPA charge and his decision (2023 WL 4194773) states in pertinent part:
“Count Thirteen charges the defendant with conspiring to violate the FCPA by bribing one or more Chinese government officials in order to regain access to Alameda trading accounts that had been frozen by Chinese law enforcement authorities. The defendant moves to dismiss this count on two independent bases: (i) the government, he argues, has failed to allege properly that any alleged bribes were paid “in order to assist [a] domestic concern in obtaining or retaining business” and (ii) venue is improper in this district.
- The Business Nexus Element
First, the anti-bribery provision that the defendant allegedly conspired to violate applies where, inter alia, a “domestic concern,” such as a U.S. resident or a resident’s agent, engages in certain conduct “in furtherance of” a payment to a foreign official “to assist … in obtaining or retaining business for or with, or directing business to, any person.” This requirement commonly is referred to as the “business nexus element.”
Count Thirteen tracks the statutory language of Section 78dd-2(a) and alleges that the defendant conspired to bribe one or more Chinese officials “in order to assist [the defendant], Alameda, and others in obtaining and retaining business for, and directing business to, [the defendant], Alameda, and others.” Moreover, the indictment provides sufficient detail about the time, place, and nature of the alleged bribe “to inform the defendant of the charges he must meet” and to enable him to “plead double jeopardy in a future prosecution based on the same set of events.” Accordingly, the indictment sufficiently pleads the business nexus element and no further inquiry into the factual allegations is required at this stage.”
