SBF paid $40 million in bribes to free up crypto trading accounts in China, US charges – Ars Technica

FTX founder Sam Bankman-Fried is facing a new charge, with an updated indictment alleging that he violated the Foreign Corrupt Practices Act when he “authorized and directed a bribe of at least $40 million to one or more Chinese government officials.”

The superseding indictment returned by a federal grand jury in New York yesterday and unsealed today said the purpose of the bribes “was to influence and induce one or more Chinese government officials to release certain Alameda trading accounts containing over $1 billion dollars in cryptocurrency, which had been frozen by Chinese authorities.” Including the new charge, Bankman-Fried now faces 13 criminal counts.

In early 2021, Chinese law enforcement authorities froze certain Alameda accounts on two of China’s largest cryptocurrency exchanges, the indictment said. Bankman-Fried “understood that the accounts had been frozen by Chinese authorities as part of an ongoing investigation into a particular trading counterparty in Alameda.”

The alleged bribe consisted of about $40 million worth of cryptocurrency, which was “transferred from Alameda’s main trading account to a private cryptocurrency wallet” in or around November 2021.

Accounts unfrozen, apparently after bribery

The alleged bribe apparently achieved its purpose. “At or around the time of the $40 million bribe payment, the accounts were unfrozen,” the indictment states. “After confirming that the accounts were unfrozen, Bankman-Fried authorized the transfer of additional tens of millions of dollars in cryptocurrency to complete the bribery.” Money from the unfrozen accounts was then used at Bankman-Fried’s direction “to finance additional Alameda trading activity,” the indictment says.

Before allegedly resorting to bribery, Bankman-Fried and others who worked for him “considered and tried numerous methods to unfreeze the accounts or otherwise regain access to the cryptocurrency in the accounts,” the indictment said. These attempts included “retaining attorneys to lobby or otherwise advocate for Alameda’s funds to be frozen; communicating with the Chinese exchanges; and opening new accounts on the Chinese exchanges using personally identifiable information of multiple individuals who did not is affiliated with FTX or Alameda (the ”Fraudulent Accounts”) and attempts to transfer the cryptocurrency from the frozen accounts to the Fraudulent Accounts in an attempt to circumvent the Chinese authorities’ freezing orders.”

But after months of unsuccessful attempts, the indictment says, Bankman-Fried and others “eventually agreed to and directed a multimillion-dollar bribe to attempt to lift the freeze on the accounts.” Several employees of Alameda are said to have been involved.

“Following Bankman-Fried’s authorization and direction, an Alameda employee sent cryptocurrency payment instructions for at least a portion of the bribe payment to other Alameda employees, including at least one employee located in the United States,” the indictment states. The alleged conspirators include individuals “known and unknown, at least one of whom was initially brought to and will be arrested in the Southern District of New York,” the indictment said.

Bankman-Fried was arrested in December. The prior criminal charges include allegations of defrauding FTX customers, investors and lenders, as well as conspiracy to commit those frauds. They also include conspiracy to commit bank fraud, conspiracy to operate an unlicensed money transmission business, conspiracy to commit money laundering, and conspiracy to make illegal political contributions and defraud the Federal Election Commission.

Use of parents’ devices limited in surety agreement

Bankman-Fried pleaded not guilty and is out on bail, but was at risk of losing his bail package due to the use of technology such as a VPN service. U.S. prosecutors and Bankman-Fried reached a new agreement on bail terms, and U.S. District Judge Lewis Kaplan approved the new conditions today.

Bankman-Fried was previously ordered to live with her parents, who have two laptops, a desktop computer and two cellphones in the house. His “parents have agreed not to allow the defendant to use the parents’ devices, to password protect the parents’ devices, to protect the passwords from the defendant, not to allow the defendant to have the passwords to the parents’ devices in any form, and to install monitoring software on the parents’ devices. .. who will photograph the device’s user every five minutes,” the new bail agreement states.

Bankman-Fried’s parents also agreed to sign sworn statements that they will not bring “prohibited electronic devices” into their home. His parents further agreed to provide the government with the serial numbers, MAC addresses, and any other identifying information the government requests for the parents’ devices, and to provide pretrial services access to the photographs taken by the surveillance software when requested by pretrial. Services.”

After a dispute over Bankman-Fried’s use of a VPN (virtual private network), he is given limited access to a laptop that will be configured to allow him to use an FTX transaction database over a VPN connection “to prepare his defense.” He is otherwise prohibited from using VPNs.