Orange May Be the New Black for FTX’s Sam Bankman-Fried

Sam Bankman-Fried’s fraudulent cryptocurrency empire fell apart last November.

So too did the hopes and financial goals of the more than 1 million customers who entrusted his FTX platform with their hard-earned money, only to have Bankman-Fried and his cohort of executives abscond with over $8 billion of misappropriated funds.

Now, the fallen crypto entrepreneur and criminally accused scamster is due in court Friday (Aug. 11) to hash out his gag order — and to defend himself against a new push from the prosecution for his incarceration.

This, as former co-CEO of FTX Digital Markets Ryan Salame, who was the key point man behind FTX’s political donation machine, is reportedly in negotiations with federal prosecutors to plead guilty to criminal charges; and a spat has erupted between the ad hoc committee of FTX’s non-U.S. customers and the U.S. Debtors.

Salame had not previously been charged with any wrongdoing, but a guilty plea from him would certainly ramp up the pressure on Bankman-Fried ahead of his Oct. 2 trial.

Other FTX insiders including Gary Wang, Caroline Ellison and Nishad Singh have already admitted their guilt to federal prosecutors and are cooperating with justice department officials as they seek to uncover just what exactly happened last fall in the lead up to FTX’s disastrous multibillion dollar implosion, one of the largest financial frauds in American history.

The one missing executive in the whole saga is former Alameda Research Co-CEO Sam Trabucco, who stepped down in August 2022 and gave full control to Caroline Ellison.

“I hope [you] have a great time on your boat!” tweeted Ellison in response to Trabucco’s resignation.

Weeks later, Alameda Research would be at the center of the multibillion-dollar hole in FTX’s balance sheet where non-comingled customer funds were supposed to be parked.

Read more: FTX Recovers $7 Billion as Unnamed Lawyer Enters Debtors’ Crosshairs

Prosecutors Want Bankman-Fried Put in Jail

Bankman-Fried has long professed his innocence, but he has also kept a warm relationship with the press, who can’t get enough of his soap opera story.

The latest point of contention between Bankman-Fried and U.S. prosecutors comes on the heels of a New York Times story on the private diary of Caroline Ellison, Bankman-Fried’s key decision maker and former lover.

As the story goes, Bankman-Fried tried to discredit Ellison, who is expected to testify at his trial this fall. His lawyer has told the court that the FTX co-founder was merely exercising his First Amendment right to counteract negative characterizations of him in the media which might themselves color the court’s opinion of him in advance of the October criminal trial.

Prosecutors on July 26 alleged that the one-time paper billionaire “crossed a line” by sharing Ellison’s diary and they want him held in jail until the trial.

In the same July hearing, U.S. District Judge Lewis Kaplan, who is presiding over the case, issued a gag order for Bankman-Fried and asked both sides to address whether jail was necessary.

A bevy of organizations, including The New York Times, the Reporters Committee for Freedom of the Press, and a documentarian making a movie about Bankman-Fried’s tumble from the top have all independently objected to the gag order, citing free speech concerns.

Today’s hearing on both the gag order and the potential jail time is set for 2 p.m. ET.

Read also: Latest FTX Filings Show Bankman-Fried Is Banking on Being Freed

Gambling With Creditor Money

FTX’s bankruptcy case is not without its own fair share of drama, as the names of FTX customers outside the U.S. who are seeking relief in the crypto exchange’s bankruptcy were released Wednesday (Aug. 9), as a spat erupts between them and the FTX Debtors.

The non-U.S. committee members named represent total claims of $856,859,066.76.

The largest claim of $191 million comes from FC Cayman A, L.L.C. and is followed by $160 million from Indian CMS company Lemma Technologies Inc., and $137 million by the Panama-registered Svalbard Holdings Limited, along with several claims in the tens of millions.

Together, the creditors are calling on the FTX Debtors to invest some of the exchange’s cash pile into short-term Treasuries to net greater income for the bankruptcy estate as well as to adopt a “proper staking, hedging and monetization process” for the firm’s remaining digital asset holdings.

The committee alleges this would help offset the more than a quarter-billion in professional fees that the Debtors have so far billed.

The Debtors claim that any such approach would be gambling by any other name. The creditors have “resisted asset sales which would provide liquidity to the estate at a substantial premium to par and have delayed prudent token monetization in favor of going ‘long’ on large crypto holdings,” said the Debtors in a court filing.