Sam Bankman-Fried, the co-founder of the crypto exchange FTX, has dodged another bullet in his legal battle with the U.S. government.
Federal prosecutors have dropped a charge of conspiracy to make unlawful campaign contributions against him, citing a lack of permission from the Bahamas, where he was extradited from last year.
This is the second time that prosecutors have narrowed the indictment against Bankman-Fried, who is accused of orchestrating a massive fraud scheme that led to the collapse of FTX and caused billions of losses for investors and customers. Previously, they had dropped a charge of violating anti-bribery statutes on the same grounds.
Bankman-Fried, who was once a billionaire, now faces less prison time if convicted. However, he still has to contend with several other charges, including wire fraud, securities fraud, and money laundering.
How Bankman-Fried Allegedly Used Campaign Finance to Influence Crypto Regulations
According to the original indictment, Bankman-Fried and two unnamed co-conspirators used hundreds of millions of dollars in bipartisan campaign financing to sway crypto regulations in their favor.
They allegedly funneled the money through various entities and individuals to avoid campaign contribution limits.
The indictment claimed that Bankman-Fried and his co-conspirators sought to influence the policies of both major political parties and several candidates in the 2020 presidential and congressional elections.
They also allegedly tried to bribe officials from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to obtain favorable treatment for FTX and its products.
The charge of conspiracy to make unlawful campaign contributions could have added two to five years to Bankman-Fried’s imprisonment if convicted.
However, prosecutors told Judge Lewis Kaplan on Wednesday that they were dropping the charge because they had failed to obtain permission from the government of the Bahamas for that charge when Bankman-Fried was extradited from the island nation in December.
In their letter to Kaplan in U.S. District Court in Manhattan, prosecutors wrote,
“The Government has been informed that The Bahamas notified the United States earlier today that The Bahamas did not intend to extradite the defendant on the campaign contributions count.”
“Accordingly, in keeping with its treaty obligations to The Bahamas, the Government does not intend to proceed to trial on the campaign contributions count,” prosecutors wrote.
The Fallout of FTX’s Collapse and the Ongoing Crypto Crackdown
Bankman-Fried’s arrest and extradition in December 2022 was a major blow to the crypto industry, which had seen FTX as one of its leading platforms.
FTX was known for offering innovative products such as futures, options, leveraged tokens, and prediction markets.
It also boasted a loyal customer base and a high-profile partnership with the NBA.
However, prosecutors allege that FTX was built on a web of lies and deception.
They claim that Bankman-Fried and his co-conspirators manipulated the prices of crypto assets, misrepresented the financial health and security of FTX, and misappropriated funds from customers and investors.
They also accuse them of operating an unregistered securities exchange and violating various laws and regulations.
The collapse of FTX triggered a wave of civil and criminal actions against other crypto exchanges, advisors, and individuals for similar schemes.
Several former FTX executives, including Caroline Ellison, Gary Wang, and Nishad Singh, have pleaded guilty to federal charges and are cooperating with the government’s case against Bankman-Fried. He is expected to face trial later this year.
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