By Lauren del Valle and Kara Scannell, CNN
(CNN) — Federal prosecutors in Manhattan filed another indictment against FTX co-founder Sam Bankman-Fried Monday, dropping another count against him.
Prosecutors had previously indicated their plans to drop the one count of conspiracy to make unlawful campaign contributions against Bankman-Fried last month in a letter to the court.
“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 in the July letter.
This is the second time prosecutors are culling charges that Bankman-Fried will face at his trial -— set for October — due to diplomacy issues with the Bahamas, where he was arrested last year.
Prosecutors opted in June to sever five other charges against Bankman-Fried that were not included in his extradition from the Bahamas.
Bankman-Fried still faces seven counts, including fraud charges and money laundering, connected to the alleged yearslong scheme to defraud FTX and Alameda Research lenders and investors.
Prosecutors maintain that Bankman-Fried conducted an illegal campaign finance scheme in connection to the charges that are moving forward to trial.
“The defendant’s use of customer deposits to conduct a political influence campaign was part of the wire fraud scheme charged in the original indictment. And as part of the originally charged money laundering scheme, the defendant also concealed the source of his fraudulent proceeds through political straw donations,” the filing, docketed last week, said.
“Things Sam is Freaking Out About”
Prosecutors asked the judge to set a date to arraign Bankman-Fried on the latest indictment — which would be his first court appearance since the judge revoked his bail and remanded him to a New York federal jail on Friday.
In a new filing, prosecutors shed light on how they are building their case against Bankman-Fried, noting that they will rely on eyewitness testimony from co-conspirators, ledgers tracking money flows, a recording and personal notes and text messages from top company executives.
In addition to the three former top executives of FTX and sister hedge fund Alameda Research, who have pleaded guilty to their role in the alleged fraud, prosecutors wrote that “the Government expects to call, among other witnesses, multiple former employees of Alameda and FTX, several of the defendant’s customer, lender, and investor victims, and an expert witness whose financial analysis will show the nature and extent of the fraud. The Government also intends to introduce documentary evidence of the defendant’s crimes, including, among other things, financial records, Google documents and excel spreadsheets, and private communications.”
Specifically, prosecutors cited ledgers that Bankman-Fried and others used allegedly to keep track of illicit money transfers between the two entities.
In addition, they said they had a recording and notes from Caroline Ellison, the former top executive at Alameda who has pleaded guilty and agreed to testify at trial.
“Ellison’s personal notes and to-do lists include entries such as a list titled ‘Things Sam is Freaking Out About,’ which delineates Ellison’s understanding, from conversations with the defendant, of what remained the defendant’s top business concerns, such as Alameda’s trading hedges, bad press about the relationship between Alameda and FTX, and fundraising,” prosecutors wrote.
In the recording to staff at an all-hands meeting two days before FTX filed for bankruptcy, Ellison said, “Then with crypto being down, the crash, the – like, credit crunch this year, most of Alameda’s loans got called. And in order to, like, meet those loan recalls, we ended up borrowing a bunch of funds on FTX which led to FTX having a shortfall in user funds,” according to prosecutors.
Prosecutors also said they want to show the jury a private message another top FTX executive, Ryan Salame, sent to a family member in November 2021, explaining that he was a straw donor that Bankman-Fried used to make political donations.
“Salame is unavailable as a witness,” prosecutors told the judge, informing him that Salame’s attorney “has represented that if subpoenaed, Salame would invoke his Fifth Amendment right against self-incrimination.”
Prosecutors also don’t want Bankman-Fried’s lawyers to question any of the witnesses about their recreational drug use. Bankman-Fried’s attorneys said they reserve the right to challenge evidence prosecutors may seek to use. Specifically, they asked the judge to block the government from using any evidence it turned over after July 1. In addition, they said they would oppose prosecutors using evidence about FTX’s bankruptcy, its ability to make customers whole, and evidence of Mr. Bankman-Fried’s resignation from FTX.
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