EXCLUSIVE: Sam Bankman-Fried to reverse extradition challenge decision

DECEMBER 17 (Reuters) – Former FTX chief Sam Bankman-Fried is expected to appear in court in the Bahamas on Monday to reverse his decision to contest extradition to the United States, where he faces fraud charges, one said person familiar with the matter on Saturday.

The 30-year-old cryptocurrency mogul was indicted in federal court in Manhattan on Tuesday, accused of complicity in a scheme to defraud FTX customers by using billions of dollars in stolen deposits to pay for expenses, debt, and investments for his Funds to hedge crypto, Alameda Research LLC.

His decision to agree to extradition would pave the way for him to appear in US court on fraud, money laundering and campaign financing charges.

Upon arrival in the United States, Bankman-Fried would likely be held at the Metropolitan Detention Center in Brooklyn, although some federal defendants are being held in jails outside of New York City for overcrowding at the facility, defense attorney Zachary Margulis-Ohnuma said.

At his first court hearing in Manhattan, Bankman-Fried would be asked to enter a plea and a judge would make a bail decision, Margulis-Ohnuma said. The attorney added that such a hearing must take place within 48 hours of Bankman-Fried’s arrival in the United States, although it likely would be sooner.

Prosecutors are likely to argue that Bankman-Fried poses a risk of absconding and should remain in detention because of the large sums of money involved in the case and the unclear whereabouts of those funds.

“The lack of money provides prosecutors with strong arguments that he is at risk of absconding,” said former federal prosecutor and commercial defense attorney Michael Weinstein. “I would assume that if a judge were to grant a pre-trial release, they would impose very restrictive and onerous conditions.”

Any trial is likely more than a year away, legal experts told Reuters.

Neither a spokesman nor a US-based attorney for Bankman-Fried immediately responded to requests for comment. Bankman-Fried has acknowledged flaws in risk management at FTX but said he doesn’t believe he is criminally responsible.

A spokesman for the US Attorney’s Office in Manhattan declined to comment.

“BIGGEST FINANCIAL FRAUD IN AMERICAN HISTORY”

It wasn’t immediately clear what caused Bankman-Fried to change his mind and decide not to contest the extradition.

He was taken to Fox Hill Jail in the Bahamas on Tuesday after Chief Magistrate JoyAnn Ferguson-Pratt denied his request to stay home while he awaited an extradition hearing.

The US State Department, in a 2021 report, said conditions at Fox Hill were “harsh,” citing overcrowding, rodent infestations and prisoners who rely on buckets for toilets. Authorities there say conditions have since improved.

Bankman-Fried has amassed a fortune worth over $20 billion while enduring a cryptocurrency boom to make FTX one of the largest exchanges in the world. His arrest last Monday in the Bahamas, where he lives and where FTX is based, came just a month after the exchange collapsed amid a spate of customer withdrawals.

Damian Williams, the chief federal prosecutor in Manhattan, called the collapse of FTX one of the “greatest financial scams in American history”. He described the bureau’s investigation as ongoing and called on those with knowledge of wrongdoing at FTX or Alameda to cooperate.

A top FTX executive, Ryan Salame, told securities regulators in the Bahamas on Nov. 9 that assets owned by the exchange’s clients were transferred to Alameda to cover the hedge fund’s losses, according to a document published in the framework of the bankruptcy proceedings of FTX Delaware.

FTX filed for bankruptcy on November 11, the same day Bankman-Fried stepped down as CEO.

A lawyer for Salame did not immediately respond to a request for comment.

Reporting by Jasper Ward; Additional reporting from Luc Cohen and Jack Queen; writing by Luc Cohen; Edited by Chizu Nomiyama, Chris Reese, Amy Stevens and Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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