Bankman-Fried Campaign Contribution Charge Is Dropped by US

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(Bloomberg) -- US prosecutors said they would drop a campaign contribution charge from their fraud case against Sam Bankman-Fried after the FTX founder argued it wasn’t part of his extradition agreement.

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The decision is a relatively small win for Bankman-Fried, who on Wednesday appeared before US District Judge Lewis A. Kaplan in Manhattan for a hearing on whether to revoke his $250 million bail. The judge placed an interim gag order on him after prosecutors alleged he was leaking information to the press.

Read More: Bankman-Fried Gets Interim Gag Order, Home Detention Remains

“In keeping with its treaty obligations to the Bahamas, the government does not intend to proceed to trial on the campaign contributions count,” US Attorney Damian Williams wrote to the court Wednesday.

The alleged illegal campaign finance contribution was one of 13 counts Bankman-Fried faced heading into an October trial at which he will fight US claims that he ran a yearslong fraud at the cryptocurrency exchange, which collapsed last year.

The practical significance of dropping the charge is limited. Bankman-Fried continues to face fraud and conspiracy charges that could land him in prison for as many as 20 years if he is convicted. He has pleaded not guilty.

Gag Order

Kaplan imposed the interim gag order after prosecutors argued Bankman-Fried — who is currently confined to his parents’ house in Palo Alto, California, with restricted communications — can’t be trusted not to taint the coming trial even under house arrest.

He came under scrutiny last week following a New York Times story about diary excerpts written by Caroline Ellison. Ellison is the former CEO of Alameda Research, FTX’s hedge fund affiliate, and Bankman-Fried’s ex-girlfriend. She has pleaded guilty to fraud and is cooperating with prosecutors.

The US has asked Kaplan to revoke Bankman-Fried’s bail deal and send him to jail ahead of the trial.

Bankman-Fried had contested the validity of five of the 13 counts, arguing they weren’t part of the extradition pact that paved the way for his return to the US from the Bahamas in December. The government severed those five charges from the trial, essentially splitting the case in two.

Who Gets the Donations?

The 31-year-old crypto entrepreneur had also challenged prosecutors on the campaign finance charge, which was one of the initial eight, claiming it should be thrown out because the Bahamian government didn’t include it in official documents green-lighting his extradition.

Generally, a person can be indicted only for the offenses on which they are extradited to the US. Prosecutors argued they were permitted to file fresh charges if they secured the consent of the Bahamas. The Bahamas has since told the government it didn’t intend to extradite Bankman-Fried on the campaign contribution charge, according to Williams’s letter.

Though prosecutors have dropped the charge, FTX’s creditors say they are owed the political contributions. In February they contacted recipients of money donated by Bankman-Fried and former FTX executives Ryan Salame and Nishad Singh, including super PACs that received millions of dollars, asking for the funds to be returned.

Several political action committees had yet to do so because of the competing claims between the Justice Department, which also sought the contributions, and the FTX creditors. The status of some of the biggest donations remains uncertain. Super PACs will disclose their first detailed financial reports to the Federal Election Commission on Monday.

In the severed case, Bankman-Fried remains accused of a scheme featuring a pair of co-conspirators the US says helped illegally seek to influence the regulation of cryptocurrency by donating millions of dollars to Democrats and Republicans alike.

Read More: Bankman-Fried Prosecutors Allege Plot to Shape Crypto Policy

The case is US v. Bankman-Fried, 22-cr-673, US District Court, Southern District of New York (Manhattan).

--With assistance from Bill Allison and Bob Van Voris.

(Adds efforts to recover political donations in last three paragraphs.)

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