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US prosecutors, laying the groundwork for a potential fraud case against Sam Bankman-Fried and others involved in the collapse of cryptocurrency giant FTX, are scrutinizing how funds held by the exchange operator moved outside the US as it was hurtling toward bankruptcy, Bloomberg is reporting.
Prosecutors are closely examining whether hundreds of millions of dollars were improperly transferred to the Bahamas around the time of FTX’s Nov. 11 bankruptcy filing in Delaware.
As Justice Department officials embark on a sweeping investigation into how FTX handled customers’ cash and assets, they met with FTX’s court-appointed overseers to discuss materials they aim to gather, the person said.
They’re also digging into whether FTX broke the law by transferring funds to Alameda Research, the bankrupt investment firm also founded by Bankman-Fried, an area of inquiry that has been reported previously.
Bankman-Fried, who’s in the Bahamas and hasn’t been charged with any crimes, has admitted to grievous managerial errors at FTX but steadfastly denied that he ever knowingly misused customers’ funds.
The New York Times reported this week that federal prosecutors are also examining whether Bankman-Fried engaged in market manipulation by orchestrating trades that led to the collapse of the TerraUSD ecosystem earlier this year.
Prosecutors in the Southern District of New York, including Assistant US Attorney Nicolas Roos, met for about two hours this week in a conference room in lower Manhattan with dozens of people investigating FTX’s collapse.
Potential charges were not discussed at the organizational meeting.
The meeting included officials from that office and the Justice Department in Washington, agents from the Federal Bureau of Investigation, and the bankruptcy team led by John J. Ray III, who was appointed FTX’s chief executive officer last month.
Lawyers for FTX from Sullivan & Cromwell, including former Securities and Exchange Commission enforcement director Steve Peikin and former Manhattan federal prosecutor Nicole Friedlander, were also present, the people said.