NEW YORK — FTX founder Sam Bankman-Fried was charged with directing $40 million in bribes to one or more Chinese officials to unfreeze assets relating to his cryptocurrency business in a newly rewritten indictment unsealed Tuesday.
Samuel Bankman-Fried departs Manhattan federal court Feb. 9 in New York.
The charge of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act raises to 13 the number of charges Bankman-Fried faces after he was arrested in the Bahamas in December and brought to the United States soon afterward. The indictment was returned on Monday.
The charge also contains language revealing that a fifth arrest was imminent in what U.S. Attorney Damian Williams has repeatedly described as a continuing investigation. That unidentified individual, according to the indictment, participated in the bribery conspiracy with Bankman-Fried and “will be arrested in the Southern District of New York."
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FTX filed for bankruptcy on Nov. 11, when it ran out of money after the equivalent of a bank run on the global cryptocurrency exchange. He has remained free on a $250 million personal recognizance bond that lets him stay with his parents in Palo Alto, California.
He has pleaded not guilty to charges that he cheated investors out of billions of dollars before his business collapsed.
An arraignment on the rewritten indictment was set for Thursday by U.S. District Judge Lewis A. Kaplan. He also on Tuesday banned Bankman-Fried from communicating with current or former employees of FTX or Alameda Research, its affiliated cryptocurrency hedge fund trading firm. The order also limits Bankman-Fried to one laptop and phone and bans him from encrypted communications or other cellphones, computers or “smart” devices with internet access.
The alleged bribes stemmed from the operation of Alameda Research. The indictment said Chinese law enforcement authorities in early 2021 froze certain Alameda cryptocurrency trading accounts containing about $1 billion in cryptocurrency on two of China's largest cryptocurrency exchanges.
Bankman-Fried, 31, understood that the accounts had been frozen by Chinese authorities as part of an ongoing probe of a particular Alameda trading counterparty, the indictment said.
After Bankman-Fried failed multiple attempts over several months to unfreeze the accounts through methods including using lawyers to lobby, Bankman-Fried ultimately agreed to direct a multimillion dollar bribe to try to unfreeze the accounts, the indictment said.
Among failed attempts, the indictment said Bankman-Fried and others he directed opened new fraudulent accounts on the Chinese exchanges using personal identifying information of several individuals unaffiliated with FTX or Alameda to try to evade freeze orders and move cryptocurrency from frozen accounts to the fraudulent accounts.
A portion of the bribe payment of cryptocurrency, then worth about $40 million, was moved from Alameda's main trading account to a private cryptocurrency wallet in November 2021 and the frozen accounts were unfrozen at about the same time, the indictment said.
After Bankman-Fried received confirmation that the accounts were unfrozen, he authorized the transfer of additional tens of millions of dollars in cryptocurrency to complete the bribe, according to the indictment.
Among those already charged in the case is Carolyn Ellison, Alameda's former chief executive. She has agreed to testify against Bankman-Fried, as have two former FTX executives who have pleaded guilty in cooperation deals with the government.
Bankman-Fried's lawyers did not immediately respond to messages seeking comment. Messages for comment were also sent to the Chinese consulate in New York and the Chinese embassy in Washington D.C.
Bitcoin and the world of cryptocurrencies, explained
Bitcoin and the world of cryptocurrencies, explained
Three hundred thirty-one years ago, the first piece of paper money was printed in the United States. The Massachusetts Bay Colony supposedly issued those first bills to fund military action in King William’s War. Flash forward to today, and those bills are as ubiquitous as the British pound or Chinese renminbi. In recent years, however, there have also been talks that those bills may be replaced with a newer form of money altogether: cryptocurrency.
What is cryptocurrency? Is it really likely to replace our current cash system? Stacker answers all these questions and more in our closer look at Bitcoin and the world of cryptocurrencies. Using news reports, financial websites, and industry resources, we’ve answered the 10 most pressing questions you have about cryptocurrencies. While the topic is a complex one, we’ve done our best to discuss it in layman's terms and have avoided the more highly technical aspects that tend to bog down the discussion rather than carry it forward.
So read on to learn who invented this new form of money, how it’s mined, and what, exactly, Elon Musk has to do with it all. You’re sure to walk away with a better understanding of what Bitcoin is and how it affects your life.
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What is a cryptocurrency?
First things first: What is a cryptocurrency? In short, they are digital currencies that are protected by cryptography (a method of safeguarding information through complex codes). This encryption makes them incredibly secure and almost impossible to counterfeit or double-spend. Most cryptocurrencies work using a new technology called blockchain, a decentralized technology that's spread across many computers.
What is a blockchain?
As stated above, blockchains are a new form of technology that records information. Termed distributed ledger technology, these blockchains keep records across a large number of computers (rather than on a single computer server), grouping the data in sequential blocks. Once locked into place, these blocks cannot be changed or altered, meaning that records of who mined a currency or spent it are never called into question, and cryptocurrencies can never be stolen the way a credit card can.
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Is there a central authority overseeing cryptocurrencies?
No. By their very definition, Bitcoin and other cryptocurrencies are completely democratic and aren’t overseen by a central authority in the way that the U.S. dollar is. A true peer-to-peer payment network, cryptocurrencies can only work if all participants use the same software and abide by the same rules. This provides a strong incentive for a consensus to be maintained, or else Bitcoin will cease to have any value and all users will lose their cryptocurrency wealth.
How are cryptocurrencies mined?
The interesting thing about cryptocurrencies, and bitcoin, in particular, is that they are largely self-perpetuating (with the exception of the genesis block). New bitcoins are mined (or minted) by being the first person to correctly verify one megabyte of existing bitcoin transactions. This is incredibly time-consuming work that involves a lot of computation power, but these days it is not the only way to obtain bitcoin. Bitcoin can also be bought or earned by doing things like publishing an article on a website that pays via cryptocurrency.
Can bitcoin be used in everyday purchases?
Yes, and no. In 2021, much of what cryptocurrencies are is more theoretical than practical, which is further demonstrated by their purchasing power—or lack thereof. While bitcoin can and has been used to buy real things (you can use a third-party app called Purse to use bitcoin to buy items on Amazon, and it has often been used on the Silk Road to buy drugs), you certainly can’t just walk into a grocery store and buy a gallon of milk with a bitcoin or two. In fact, even apps like Purse or PayPal, which allow purchases to be made with bitcoin, convert the cryptocurrency into fiat money before making the transaction, so you aren’t technically spending that bitcoin or Dogecoin, but rather its legal tender value.
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Why were cryptocurrencies invented?
So if you can’t spend a bitcoin or unit of cryptocurrency, why were they invented? The answer may lie in the text of the genesis block of Bitcoin, which reads: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” (Alluding to a headline from The London Times.) This seems to imply that the founder had a lack of faith in the banking system and was looking for an alternative way to store and protect their wealth, as well as wanting to disrupt the control of the money supply and empower the individual when it came to their finances.
Who created cryptocurrencies?
Bitcoin is widely considered to be the world’s first cryptocurrency. Yet, despite having existed for just over a decade, no one actually knows who founded it. The original Bitcoin whitepaper thate outlines how the currency works was published by Satoshi Nakamoto, the same person who mined the first bitcoin block, but the individual’s (or group of individuals’) identity remains a mystery. There are dozens of theories out there about who they are, but none have been definitively proven, making this a Holy Grail-level mystery of our time.
Why are cryptocurrencies important?
Financial pundits aren’t yet convinced that Bitcoin, or similar cryptocurrencies, will replace the dollar, pound, or yen in any real way. However, as a scientific and technological innovation, cryptocurrencies are massively important. In particular, the blockchain system that governs most of these currencies has the power to change the future. Blockchain allows us to move information securely and authentically and can be adapted for things like voting, maintaining inventory records, and identifying exploited labor practices.
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How many kinds of cryptocurrency are there?
The number of cryptocurrencies is always growing, so it can be difficult to pin down an exact count, but as of April 2021, there were over 10,000 different types of cryptocurrency. This includes coins, like bitcoin and Dogecoin, as well as tokens, which represent a tradable asset or utility (like 10 hours of free streaming on a service or a certain number of loyalty points from a company).
How does Elon Musk fit in with all of this?
Almost every discussion of cryptocurrency winds its way to Elon Musk, so how does he fit in with all of this, exactly? Only as an ardent supporter of and believer in cryptocurrencies, really. Many have theorized Musk is actually Nakamoto (he’s not) or the mastermind behind Dogecoin (that would be Jackson Palmer), but really, Musk is simply one of the most outspoken tech leaders on the topic. Both of his companies, Tesla and SpaceX, are heavily invested in cryptocurrency and have engaged with the idea of accepting them as cash-equivalent payments for goods and services, but aside from that, Musk is no more special in the development or growth of these cryptocurrencies than you or me.
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