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Sam Bankman-Fried may be ‘in a position to name names’ in FTX fraud: Former prosecutor

Former Assistant U.S. Attorney to the Southern District of New York and former Assistant Special Watergate Prosecutor Nick Akerman joins Yahoo Finance Live to weigh in on the criminal case against Sam Bankman-Fried.

Video Transcript

- But first, let's get you up to speed now on the latest with the FTX criminal charges as a New York judge has granted former CEO Sam Bankman-Fried bail to the tune of $250 million. Our Alexis Keenan tracking the latest for us. Alexis, what did we learn today?

ALEXIS KEENAN: Yeah, Dave, this is just a monster bail bond amount that was set. $250 million bond set by a magistrate judge. That came at the suggestion of US attorneys who did not contest bail. But they did ask for this high bond amount. And they said in court, according to reporters who were there, that this they believed was the highest ever pretrial bond. The judge said that Bankman-Fried would then be asked at a later date to actually enter his plea. So we did not hear that in this hearing whether he will plead guilty or not guilty to the charges.

Now, according to the Inner City Press that was in the courtroom, the terms of the bail required this. First, Bankman-Fried will be required to be on home detention at his parents' home in Palo Alto. He'll be required to wear an electric monitor to monitor his location. Also, he must surrender his passport. And he must keep his financial transactions to under $1,000, unless he gets more authority to transact in higher amounts.

The judge also noted Bankman-Fried's strong ties to his communities, that he was a US citizen. And his notoriety, the judge said, would lessen the risk of Bankman-Fried being a flight. Now, in support of his freedom, his own attorneys, they highlighted that Bankman-Fried voluntarily left the Bahamas, waived his right to fight extradition to the United States. They said that should go in his favor. Also, they said interestingly at home that he could get exercise, as well as mental health and substance abuse treatment. So it will be interesting to see if he does enter a not guilty plea if that will come into his defense.

Now, this is all, of course, on the heels of an announcement late last night from the Southern District of New York. Federal prosecutors say that two of Bankman-Fried's former deputies, Caroline Ellison and also Gary Wang, had entered guilty pleas on multiple criminal charges and also flipped as witnesses for the prosecution. Those two executives are charged with similar counts of Bankman-Fried wire fraud conspiracy among other charges. Back to you.

- A major day in that trial. Alexis Keenan, thank you so much. Joining us now with more on the case, Nick Akerman, former assistant US attorney of the Southern District of New York, former Assistant Special Watergate prosecutor. Good to see you, Sir. Want to circle back in a second to Ellison and Wang cooperating. But just your reaction to the $250 million bail set.

NICK AKERMAN: Well, that's pretty substantial. But then again, the amount of money that is the subject of this fraud that has been alleged in the indictment is in the billions of dollars. And clearly this particular defendant had access to lots of money at some point. And the bond is being secured by the home that his parents owned in Palo Alto. So that gives him an extra incentive not to flee for fear of wrath from his parents. So I think that this is probably an appropriate bond under these circumstances and considering the magnitude of the crime that's involved here.

- Thanks for being with us here today. I want to ask you about Ellison and Wang and their potential involvement with the prosecution. Anything you can glean at this very early stage that they may have been able to share with authorities that may have helped the case against SBF here.

NICK AKERMAN: Oh, I think they are the primary witnesses that led to the indictment here of Bankman-Fried. I mean, they are both insiders. Ellison was the person that was handling the customer money at FTX. And Wang was the person who created the program that allowed them to move money around illegally. So you've got people who are actually living with Bankman-Fried in the Bahamas.

They started the company with him basically. And they really know where all the bodies are buried. They know who's involved. They know who did what and really are in a position to name names of others who might be involved. And it wouldn't surprise me-- and we talked, I think, on this show the last time about whether or not Bankman-Fried's parents might be criminally liable. And certainly, they would be in a position to know that as well as other people who were in the company that might be criminally involved.

- Nick, does the speed at which this is all taking place imply that this cooperation deal has been in the works for quite some time? And what's your expectation as far as a plea from Sam Bankman-Fried?

NICK AKERMAN: Well, I think, first of all, yes, I mean, this deal with these two cooperating witnesses didn't happen overnight. But it was pretty quick. I mean, it wasn't as though a lot of time has gone by on this since all of this has hit the papers, and everybody knew about what was going on in the bankruptcy court. So it's apparent that the authorities acted extremely quickly here. They went right to the people that were just below Bankman-Fried, the people that really would be able to basically give him up. And they made deals with him.

They-- each of them essentially admitted to a series of crimes. The same thing that Bankman-Fried has been charged with. And they're hoping that through their cooperation that that will mitigate to a great extent, their sentence, which means it's not only testifying in the grand jury and providing information, but it also means testifying at a possible trial, which brings us to what is Bankman-Fried going to do?

It seems to me knowing that his two cohorts have pleaded guilty, it's going to be very tough if not impossible for him to go to trial on these charges. It seems to me that when you have two insiders that were that close to him basically laying out the scheme, it is almost virtually impossible to ever think that he could be acquitted by a jury and that if I were his lawyer, I would basically advise him to cut his losses, take a plea, and make the best possible deal he could so that at least he goes before the court showing some remorse, showing that he's basically taken responsibility for what he did, all of which are mitigating factors that could be used ultimately in the sentence that he receives.

- Nick, how much of the trial of the facts of everything involved in this case are complicated by the fact that it's involved with crypto-- a relatively untested area when it comes to, I guess, over time just because it's been a rather new area of rather new asset class? Just wondering, can the existing fraud statutes just easily cover this? Or is there something else involved that may slow down the proceedings that may cause hiccups that you could potentially see because this is, in fact, a rather new asset class crypto?

NICK AKERMAN: Well, it is a new asset class. But it's an old traditional fraud. It's really no different than any other fraud. They essentially lied to the customers, didn't tell them about the fact that their monies are in any investors of FTX, that the monies there would be going to Alameda, another company, that was a private company owned by Bankman-Fried. Money was as basically, they took people's money, whether it was the lenders-- of Alameda, whether it was the customers or the investors. And they essentially moved it around like it was one big slush fund. There is nothing unusual about this fraud. I mean, this is a pretty classic fraud that is perpetrated and has been perpetrated for years. And the fact that it's a new asset class really doesn't make a bit of difference.

- All right, we have to leave it there. But thank you again for stopping by here. Nick Akerman, former assistant US attorney, Southern District of New York. Also, former Assistant Special Watergate prosecutor.