Former SEC official thinks SBF may lose criminal trial

John Reed Stark, former director of the SEC’s Office of Internet Enforcement, believes that federal courts may ultimately convict the FTX founders on multiple criminal charges, including fraud, due to three factors.

Stark said on Oct. 2 that witness testimony from former executives, corroborating evidence in FTX records and Sam Bankman-Fried's post-bankruptcy media tour could sway the court in ruling in prosecutors' favor.

In fact, figures such as Caroline Ellison, Gary Wang and Nishad Singh have all pleaded guilty in the FTX case. It is also widely expected that the Justice Department will subpoena Ellison and other parties to testify against Bankman-Fried.

Prosecutors also filed court documents to accept witness testimony from offshore and non-U.S. FTX users.

John Ray III, who took over leadership of the FTX estate in November 2022, may also play a key role in the government's prosecution. The former head of the SEC's Office of Internet Enforcement pointed to Ray's $200 million "forensic spree" and his possible cooperation with authorities following his appearance in Congress.

Less than a month after taking the job, Ray said that despite his more than 40 years of experience in the legal and restructuring fields, FTX's operations were new.

Never in my career have I seen such a complete failure of corporate controls and complete lack of credible financial information as here. From compromised system integrity and faulty regulatory oversight to the concentration of control in the hands of a tiny number of inexperienced, immature and potentially compromised individuals, the situation is unprecedented. --John Ray III, bankrupt FTX CEO

Stark further added that Bankman-Fried's media appearances and interviews prior to his arrest in the Bahamas could have compromised his defense. In one of the interviews, SBF admitted that the risk management system was sub-par but denied any criminal negligence.

Over at least six weeks, Bankman-Fried appeared in court and defended herself against seven criminal charges. Prosecutors allege SBF stole hundreds of millions in customer deposits to fund political donations, real estate purchases and lavish lifestyles.

A Voir Dire (preliminary examination of jurors or witnesses) is scheduled for October 3, 2023, marking the start of the United States v. Sam Bankman-Fried case nearly a year after FTX’s $8 billion disaster.