The Tribune

• US needs nation’s permission on SBF charges

• Or fraud, bribery, corruption counts to be dropped

• Would massively weaken case versus FTX founder

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE FATE of embattled FTX chief, Sam Bankman-Fried, rests in The Bahamas’ hands in determining how many criminal charges he will ultimately face over the crypto exchange’s multi-billion dollar implosion, it was revealed yesterday.

US federal prosecutors, in legal filings with the southern New York district court, disclosed they will not proceed with multiple counts and charges against Mr Bankman-Fried unless they obtain the Bahamian government’s “consent” to move ahead with them.

Should The Bahamas not grant permission, this will result in the US Justice Department abandoning multiple fraud, bribery and corruption-related charges against the FTX founder. Those subject to being discontinued include “conspiracy to commit bank fraud”; “conspiracy to violate the Foreign Corrupt Practices Act’; “conspiracy to operate an unlicensed money transmission business”; commodities fraud; securities fraud; and US campaign finance law violations.

Such an outcome would result in close to half the charges against Mr Bankman-Fried being dropped, and would represent a major weakening of the criminal case against him over the massive losses suffered by FTX clients and creditors. The federal authorities’ legal documents confirm that The Bahamas’ permission has been requested, and a response from the Davis administration is now awaited.

Given the nature of The Bahamas’ relationship and economic dependency on the US, the source market for 90 percent of its tourists and 85 percent of the country’s imports, it would be a stunning development if this nation refused to grant the “waiver” sought by the US Justice Department and its prosecutors.

However, the fact the US has had to revert back to The Bahamas for permission to proceed further highlights the haste with which both the criminal case against Mr Bankman- Fried was put together and his extradition from this nation sought. Many will also interpret it as a tacit admission that the former FTX chief and his attorneys had a case with their arguments that multiple charges should be dropped because the US violated The Bahamas’ Extradition Act and treaty.

The development also places an unwanted spotlight back on The Bahamas, temporarily at least, given that much of Mr Bankman- Fried’s fate once again rests in this nation’s hands. Many had hoped his extradition to New York would have diverted much of the unwelcome publicity surrounding FTX’s collapse away from these shores.

The FTX chief and his legal advisers are arguing that many of the charges brought against him subsequent to his extradition run afoul of The Bahamas- US extradition treaty, and specifically its Article 14. Known as the “rule of specialty”, this stipulates that someone being extradited from The Bahamas “may only be detained, tried or punished” in the US “for the offence for which extradition was granted”, while setting out other criteria.

The alleged breach occurred because of the charges added following Mr Bankman-Fried’s extradition, and the US is now moving to correct this by seeking The Bahamas’ permission to proceed with the new grounds. “There is no basis for dismissal of any counts at this stage of the proceedings because the US treaty with The Bahamas does not place limits on charging a defendant with new offenses post-extradition,” federal prosecutors alleged.

“The treaty expressly reflects only an agreement between the two countries that the extradited person will not be ‘detained, tried, or punished’ without the consent of the executive authority of the extraditing country..... Accordingly, the mere fact that the [latest] indictment contains new charges cannot violate the rule of specialty.”

Confirming that The Bahamas’ permission to move ahead with the additional charges has been sought, and a reply is now awaited, the US prosecutors added: “The Government has notified The Bahamas, which is the only party that would have standing to object on specialty grounds to trying, punishing or detaining the defendant on new charges, of the additional charges in the [latest] indictment and is seeking a specialty waiver from The Bahamas.

“The country’s response will be dispositive: The [US] government will proceed on the new charges in the [latest] indictment if The Bahamas consents to trial on these charges, and will not proceed on those counts if The Bahamas denies the government’s request. Because the decision whether to waive the rule of specialty is for the extraditing country to make, the second circuit has long held that a defendant lacks standing to assert the rule of specialty.”

The new charges not included in original extradition warrant for Mr Bankman-Fried, but which were added subsequently, involve the alleged bank fraud, Foreign Corrupt Practices Act and unlicensed money transmission business violations. However, these are not the only counts in peril if The Bahamas’ “consent waiver” is not obtained.

“The [latest] indictment also adds substantive charges of commodities fraud and securities fraud, in addition to the charges of conspiracy to commit these crimes that were in the original indictment,” US prosecutors add. “In his motion, the defendant does not challenge the inclusion of these counts. However, the US is also seeking a waiver of the rule of specialty from The Bahamas with respect to these counts and will proceed only if The Bahamas consents.”

The same applies to the alleged US campaign finance law violations. “In an abundance of caution, the US has conveyed to The Bahamas its understanding that the omission of the campaign finance charge was inadvertent, and informed The Bahamas that, absent timely information to the contrary from The Bahamas, the US intends to proceed on this charge. If The Bahamas objects, the government will not proceed on this charge,” prosecutors added.

Acknowledging that Mr Bankman-Fried had sought the US campaign finance charge’s dismissal because it was not included in the extradition “surrender warrant”, prosecutors nevertheless asserted it was incorporated into the original indictment that formed the basis for seeking his removal from The Bahamas as well as the “diplomatic note” presented to the Davis administration.

“Taking the extradition record as a whole, including the fact that the defendant specifically consented in Bahamian court to be extradited on this charge, it would not violate the rule of specialty to proceed to trial on this charge and, in any event, the defendant lacks standing to raise this issue,” they argued.

Among the Bahamian government ministers likely playing a key role in the decision on the “consent” will be Fred Mitchell, minister of foreign affairs, and who signed Mr Bankman-Fried’s “warrant of surrender”, and attorney general Ryan Pinder KC.

“The only question is whether the [US] government can now proceed to trial against the defendant, who is present in this country as a result of his extradition from The Bahamas, on the additional charges included in the [latest] indictment,” federal prosecutors added.

“And, on that question, the US is seeking the consent of The Bahamas before proceeding to trial on the additional charges in the [latest] indictment, as contemplated by the Extradition Treaty.... The Government is seeking a waiver from The Bahamas, and while that request is pending, the court should deny the defendant’s motion to dismiss counts nine, ten and 13 on specialty grounds.”

As for Mr Bankman- Fried’s demand that US prosecutors produce all “diplomatic correspondence and notes relating to his extradition”, US prosecutors retorted: “The defendant is not entitled to communications with The Bahamas because those communications are not in the possession of the prosecution team.

“To the extent that the Department of State and the Department of Justice’s Office of International Affairs have engaged in diplomatic communications with The Bahamas, those entities are not part of the prosecution team. Finally, to the extent that the defendant argues that affidavits of law enforcement agents or prosecutors in connection with a request transmitted to The Bahamas are disclosable under Rule 16, he is wrong. Those materials constitute ‘internal government documents’ that are expressly shielded from disclosure.”