SBF Off the Hook for Campaign Contributions, But Not Much Else

Troubled FTX founder Sam Bankman-Fried got a modest bit of relief Thursday afternoon. The news broke that federal prosecutors have dropped one of the lesser counts against the crypto entrepreneur. He will no longer faces charges of violating campaign finance laws when his case goes to trial in the fall.

The campaign finance charge was the eighth count in the original indictment of Bankman-Fried. It is null and void thanks to a letter that US Attorney Damian Williams sent to Judge Lewis Kaplan of the Southern District of New York on Wednesday.

Prosecutors Drop Campaign Finance Allegation

In the letter, Williams explained that his office had received notification from the government of the Bahamas, where police arrested Bankman-Fried in December, that campaign contributions were not among the grounds for his extradition to the United States.

“Accordingly, in keeping with its treaty obligations to The Bahamas, the Government does not intend to proceed to trial on the campaign contributions count,” Williams continued.

It was a rare bit of grace from a prosecutor who, in a press conference earlier this month, boasted about how tough his office is on crypto-related fraud. Williams stated:

“The Southern District of New York has always been on the cutting edge of catching and prosecuting criminals . . . who use new technologies to commit old-fashioned fraud. . . . SDNY is watching, and we’re determined to follow the digital fingerprints to bring fraudsters to justice.”

While clearly a victory for Bankman-Fried, the significance of this latest twist in his legal saga may be modest.

SBF’s Legal Woes Persist

Government lawyers have called for Bankman-Fried’s pre-trial detention, applying a standard to which other former CEOs facing prosecution have been curiously exempt.

Whatever the outcome of that request, the defendant is subject to a far-reaching gag order. It blocks him from communicating with the media about his case.

In the court of public opinion, Bankman-Fried continues to be highly controversial. Some may have thought that here was a garden-variety case of fraud. However, the legal saga took a turn for the bizarre last week. Reports emerged that the defendant’s brother, Gabe Bankman-Fried, wanted to buy a Pacific island with funds from FTX.

The idea was reportedly to have a refuge in the event of a global cataclysm. Namely, a pandemic or a conflict with Russia and/or China.

This would have been a questionable proposal on several grounds. The island of Nauru has more than its share of economic and social problems. It is broke and bereft of exportable resources since its reserves of lime phosphate ran out. Although the island is exploring new revenue streams.

Given Nauru’s circumstances, it is unclear how long one could hold out in a bunker there in the midst of some kind of global meltdown. Nauruans rely largely on canned goods from Australia and other exporting nations. So, how would fresh supplies ever get to a bunker on a remote island cut off from the world?

Moreover, a Nauru spokesperson confirmed to CNBC that the island is not on the market.