What Sam Bankman-Fried’s New Attorney Is Getting Himself Into

Possible crimes including mishandling customer funds and wire fraud mean that Sam Bankman-Fried’s new attorney may have his hands full


FTX’s Sam Bankman-Fried | Blockworks exclusive art by Axel Rangel


Many of Sam Bankman-Fried’s lies have unraveled over the past month. Through recent bankruptcy filings, many observers have noted that it is almost certain that the FTX collapse involved some manner of fraud, which could include blatantly stealing money from customers.

Both the US Securities and Exchange Commission and Department of Justice have been looking into the crimes allegedly committed by Bankman-Fried and his inner circle.

Bankman-Fried has hired former assistant United States attorney for the Eastern District of New York Mark S. Cohen as his new defense attorney after being ditched by Martin Flumenbaum for “incessant and disruptive tweeting.”

Jack Sharman, a white-collar defense lawyer and former special counsel to the US House Financial Services Committee for the Whitewater investigation involving former President Bill Clinton, told Blockworks that “a white-collar target’s desire to explain or blame is powerful, but public and repeated statements about potential criminal conduct never help and usually hurt. Client management, however, can be challenging in such circumstances.”

Cohen, who once defended convicted child sex trafficker Ghislaine Maxwell, may be up for the challenge, but what crimes could the now fallen crypto celebrity be guilty of? 

“The publicly-reported allegations about Mr. Bankman-Fried could be the basis for charges of securities fraud, mail-and-wire fraud, bank fraud, and conspiracy to commit those offenses,” Sharman said. “In addition, regulators such as the SEC and the CFTC could bring parallel civil enforcement actions.”

Mishandling customer funds 

The misappropriation of funds refers to the intentional use of another person’s property or money without receiving authorization.

Although Bankman-Fried has been actively denying his involvement in the mismanagement of customer funds in his recent media tour, telling The New York Times that he, “wasn’t trying to commingle funds,” recent bankruptcy filings alleged the company used “software to conceal the misuse of customer funds.”

If there really was no intent behind using customer funds, it doesn’t quite make sense to have installed software to conceal footprints.

If Bankman-Fried were to be found guilty of this felony offense, he would face a minimum of one year in prison and fines of up to $10,000 for each count. 

Wire fraud

Wire fraud involves deception involving the use of some form of internet or telecommunications. This includes sending false information to obtain money or property and threats. 

This type of fraud is considered a federal crime in the United States, and jurisdiction can be claimed by the federal government, even when illegal activity is committed internationally.

Considering inaccurate financial statements had been given by many of Bankman-Fried’s companies that facilitated the acquisition of competitors, it is entirely possible that these purchases involved deception and were fraudulent. 

Wire fraud is a more serious offense, and as such, it brings with it up to 20 years in prison and a fine up to $250,000 for each count — a pittance, considering the billions of dollars in lost customer savings. 

Criminal securities fraud

Securities fraud or stock and investment fraud is participating in illegal or unethical activities using the securities or asset markets to make a profit at the expense of others. 

This type of fraud includes Ponzi schemes, providing false information, and insider trading — perpetrators can include organizations or individuals. 

As FTX was offering yield-bearing products, it is possible that it was violating laws related to the sale of securities products.

Federal securities fraud conviction could punish perpetrators for up to 25 years in prison.

Updated Dec. 7, 2022 at 9:11 am ET: Comments from defense attorney Jack Sharman have been added.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Cover Vertex.jpg


The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.


Plus, a dive into crypto’s ever-expanding unicorn club


Also, tokenization continues to grab headlines and one bitcoin miner stock soars Tuesday after inking a big deal


Fifteen million daily failed transactions disappeared from Solana


FTX debtors will pay the IRS $200M, with an outstanding lower priority claim of $685M


I’ve come to the realization that more attention is needed to create and sculpt the digital spaces where we live


The NYSE went down yesterday after a glitch caused a string of erroneous trades. Does DeFi fix this?