Former FTX chief and trading affiliate hire lawyers to probe collapse

NEW YORK: FTX founder and former chief executive Sam Bankman-Fried and Caroline Ellison, head of its now-defunct trading affiliate, have tapped defense attorneys as US authorities investigate the collapse of the exchange's digital currency, according to a spokesman for Bankman-Fried and a source familiar with Ellison's selection.

Bankman- Fried retained Mark S Cohen, a Cohen Gresser spokesman, Mark Botnick, Bankman- Fried said in an emailed statement. Cohen could not be reached for comment.

A source familiar with the matter told Reuters that Ellison, who ran trading firm Alameda Research, has hired Washington-based law firm Wilmer Cutler Pickering Hale and Dorr to represent her. Neither Ellison nor spokespeople for the firm responded to requests for comment.

Regulators around the world, including in the Bahamas where FTX is based and in the United States, are investigating the role of FTX's top executives, including Bankman-Fried, in the firm's stunning collapse, according to a report by Reuters. The exchange filed for bankruptcy last month after seeing at least US $1 billion of customer funds vanish.

Bankman- Fried or Ellison has not been charged with a crime, according to Prosecutors and regulators. FTX customers have been involved in civil lawsuits.

David Mills, a professor at Stanford Law School, is consulting on the matter for Bankman-Fried, Botnick said. Mills did not respond to requests for comment. Mills' advisory work for Bankman- Fried was previously reported by Semafor.

Cohen, a former assistant to the United States attorney for the Eastern District of New York, recently defended Ghislaine Maxwell in her sex trafficking trial.

Bankman-Fried had previously hired Martin Flumenbaum of the law firm Paul, Weiss, Rifkind, and Wharton Garrison, but the law firm said last month it was no longer representing him due to conflicts.

The US authorities sought information from investors and potential investors in FTX in recent weeks, according to two sources with knowledge of the requests. Federal prosecutors in New York are asking for details on any communications that firms have had with the firm's executives, including Bankman-Fried, according to the sources. The information requests were previously reported by Bloomberg.

One of the sources said that the Securities and Exchange Commission is asking for similar information from investors.

The US authorities are likely to look for any evidence of misrepresentations of information to investors, according to sources and attorneys who spoke on condition of anonymity.

Spokespeople for the Manhattan U.S. attorney's office and the SEC wouldn't say anything about the information request.

FTX secretly transferred customer funds to its affiliate Alameda Research to fill a shortfall at the trading firm, according to a report by Reuters. The Wall Street Journal reported that Ellison and senior FTX officials were aware that the exchange had dipped into its customer funds to help Alameda meet its liabilities.

According to a video link at the New York Times' Dealbook Summit with Andrew Ross Sorkin on Wednesday, Bankman-Fried said he did not knowingly commingle customer funds on FTX with funds from his proprietary trading firm, Alameda Research.

Bankman- Fried said he didn't think he has any criminal liability because he didn't try to commit fraud.