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As Prosecutors Reach Out to Former Executives FTX Inquiry Expands

Federal prosecutors in Manhattan are speaking with lawyers for former officials at the collapsed crypto exchange FTX and scrutinizing the immediate family of its founder, Sam Bankman-Fried.

Federal prosecutors are scrutinizing a growing array of people tied to Sam Bankman-Fried’s collapsed cryptocurrency empire, including his father, his brother and former colleagues, as part of a rapidly expanding investigation into one of the biggest American financial crime cases in more than a decade, according to 13 people with knowledge of the inquiry.

The U.S. attorney’s office in Manhattan has created a special task force to pursue its investigation into the collapse of FTX, the crypto exchange founded by Mr. Bankman-Fried.

More than half a dozen prosecutors, led by Damian Williams, the U.S. attorney for the Southern District of New York, are building the criminal case and tracking down the billions of dollars in customer money that Mr. Bankman-Fried has been charged with misappropriating.

In recent weeks, prosecutors have had talks with lawyers representing a dozen former executives and employees at FTX and Alameda Research, the hedge fund Mr. Bankman-Fried also founded, 11 people with knowledge of the inquiry said. Prosecutors have also examined the role of Mr. Bankman-Fried’s family members in his business empire, six people with knowledge of the matter said.

The collapse of FTX has forced virtually everyone in Mr. Bankman-Fried’s immediate orbit to seek legal counsel as the investigation intensifies and prosecutors weigh bringing more charges. Defense lawyers at the law firms Mayer Brown, Steptoe & Johnson, and Covington & Burling each represent multiple former FTX executives who may have information to contribute.

“As people begin flipping or cooperating with the government, it can lead to new lines of inquiry and new people of interest,” said Daniel Hawke, a lawyer for the firm Arnold & Porter who was a former director of the Securities and Exchange Commission’s market abuse unit.

The FTX investigation could also ensnare companies that either received money from the exchange or lent it funds. The collapse of FTX last year set off a crisis at the crypto lending firm Genesis, which was recently charged with securities law violations by the S.E.C. And in late January, a bipartisan group of senators sent a letter to Silvergate, a bank that did business with FTX, asking company officials whether they were aware of the exchange’s misuse of customer money.

In addition to tracking down customer funds, prosecutors are trying to recover hundreds of millions of dollars that were stolen from the exchange by a hacker around the time FTX filed for bankruptcy in November. And they are scrutinizing the more than $90 million in campaign contributions that FTX employees and others close to the company gave to congressional candidates and political action committees.

Much of the criminal case against Mr. Bankman-Fried could hinge on testimony from his former colleagues. Two of his closest advisers, Caroline Ellison and Gary Wang, pleaded guilty to fraud in December and have been cooperating with prosecutors for months. Now, the investigators are focusing their attention on other former FTX executives.

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