Sam Bankman-Fried is expected to plead not guilty in the FTX fraud case - and prosecutors won't be lenient

• Sam Bankman-Fried is expected to enter a plea of not guilty in his fraud case on Tuesday.
• The disgraced FTX founder is accused of defrauding investors and is facing eight criminal charges.

Sam Bankman-Fried is expected to plead not guilty on Tuesday, initiating a legal back-and-forth that former federal prosecutors say is unlikely to result in a lenient deal from the Justice Department.

When the FTX founder is arraigned in federal court for fraud charges, he will appear in person to enter his not guilty plea, the Wall Street Journal first reported on Friday. In confirming the news, Bloomberg also pointed out that the move can provide his legal team more insight into prosecutors' evidence — and more time to potentially negotiate a lighter sentence if he changes his plea to guilty.

Bankman-Fried is facing eight charges after his now-bankrupt cryptocurrency exchange reportedly lost at least $8 billion of customer money. US prosecutors have alleged he orchestrated a years-long scheme, where he used FTX deposits for various investments and daily expenses at his trading firm Alameda Research.

The Justice Department is in a "good position" when it comes to the fraud case, former federal prosecutor Danya Perry told CNBC, noting that former Alameda CEO Caroline Ellison and FTX cofounder Gary Wang have pleaded guilty.

Behind the scenes, she believes negotiations have been underway for a possible deal, but prosecutors most likely have other "cooperating witnesses lining up at the door."

"They have a mountain of paper evidence, and in fact, admissions by the defendant himself," added Perry, a former assistant US attorney for the Southern District of New York. "So they're not going to be in any particular rush, and they're not going to be welcoming of any sweetheart plea deal."

Other former prosecutors have similarly cast doubt on Bankman-Fried's ability to secure a deal. Ian McGinley, who also previously served as an assistant US Attorney in the SDNY, told CoinDesk that winning leniency typically requires a defendant to present evidence against someone else.

But it's unclear if Bankman-Fried can point the finger at others.

"The issue here that he faces is he is the head of FTX. The buck presumably stopped with him. So it's hard to see how he could cooperate at all," McGinley said.

And if the case goes to trial, he has almost no chance of getting acquitted, former Watergate prosecutor Nick Akerman has said.

Bankman-Fried hasn't helped his cause either, especially while on a public apology tour after FTX's liquidity crisis in early November. Instead of laying low and listening to his legal counsel, he spoke with an array of news outlets about the situation.

"I don't think I'll be arrested," Bankman-Fried said during an interview hours before he was detained by Bahamian authorities on December 12. He even tweeted on Friday to deny moving tokens out of Alameda's crypto wallets shortly after being released on bail.

A not guilty plea would mean the government continues its investigation, but Perry told CNBC that prosecutors are "only going to be digging in deeper. They've said they're really looking under every stone here."

She added: "That may not be his best move either. He's in a tough position."