NEW YORK—The decision by U.S. prosecutors on Wednesday to drop a campaign finance charge against Sam Bankman-Fried may keep his trial focused on what the government considers his main crime: stealing billions of dollars from cryptocurrency customers at his now-bankrupt FTX exchange.
Mr. Bankman-Fried, 31, is fighting to stay out of jail ahead of his Oct. 2 trial on fraud charges, after prosecutors in Manhattan accused him of tampering with witnesses by sharing personal writings of his former romantic partner Caroline Ellison with a New York Times reporter.
He got a modest victory on Wednesday night when prosecutors decided to drop a campaign finance charge claiming the former billionaire illegally directed associates to donate millions of dollars to political campaigns.
That decision came after the Bahamas, where FTX was based and Mr. Bankman-Fried was arrested in December, told the U.S. Attorney’s office in Manhattan it had not intended to extradite Mr. Bankman-Fried on that charge.
Mr. Bankman-Fried still faces seven counts of defrauding or conspiring to defraud customers, investors and lenders in what prosecutors called one of the “biggest financial frauds in American history.”
He faces a second trial next year on five charges brought after his extradition, including foreign bribery conspiracy and bank fraud conspiracy.
Mark Kasten, a lawyer at Buchanan Ingersoll & Rooney in Philadelphia, said dropping the campaign finance charge could help Mr. Bankman-Fried by letting his lawyers “focus their narrative” on the fraud case.
“Jurors have a visceral reaction to campaign finance charges: campaign finance charges are crimes on the public, and jurors themselves are indirect victims,” he said. “Victims of the other charges by comparison are customers of or investors in Alameda or FTX.”
While admitting that FTX had inadequate risk management, Mr. Bankman-Fried has pleaded not guilty and denied stealing funds.
Mr. Bankman-Fried rose to prominence as an entrepreneur promising safety in volatile cryptocurrencies and as a prolific donor, mainly to Democrats, in the 2022 U.S. midterm elections.
Ms. Ellison, the former chief executive of Mr. Bankman-Fried’s crypto-focused hedge fund Alameda Research, pleaded guilty to fraud charges and is expected to testify against him.
Nishad Singh, FTX’s former director of engineering, pleaded guilty to fraud and campaign finance charges, saying he used transfers from Alameda to make political donations in part to bolster Mr. Bankman-Fried’s and FTX’s political influence.
A third former member of Mr. Bankman-Fried’s inner circle, former FTX technology chief Gary Wang, has also pleaded guilty.
