Sam Bankman-Fried is scheduled to stand trial on Tuesday, facing accusations of misappropriating billions of dollars from clients of his cryptocurrency exchange, FTX. This comes almost a year after the company’s downfall sent shockwaves through the financial markets and tarnished his personal reputation.
According to federal prosecutors, the 31-year-old former billionaire allegedly diverted funds from FTX customers from the time of its establishment in 2019 until its bankruptcy in November 2022. These funds were purportedly used to support his hedge fund, Alameda Research, acquire luxury properties, and contribute over $100 million to political candidates in the United States.
Bankman-Fried has entered a plea of not guilty to seven charges related to fraud and conspiracy. While he has acknowledged shortcomings in risk management, he vehemently denies any wrongdoing in terms of misappropriating funds. His legal team has indicated in court documents that they intend to argue that FTX’s handling of customer funds was appropriate and that the majority of responsibility for their failure lies with others at FTX and Alameda.
The initial phase of the trial will involve the selection of a 12-member jury tasked with evaluating these conflicting narratives and determining whether Bankman-Fried should be convicted.
Sam Bankman-Fried, the founder of FTX who is facing charges, departs from the United States Courthouse in New York City, U.S., on July 26, 2023. REUTERS/Amr Alfiky/File Photo Acquire Licensing Rights
Commencing at approximately 9:30 a.m. EDT (1330 GMT) in the federal court in Manhattan, U.S. District Judge Lewis Kaplan will conduct an examination of a group of New York residents. This process involves posing inquiries about their personal backgrounds and past experiences to identify any potential jurors who might carry biases.
The trial is anticipated to extend over a period of up to six weeks. It will include testimony from three individuals who were previously part of Bankman-Fried’s close-knit circle and have already admitted to fraud charges. They have also agreed to collaborate with the Manhattan U.S. Attorney’s office.
Bankman-Fried’s legal team has indicated their intention to challenge the credibility of the witnesses, which includes former Alameda chief Caroline Ellison and former FTX executives Gary Wang and Nishad Singh. They plan to argue that these witnesses may be motivated to implicate their client in order to secure a more lenient sentence, a common strategy in white-collar fraud cases.
Furthermore, they have laid the groundwork for an argument suggesting that Bankman-Fried believed his exchange was within its rights to invest customer deposits as long as customers could ultimately withdraw their funds. They contend that a series of business failures, rather than deliberate fraud, resulted in the exchange lacking sufficient funds to meet withdrawal requests.
Bankman-Fried’s case represents the highest-profile prosecution to date of a former cryptocurrency executive by U.S. prosecutors.
His indictment in December marked a dramatic downfall for Bankman-Fried, who had previously enjoyed a reputation as a legitimate figure in an industry marred by scams and get-rich-quick schemes.
Prosecutors allege that Bankman-Fried constructed this reputation through deception and bolstered it with endorsements from celebrities and prominent athletes.
Bankman-Fried has been in custody at the Metropolitan Detention Center in Brooklyn since August 11, following a judge’s determination that he likely engaged in witness tampering, including sharing Ellison’s personal writings with a journalist. It’s worth noting that Ellison and Bankman-Fried were previously in a romantic relationship.
During the trial, he will be transported to court early on most days to allow for preparation with his legal team.
Reported by Jody Godoy and Luc Cohen in New York; Edited by Amy Stevens and Lincoln Feast
