FTX Founder Sam Bankman-Fried’s Criminal Trial Opens

Federal prosecutors on Wednesday opened the legal trial of Sam Bankman-Fried, the founder of the unsuccessful cryptocurrency exchange FTX, with a very simple concept: He intentionally “lied to the earth,” major to a person of the largest financial frauds of a technology.

Mr. Bankman-Fried’s law firm state-of-the-art a much distinctive narrative. The former crypto mogul, the law firm explained, was just a perfectly-intentioned entrepreneur who acted “in great faith” to make his firm prosperous, with no intention to defraud everyone.

The dueling arguments are at the crux of Mr. Bankman-Fried’s demo, which has turn out to be the highest-profile reckoning for a small business govt due to the fact the Theranos founder Elizabeth Holmes was convicted of fraud early previous 12 months.

A onetime crypto wunderkind, Mr. Bankman-Fried, 31, turned a tousle-haired billionaire pretty much right away, only to see his firm collapse previous calendar year and his fortune evaporate. He has been billed with orchestrating a conspiracy to use $10 billion that FTX’s buyers experienced entrusted to him for all manner of personalized initiatives, like enterprise money investments, political donations and luxury genuine estate purchases.

“It looked like Sam Bankman-Fried was on best of the planet,” Thane Rehn, a guide prosecutor, told a packed place at the federal courthouse in Manhattan on Wednesday. “All of it was designed on lies.”

Mr. Bankman-Fried’s attorney, Mark Cohen, quickly strike back. “It’s not a crime to operate a organization in good faith that finishes up likely as a result of a storm,” he explained. He termed the prosecution’s portrayal of his shopper a “cartoon of a villain” that distorted the points.

Mr. Bankman-Fried, who has put in the last 7 weeks in jail, appeared in court with close-cropped hair that experienced been reduce recently by a fellow detainee. He wore a go well with and tie and viewed the proceedings flanked by his other legal professionals, even though his mothers and fathers, the Stanford legislation professors Joseph Bankman and Barbara Fried, sat a few rows behind him.

His demo has come to be a carefully watched referendum not only on the drop of FTX but on reckless conduct throughout the cryptocurrency field. A frenzy over electronic cash like Bitcoin and Ether swept up millions of each day buyers in advance of the sector imploded previous year, wiping absent people’s personal savings and sending a procession of get started-ups into individual bankruptcy.

When FTX collapsed in November, Mr. Bankman-Fried became a image of the industry’s excesses. At the peak of its energy and impact, his corporation was valued at $32 billion and Mr. Bankman-Fried was greatly hailed as a chief capable of bringing obscure crypto technologies into the mainstream of worldwide finance. He jetted back and forth from FTX’s base in the Bahamas to meetings in Los Angeles and Washington, exactly where he rubbed shoulders with celebrities and politicians, and experienced his photograph plastered on billboards and magazine handles.

Now FTX is bankrupt and the crypto marketplaces have cratered, top to dozens of lawsuits and tens of billions of dollars in losses that have devastated the finances of person investors around the globe.

Mr. Bankman-Fried, who in non-public writings has termed himself “one of the most hated men and women in the planet,” has pleaded not responsible to seven counts of fraud and revenue laundering. If convicted, he could deal with what amounts to a lifetime sentence in jail.

The FTX founder faces an uphill fight in the demo. 3 of his major executives have pleaded responsible to fraud and agreed to cooperate versus him — together with his on-and-off girlfriend, Caroline Ellison, who ran Alameda Research, a hedge fund that Mr. Bankman-Fried started.

Prosecutors and defense lawyers mentioned in court docket that they experienced not held any negotiations in excess of a plea arrangement, and that no deal had at any time been supplied to Mr. Bankman-Fried.

On Wednesday, Mr. Rehn accused Mr. Bankman-Fried of “fraud on a huge scale,” casting him as a schemer who was “not what he appeared to be.” He mentioned Mr. Bankman-Fried experienced moved cash that consumers deposited with FTX to Alameda, which then funneled the income into investments and donations.

Mr. Rehn frequently invoked the cooperating witnesses, stressing that people today who say they participated with Mr. Bankman-Fried in the scheme would testify towards him. He also pointed to Mr. Bankman-Fried’s posts on X, the social media assistance previously acknowledged as Twitter, and commercials utilized to promote FTX, calling them lies intended to deceive buyers.

“He was taking these customer deposits, and paying them for himself,” Mr. Rehn mentioned. “The defendant was trying to keep his clients in the dim.”

Prosecutors have marshaled millions of webpages of electronic evidence, together with text and email logs, as well as snippets of laptop or computer code that confirmed how FTX moved customer cash to Alameda. They have an audio recording from the 7 days of FTX’s collapse in which Ms. Ellison appears to acknowledge that she and Mr. Bankman-Fried labored with each other to steal shopper deposits. And they have gained a collection of pretrial disputes, allowing for them to current proof that Mr. Bankman-Fried has contested and avoid his lawful group from mounting particular defenses.

Mr. Cohen, the protection law firm, pushed back again from the public narrative that Mr. Bankman-Fried was a con artist intent on stealing customer income.

“Sam didn’t defraud everyone,” he claimed. “Sam acted in excellent religion.”

Casting his shopper as “a math nerd who didn’t drink or bash,” Mr. Cohen walked the jurors by FTX’s history, arguing that Mr. Bankman-Fried experienced acted in his customers’ pursuits, even if he didn’t usually make the correct conclusions.

“No just one human being, no C.E.O., undoubtedly not Sam, could be everywhere and carrying out all the things,” he stated.

Mr. Cohen also attacked the trustworthiness of Ms. Ellison and the other cooperating witnesses, pointing out that they were being hoping to steer clear of extensive jail sentences. He claimed that Mr. Bankman-Fried experienced urged Ms. Ellison to put hedges on Alameda’s buying and selling action, but that she experienced overlooked him, foremost to some of the difficulties that brought about the enterprise empire to implode.

“You should take into consideration what Sam did and mentioned in authentic time,” he claimed. “He produced company choices that he imagined had been correct when he created them.”

Following the opening statements, prosecutors known as their 1st witness, Marc-Antoine Julliard, an investor in London who lost additional than $100,000 in dollars and Bitcoin in FTX’s collapse. Mr. Julliard said he experienced considered FTX would continue to keep his revenue risk-free.

Another witness, Adam Yedidia, a university close friend of Mr. Bankman-Fried’s who worked at Alameda and FTX, explained he experienced give up just right before FTX submitted for bankruptcy when he realized that its customer revenue experienced been siphoned off to Alameda. Testifying below immunity, Mr. Yedidia also talked over the lavish flats in the Bahamas that prosecutors have stated have been acquired with FTX buyer income.

The opening statements and witness testimony started soon soon after the choose overseeing the circumstance, Lewis A. Kaplan swore in a jury of 9 ladies and 3 guys. Through the collection method, just one future juror mentioned he and his twin brother experienced misplaced funds in the crypto market place, when another explained she worked for a economic organization that had lost resources with FTX and Alameda. The two were excused.

A third applicant continuously said he did not know if he could be impartial mainly because he didn’t fully grasp how cryptocurrencies labored.

“You possibly have a ton of corporation in this courtroom,” Judge Kaplan responded.

The potential juror, who was excused, explained the full thought of crypto rubbed him the incorrect way, reminding him of the Ponzi scheme carried out by the disgraced financier Bernard Madoff.