Sam Bankman Fried’s fraud trial is about to begin. Here’s what you need to know

New York
CNN
—

Eleven months ago, Sam Bankman Fried He was living in the Bahamas as a cryptocurrency star, running a celebrity-backed startup, surrounded by fans and friends who believed he was the real deal: an MIT mathematician. A visionary who abandoned Wall Street to chart his own. A philanthropist building a fortune has repeatedly said he intends to give it all away.

He will stand trial this week in what federal prosecutors described as one of the largest frauds in US history.

31-year-old Bankman Fried, known as SBF, has defended the case Not guilty to seven counts of fraud and conspiracy in connection with the collapse of FTX, his cryptocurrency trading platform. If convicted and given the maximum sentence, he could spend the rest of his life in prison.

Here are the key things to know about this case, and what we may see over the next few weeks at trial.

SBF faces seven charges, including wire fraud and securities fraud.

Prosecutors alleged that SBF stole billions of dollars in FTX client funds for his personal use and to cover huge losses incurred by Alameda Research, a cryptocurrency hedge fund he also controlled.

They also say that SBF defrauded investors in FTX by covering up the scheme.

Prosecutors He chose in June to dismiss five more charges Which was brought in after the delivery of Bankman Fried from the Bahamas, where FTX was based. A separate trial on these charges is scheduled to begin in March.

FTX has marketed itself as an easy and secure gateway to trading cryptocurrencies. It made money by collecting fees on clients’ trades, just like a typical brokerage.

As digital asset valuations rise in 2021, FTX’s profile has also risen. At its peak, the company had a private valuation of more than $30 billion. She has plastered her name across the Miami basketball scene and garnered celebrity endorsements from Tom Brady and Larry DavidAnd they both starred in Super Bowl ads for FTX.

But encryption Market turmoil took hold In the spring of 2022, which will reduce the value of the entire industry to $1 trillion from $3 trillion.

By November, cracks in FTX’s foundation began to show, and it took just over a week for everything to come crashing down.

Investors and customers began to panic in response Report from cryptocurrency news site Coindesk Which raised serious questions about the financial ties between FTX and Alameda, two ostensibly separate companies founded by Freed Bankman. Based on a document obtained by Coindesk, it appears that much of Alameda’s assets consist of FTT, a digital token created by FTX that has been rapidly losing value, putting Alameda on shaky financial footing.

Customers rushed to withdraw their funds from FTX, exposing a shortfall of $8 billion.

FTX filed for bankruptcy on November 11, and Freed Bankman resigned as CEO.

He was arrested in December in the Bahamas on charges including fraud and conspiracy and extradited to the United States in January.

Since his arrest, SBF Repeatedly He spoke and wrote about his view of the case: He was an inexperienced businessman who was out on his skates, and had not knowingly committed any fraud.

His lawyers have hinted in court documents that they will invoke the “advice of counsel” defense. In other words, SBF did not know that his actions were illegal and was following the directions of FTX’s attorneys.

In a personal writing by Bankman-Fried published in The New York Times, he placed the blame for Alameda’s losses on its CEO, Caroline Ellisonwho is also his ex-girlfriend.

Ellison along with three other exes High-ranking colleaguesHe pleaded guilty in cooperation with prosecutors.

“The biggest challenge SBF faces is that his former colleagues will testify against him,” said Howard Fisher, a partner with Moses Singer and a former top lawyer at the SEC. Moreover, FTX’s new management, led by the restructuring expert who oversaw the liquidation of Enron, was openly hostile toward Bankman-Fried.

“This type of cooperation is a godsend for the prosecution,” Fisher said.

Another problem, Fisher said, is that the SBF, in its lengthy blog posts, tweets, television media appearances, and alleged document leaks, has “consistently failed to demonstrate awareness of the seriousness of its situation.”

“Juries tend to dislike know-it-alls who lack respect for the process… While a defendant in a case like this would be well advised not to take a stand, SBF’s unwavering confidence in himself could well lead him to take that risk.”

Jury selection begins Tuesday, October 3, in Manhattan federal court. The trial is expected to last up to six weeks.

During that time SBF will remain At the Metropolitan Detention Center in Brooklyn, where he has been since Judge Lewis Kaplan revoked his bail on August 11 due to SBF’s efforts to intimidate witnesses.

If convicted of all seven felony counts and given the maximum sentence, SBF faces a possible 110 years in prison.