Day one of the fraud trial began with the founder of FTX ,Sam Bankman-Fried, donning a suit instead of his trademark T-shirt and shorts.
On Tuesday, jury selection in the criminal case against the former cryptocurrency tycoon Sam Bankman-Fried got underway in a federal court in Manhattan.
October 5, 2023 at 12:00 pm
Updated October 5, 2023 at 12:00 pm
Source: Sam Bankman-Fried. Lam Yik/Bloomberg via Getty Images
The dramatic collapse of FTX has led to the trial of Bankman-Fried, the founder of the cryptocurrency exchange FTX and its affiliated hedge fund Alameda Research, for financial offenses. Prior to its abrupt demise last year, FTX had a market worth of almost $32 billion.
Just before 10 am, Bankman-Fried entered the courtroom. He was wearing a gray suit instead of his usual ill-fitting T-shirts and loose shorts, and his normally messy hair was short. He took a seat after giving his attorneys a nod.
For 31-year-old Bankman-Fried, who had established himself as the face of the cryptocurrency sector and a rising political power broker, the trial brings to an end nearly a year of free fall. Bankman-Fried and FTX spent millions on celebrity endorsements, donated to political campaigns, and promoted the cryptocurrency brokerage as the wave of the future in the world of finance.
A run on the exchange’s deposits revealed that FTX was unable to give consumers their money, forcing the firm to file for bankruptcy. This came about as a result of stories that raised concerns about the financial soundness of FTX and Alameda in November. The following month, Bankman-Fried was detained in the Bahamas as the scandal eroded public confidence in the Bitcoin sector.
Seven conspiracy and fraud accusations have been brought against Bankman-Fried for allegedly diverting billions of dollars from investors’ funds into hazardous trading and other illegal activities. The Manhattan US attorney’s office has also charged Bankman-Fried with buying up expensive real estate, supporting his favorite philanthropic endeavors, and giving a lot of money to political campaigns while using customer funds to pay for Alameda’s rising loan charges. He might receive a life sentence if found guilty.
Federal judge Lewis Kaplan will preside over the trial, which should last around six weeks. During the first few hours of the trial, the prosecution claimed that no plea agreement offers had been offered. The previous head of Alameda and his on-again, off-again girlfriend, Caroline Ellison, as well as a number of Bankman-Fried’s deputies and executives at the exchange, are anticipated to testify in the trial.
As the jury selection process got underway, Bankman-Fried showed signs of alertness by turning on his laptop in front of him and occasionally grinning at his attorney. He exhibited a positive attitude despite the possibility of decades in prison.
A limited number of people for such a hotly anticipated case stayed outside the courthouse on the morning of the trial: perhaps 20 photographers and a few reporters. Donald Trump’s appearance at his civil fraud trial began on the same day as Bankman-Fried’s trial, drawing a far larger media circus close by.
Due to Bankman-Fried’s difficulties getting from the jail where he is being held to the courthouse on time, the procedures for Trump’s trial started later than expected.
While they waited for the defendant, Kaplan informed the attorneys involved in the case, “We can thank the delay to what’s going on in the other courtroom nearby.”
At around 10.37 am, prospective jurors were told to enter the courtroom. As the first group made its way toward the jury box, Bankman-Fried held his hands in front of him. After about 50 possible jurors had been sworn in, Kaplan explained the facts of the case and started interrogating those called regarding potential conflicts.
A number of potential jurors revealed that they were familiar with the case; one guy told the judge that he had heard about it on Joe Rogan’s podcast. Kaplan inquired as to whether the company had made or lost money when a woman who claimed she could serve as an impartial juror revealed that her company had previously invested in FTX and Alameda.
“Lose money,” she murmured.
Kaplan also spoke with potential jurors who had difficulties with their schedules. Kaplan inquired as to the woman’s place of employment after she stated that a circumstance would prevent her from serving as a juror in the case.
“Ms Universe,” she said.
Kaplan prodded her for information. She said, “Um, it’s the pageant,” adding that the position required travel to El Salvador.
One man stated that he was unable to attend owing to financial difficulties. The man added, “I just bought a cello, I’m paying off $600 a month,” in more detail.
In the afternoon, Bankman-Fried turned repeatedly to observe as additional potential jurors filed into the courtroom. After the jury selection procedure is complete, opening arguments are scheduled to begin later this week.
The unraveling of a crypto empire
Following a CoinDesk story that Alameda had billions in FTX’s own cryptocurrency, FTT, Bankman-Fried’s high-flying world began to come crashing down in November 2022. Allegedly, Alameda utilized FTT as collateral for huge loans. FTT’s potential decline could jeopardize FTX and Alameda. The fact that FTT had no value other than FTX’s promise to purchase tokens at $22 added to the anxiety.
Changpeng Zhao, the CEO of leading FTX rival Binance, stated that his company would sell its $50 million in FTT in the wake of the findings. In a high-tech bank run-like event, FTX clients withdrew their money as FTT spun out of control.
FTX was reeling from a “giant withdrawal surge,” in which users scrambled to withdraw around $6 billion in cryptocurrency tokens in just three days. Observers feared the disaster could trigger a widespread collapse similar to the real estate crisis of 2008 in the industry. Bankman-Fried resigned, and FTX declared bankruptcy.
The Manhattan US attorney, Damian Williams, stated in December that the failure of FTX resulted in “billions of dollars in losses to its customers, lenders, and investors.” This was an instance of willful deception, plain and simple, not of inadequate management or oversight.
Bankman-Fried is accused by federal prosecutors of diverting billions for his own use together with a number of accomplices. Bankman-Fried had established himself as a political megadonor and philanthropist who promised to avert disaster while serving as the CEO of FTX. While courting politicians in Washington, he shared the platform with previous leaders Tony Blair and Bill Clinton.
Federal prosecutors assert that Bankman-Fried transferred billions for his own benefit together with a number of co-conspirators, including his longtime lover Caroline Ellison, CEO of Alameda.