Less than a year after the catastrophic collapse of cryptocurrency exchange FTX, Sam Bankman-Fried is set to face his first day in court on a series of charges.
The former CEO of the bankrupt exchange will face a 21-day court trial from October 4 to November 9. Bankman-Fried has been in pretrial custody at the Metropolitan Detention Center since August 11 and is currently in custody. Several unsuccessful motions were filed seeking his release in preparation for trial.
U.S. District Judge Lewis Kaplan denied the former FTX CEO’s latest motion for release, citing concerns that Bankman-Fried was a flight risk as the charges against him were extremely high. Serious, and if convicted, he could spend a long time in jail. The former FTX CEO has been granted permission to meet with his legal team at 7am during the court proceedings.
Proceedings will begin on October 3 with jury selection before the trial begins on Wednesday, October 4. Cointelegraph highlights five major issues ahead of one of the largest cryptocurrency-related trials in history.
What happened to FTX?
Once hailed as a darling of the cryptocurrency industry, FTX was co-founded by Bankman-Fried and Gary Wang in 2019 and has become a household name in the United States for its high-profile sponsorships and events.
Over the next three years, the company raised a series of financings, including an initial $900 million in July 2021 and another round of financing Raised $420 million In October 2021, the deal was expected to bear fruit in 2022 as it kicked off with another $400 million funding round led by the likes of SoftBank and Temasek, valuing the company at an estimated $32 billion.
FTX has signed several major sponsorship deals over the past two years. These include Mercedes’ Formula 1 team and a reported $135 million naming rights deal for the Miami Heat’s NBA stadium.
The company appears to be in good standing after the Terra/LUNA stablecoin debacle rocked the broader cryptocurrency ecosystem. Several well-known cryptocurrency lending companies were affected, leading to FTX’s $240 million offer to acquire BlockFi and its failed bailout of Voyager Digital.
Things began to go wrong in November 2022, with rumors that FTX was experiencing troubles related to its relationship with Bankman-Fried’s quantitative trading firm Alameda Research and the latter’s reliance on FTX’s native exchange token FTT.
1) Hello everyone:
Today, I filed voluntary Chapter 11 proceedings in the United States against FTX, FTX US and Alameda.
— SBF (@SBF_FTX) November 11, 2022
The house of cards collapsed as Binance CEO Changpeng Zhao “CZ” announced that the exchange would sell its holdings of FTT tokens, which became the catalyst for FTX’s liquidity crisis as FTT’s value plummeted.
Liquidating our FTT is just post-exit risk management, learn from LUNA. We were supportive before, but we won’t pretend to have sex after the divorce. We are not against anyone. But we will not support those who lobby behind the scenes against other industry players. forward.
— CZ Binance (@cz_binance) November 6, 2022
On November 11, 2022, FTX, FTX US and Alameda Research initiated bankruptcy proceedings, and Bankman-Fried resigned as CEO. John Ray III, who handled the infamous Enron bankruptcy, was named acting CEO, tasked with reviewing and monetizing FTX Group’s remaining assets.
seven counts
Bankman-Fried was charged with seven counts of conspiracy and fraud in connection with the exchange’s collapse.
The U.S. Department of Justice originally declare An eight-count indictment involving fraud, money laundering and campaign finance crimes was filed in December 2022. They include two counts of conspiracy to commit wire fraud, two counts of wire fraud and one count of conspiracy to commit money laundering.
Bankman-Fried is also charged with conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to defraud the United States and campaign finance violations.
The Justice Department later dropped the latter campaign donation charge in July 2023 after Bankman-Fried was deported due to an extradition deal with the Bahamas.
Who will testify?
The Justice Department notified presiding judge Kaplan that it will call several witnesses to the trial, including former FTX customers, investors and staff.
U.S. attorneys noted that they want FTX customers who deposited funds at the defunct exchange to testify about their expectations and understanding of the exchange’s deposit policies and their ability to withdraw funds at any time.
Investors who purchase FTX stock are expected to demonstrate their expectations of the company as a custodian of user funds as well as full custody of the cryptocurrency exchange.
Finally, the Justice Department wants cooperating witnesses who have admitted conspiring with Bankman-Fried to commit the fraud to testify about their interactions with the former CEO and statements and actions he made months ago. to bankruptcy.
Cooperating witnesses expected to appear include Wang, FTX engineering director Nishad Singh and Bankman-Friend’s ex-girlfriend Caroline Ellison, the former CEO of Alameda Research.
How long will SBF be in jail?
According to the Department of Justice, Bankman-Fried’s alleged crimes will result in severe prison sentences.
The wire fraud conspiracy, wire fraud and money laundering charges carry a maximum penalty of 20 years in prison. Meanwhile, charges of conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to defraud the United States carry a maximum penalty of five years in prison.
according to CNNThe 30-year-old could face more than 100 years in prison if convicted of multiple charges brought against him by the US government.
The biggest fraud in U.S. history?
Legal experts have said the Bankman-Fried trial could mark one of the most significant fraud cases in U.S. history. After FTX collapsed, $8.9 billion in customer deposits and investor funds disappeared, while an estimated $7.3 billion in liquid assets have been recovered through bankruptcy proceedings.
Bernie Madoff Arguably, it remains the most mysterious fraud case in the United States, and the recent portrayal of his $19 billion Ponzi scheme in a Netflix documentary highlighted the scale of his influence and secret scheme.
While Bankman-Fried may not have caused as severe financial damage as Madoff, his own image and that of the FTX brand as an apparently active cryptocurrency supporter has thrust the story into the spotlight, along with the late Madoff ’s 17th birthday is similar. years of fraud.
Bankman-Fried has also become involved in the U.S. political landscape, donating more than $40 million to Democratic committees and candidates in 2022. According to author Michael Lewis, the former FTX CEO is even considering paying Donald Trump $5 billion to stop running for US President Lewis’s upcoming biography.
Bankman-Fried maintains his innocence and has pleaded not guilty to all charges brought against him in August 2023.
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