A year ago, 30-year-old billionaire Sam Bankman-Fried posted a 14-tweet thread discussing the balance of “security and freedom” in cryptocurrency regulation. Now, a different kind of freedom is on the horizon as he walks into a Manhattan courtroom to face criminal charges that carry a combined maximum penalty of more than a century in prison.
Bankman-Fried’s trial is set to begin on Tuesday with jury selection set to last six weeks, marking a final reckoning for the disgraced tycoon who was once viewed as a crypto currency by Washington lawmakers and Silicon Valley investors. responsible spokesperson. A respected voice on the future of disruptive digital assets.
He is accused of defrauding dozens of the world’s top investors and millions of customers at his FTX cryptocurrency exchange, and stealing billions of dollars entrusted to his custody.
FTX went bankrupt for $40 billion in November 2022, leaving a mess that has been described as worse than Enron, and Bankman-Fried’s alleged crimes have been likened to that of Bernard Madoff, the legendary architect of the Ponzi scheme (Bernard Madoff). U.S. prosecutors called the alleged scheme “one of the largest financial frauds in U.S. history.”
The trial will present millions of pages of evidence and may include testimony from Bankman-Fried’s closest friends and romantic partners. It is the first major test in U.S. authorities’ efforts to clean up the lawless world of offshore cryptocurrency trading.
“This is a very important case. It’s the largest trial we’ve ever seen in the cryptocurrency world,” said Sarah Paul, a former federal prosecutor and partner at the law firm Evershed Sutherland. “If the victims don’t get justice, I think it’s going to be a real blow. I think it’s dangerous. You have to get bad actors like this out of the industry.”
Case against “SBF”
Bankman-Fried’s defense team, led by Mark Cohen, faces an uphill battle. One of the seven charges against him — including conspiracy to launder and defraud lenders, investors and customers of his cryptocurrency empire — could be enough to see Bankman-Fried face a lengthy prison sentence.
Prosecutors will try to prove that Bankman-Fried conspired with his inner circle of college students and childhood friends to secretly loan billions of dollars in FTX client funds to his cryptocurrency trading company, Alameda Research, which used the money heavily for venture capital. , luxury real estate, political donations and marketing — including a Super Bowl TV spot and a glossy Vogue ad starring FTX promoter Gisele Bündchen.
Crucial to the prosecution’s case was testimony from Bankman-Fried’s closest confidants and former lovers, many of whom lived together in a luxury $30 million penthouse in the Bahamas, FTX’s It was headquartered there until a run on the exchange in late 2022 pushed it into trouble. Bankruptcy, loss of up to $9 billion in customer funds.
Bankman-Fried gained global fame after amassing a fortune of more than $20 billion in just three years as CEO of FTX and pledging to donate much of his personal wealth. He was known for his eccentric behavior, including sleeping on a bean bag in his office and wearing shorts and a T-shirt while greeting celebrities such as former President Bill Clinton.
His inner circle indulges in late-night board games and becomes involved in romantic relationships. Before FTX failed, Bankman-Fried was known for his dislike of vegan burgers and meals with too much salt.
Four of Bankman-Fried’s former deputies have pleaded guilty. Former Alameda executive Caroline Ellison and his one-time lover are expected to be star witnesses.
“I think the government’s case looks very strong. They have multiple cooperating witnesses who worked closely with him and will say they committed crimes with him,” Paul said. “It’s hard to imagine this not working out here.”
Bankman-Fried’s attorneys may try to undermine the witnesses’ credibility, pointing to their past relationships and the leniency they hope to receive in exchange for cooperation.
The evidence includes millions of pages of private notes, Slack messages and emails extracted from FTX’s internal records. Prosecutors also plan to produce audio recordings of an Alameda all-staff meeting held days before FTX’s bankruptcy, in which they say Ellison told her employees that Bankman-Fried had raided client funds.
The question of whether Bankman-Fried deceived investors could shed light on how he induced venture capital firms, including big-name firms such as Sequoia Capital, BlackRock and Temasek, to pour nearly $2 billion into FTX. Investors were heavily criticized for failing to uncover problems with FTX through due diligence.
defense
There is always the possibility that Bankman-Fried could change her plea and plead guilty before or during trial, although the incentive to do so would be diminished because the government is unlikely to offer a particularly attractive deal at such a late stage.
If the trial is likely to go ahead as planned, numerous interviews and documents from Bankman-Fried’s legal team indicate that his defense strategy will include placing blame on others, including lawyers for Allison and FTX. He has said he did not know key details of the financial engineering behind his empire and that he never intended to deceive anyone.
A key decision facing Bankman-Fried is whether to risk damaging cross-examination by testifying against government witnesses. Theranos founder Elizabeth Holmes testified at the 2021 trial and was later found guilty on some of the charges.
“Bankman-Fried was reckless in testifying. He acted very erratically,” said Bradley Simon, a criminal defense partner at Schlam Stone & Dolan. “Presumably his lawyer told him it was impossible. But sometimes clients don’t listen.”
While prosecutors will tell a straightforward story of deceit and greed, the defense team may be inclined to explore the legal and technical complexities of FTX’s collapse.
“I don’t think this is a young man who’s going to arouse a lot of sympathy. He’s a high roller. The jurors are going to be from all walks of life. I don’t think they’re going to have a good rapport with him,” Simon said. “But you never know. It only takes one juror to hold out and everything for the government will be in vain.”
The rocky road to judgment
Bankman-Fried’s path to court has been rocky. The FTX founder was released on $250 million bail, one of the largest ever, and was confined to his parents’ home in Palo Alto, California, but soon began violating various bail conditions, This annoyed the court.
In February, Judge Lewis Kaplan said Bankman-Fried’s communications with FTX US general counsel Ryne Miller via email and encrypted messaging apps appeared to be an attempt to get potential witnesses to “sing from the same hymn.” He also lambasted the defendant for using a VPN, ostensibly to watch American football games through a subscription in the Bahamas.
Cohen assured the court that his client then understood “there was no room for error.” But in August, Kaplan ultimately revoked Bankman-Fried’s bail amid accusations that he had leaked Ellison’s private writings to him. this New York Times, allegedly to intimidate witnesses.
Bankman-Freed has since been incarcerated in Brooklyn’s notorious Metropolitan Detention Center, where he claims he was deprived of vegan food and medication. His lawyers also argued that he did not have adequate laptops and internet access in prison to prepare for trial.
Beyond the humiliation of a once-high-profile billionaire being led into a courtroom in handcuffs, the trial will also shed light on reckless lending, risk-taking and handling of customer funds within the cryptocurrency industry during the height of the bubble in 2022 The harsh rebuke comes as creditors now seek to claw back billions of dollars in several high-profile bankruptcies, while U.S. regulators battle with other large cryptocurrency companies, including largest exchange Binance Start a fight.
“The crypto industry now wants to paint SBF as a lone rotten apple, but FTX’s implosion highlights many of the problems prevalent throughout the crypto industry,” said Hilary Allen, a law professor at American University.
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