Ex-crypto king Sam Bankman-Fried faces trial for “biggest fraud in history.”
The trial of Sam Bankman-Fried began yesterday in what has been called a “watershed moment” for the cryptocurrency world.
The disgraced tycoon, who founded cryptocurrency exchange FTX in 2019, is on trial for alleged financial crimes related to the company’s collapse in November last year.
The 31-year-old is charged with seven counts of conspiracy and fraud, alleging he funneled investor funds into risky bets and other unlawful purposes.
The US Attorney’s Office in Manhattan accuses him of using FTX customer funds to cover the rising borrowing costs of the sister hedge fund Alameda, as well as buying lavish real estate and disbursing millions of dollars in political donations.
Bankman-Fried, the son of two Stanford professors, has denied all allegations. A conviction on all counts could mean a prison sentence of 115 years.
Disgraced: FTX founder Sam Bankman-Fried faces seven counts of conspiracy and fraud over allegations he diverted investor funds for risky bets and other unlawful purposes
The first phase of the trial began yesterday in New York as the jury selection process began.
U.S. District Judge Lewis Kaplan told the 50 prospective jurors gathered in the Manhattan courtroom that he would ask them questions to whittle them down to 12 and six alternates.
“The goal is to select a jury of individuals who, regardless of what they know or do not know about these parties or this case, are willing and able to try this case in a mutually fair and impartial manner based solely on of the evidence,” Kaplan said.
The judge also told Bankman-Fried, who wore a suit and striped tie and whose once-signature unkempt, curly hair was neater than usual, that it was his decision whether to testify in his own defense. When asked if he understood, Bankman-Fried replied, “Yes.”
The judge signaled that opening statements in the case could begin today.
Defense attorneys have signaled plans to undermine the credibility of witnesses, including members of Bankman-Fried’s inner circle, who have pleaded guilty to fraud charges and agreed to cooperate with prosecutors.
They include Caroline Ellison, 28, Bankman-Fried’s ex-girlfriend and former managing director of Alameda Research, and Gary Wang, 31, co-founder of FTX and former roommate of the defendant.
Lawyers will argue that Bankman-Fried had no criminal intent despite mistakes that led to the stock market’s collapse.
The FTX empire suffered a spectacular crash when it declared bankruptcy 11 months ago after attempts to raise £7bn in funding failed.
High profile: Bankman-Fried on a conference call with Tony Blair and Bill Clinton
This collapse had a dramatic impact on the entire market, resulting in a loss of more than $1 trillion in cryptocurrency market capitalization last year.
It also undermined trust in those behind cryptocurrencies. Bankman-Fried was once worth almost £22bn and also shared conference stages with the likes of Tony Blair and Bill Clinton.
Prosecutors say Bankman-Fried built that reputation on lies and bolstered it with endorsements from celebrities and top athletes.
FTX has been backed by high-profile figures such as supermodel Gisele Bundchen (pictured).
FTX has been endorsed by prominent personalities such as supermodel Gisele Bundchen and American basketball player Stephen Curry.
“We have become overconfident and careless,” Bankman-Fried wrote on X, formerly Twitter, five days after FTX filed for bankruptcy. “And problems were brewing. Bigger than I thought.’
He was arrested in the Bahamas in December last year before being extradited to the US on charges that he stole billions from the exchange’s customers to cover losses at Alameda.
It is estimated that thousands of investors in the UK were affected by FTX’s collapse. The Financial Conduct Authority found that 8 percent of its 1 million customers were in the UK – the equivalent of 80,000.
Although Bankman-Fried was released on £200 million bail, one of the highest in US history, this was later revoked after he was accused of attempting to tamper with potential witnesses – including attempting to contact his ex- Flame Ellison.
But the trial itself represents a key moment for the industry, which is still trying to recover from the FTX fallout.
Walid Koudmani, chief analyst at broker XTB, said the trial could “affect the fate of the crypto industry” and called it a “watershed moment.”