Sam Bankman-Fried will soon have his first day in court as he faces a litany of charges less than a year after the calamitous collapse of cryptocurrency exchange FTX.
The former CEO of the bankrupt exchange is set to face 21 days in court during his criminal trial scheduled from Oct. 4 to Nov. 9. Bankman-Fried has been in pre-trial detention at the Metropolitan Detention Center in New York City since Aug. 11 and has filed several unsuccessful motions seeking temporary release to prepare for his trial.
United States Judge Lewis Kaplan denied the former FTX CEO’s latest motion for release, citing concerns that Bankman-Fried was a flight risk given the severity of the charges he faces and the potential length of time he could spend behind bars if convicted. The former FTX CEO has been granted permission to meet with his legal team at 7 am Eastern Time on active court days.
Proceedings will begin with jury selection on Oct. 3 before the trial gets underway on Wednesday, Oct. 4. Cointelegraph has highlighted five major talking points ahead of one of the most significant cryptocurrency-related trials in history.
What happened to FTX?
Once hailed as the darling of the cryptocurrency industry, FTX was co-founded in 2019 by Bankman-Fried and Gary Wang and became a household name in the U.S. due to its high-profile sponsorships and campaigns.
Over the next three years, the company carried out a series of fundraising rounds, including a preliminary $900 million raise in July 2021 and another $420 million in October 2021. The year 2022 promised to be fruitful for the exchange as it kicked off with a further $400 million fundraising round headed by the likes of SoftBank and Temasek, valuing the company at an estimated $32 billion.
FTX signed several major sponsorship deals during those two years. These included the Mercedes AMG Petronas Formula One team and a reported $135 million deal for the naming rights to Miami Heat’s National Basketball Association arena.
The company appeared to be on a sound footing as the broader cryptocurrency ecosystem wavered after the Terra ecosystem implosion. Several high-profile cryptocurrency lending firms were caught in the fallout, which led to FTX making a $240 million offer to acquire BlockFi and a failed bid to bail out Voyager Digital.
Things began to unravel in November 2022 as rumblings emerged of trouble at FTX related to its relationship with Bankman-Fried’s quantitative trading firm Alameda Research and the latter’s dependence on FTX’s native FTX Token (FTT).
1) Hi all:
— SBF (@SBF_FTX) November 11, 2022
Today, I filed FTX, FTX US, and Alameda for voluntary Chapter 11 proceedings in the US.
The house of cards came crumbling down as Binance CEO Changpeng “CZ” Zhao announced the exchange would sell its FTT token holdings, which was a catalyst for the liquidity crisis at FTX due to the value of FTT plummeting.
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards.
— CZ Binance (@cz_binance) November 6, 2022
On Nov. 11, 2022, FTX, FTX US and Alameda Research entered bankruptcy proceedings, with Bankman-Fried resigning as CEO. John Ray III, the man who handled the infamous Enron bankruptcy, was appointed as acting CEO to review and monetize the remaining assets of the FTX group.
Seven counts
Bankman-Fried stands accused of seven counts of conspiracy and fraud relating to the collapse of the exchange.
The U.S. Department of Justice (DOJ) had initially announced an eight-count indictment with fraud, money laundering and campaign finance offenses in December 2022. This included two counts of wire fraud conspiracy, two of wire fraud and one of conspiracy to commit money laundering.
Bankman-Fried was also charged with conspiracy to commit commodities fraud, securities fraud and conspiracy to defraud the United States and commit campaign finance violations.
The DOJ dropped the campaign contributions charge in July 2023 due to an extradition agreement with the Bahamas from where Bankman-Fried had been deported.
Who will testify?
The DOJ informed Kaplan that it would call up several witnesses for the trial, including former FTX clients, investors and staff.
U.S. attorneys noted that they expected FTX customers who had deposited funds on the defunct exchange to testify regarding their expectations and understanding of the exchange’s deposit policy and the ability to withdraw funds at any time.
Investors who purchased shares in FTX are expected to testify about their expectations of the company being a custodian of user funds, as well as the full scope of custodianship regarding cryptocurrency exchanges.
Lastly, the DOJ expects cooperating witnesses who pled guilty to participating in a conspiracy to commit fraud alongside Bankman-Fried to testify about their interactions with the former CEO and statements and actions he carried out in the months leading up to the bankruptcy.
Among the cooperating witnesses expected to appear are Wang, former FTX engineering director Nishad Singh and Bankman-Friend’s ex-girlfriend and former Alameda Research CEO, Caroline Ellison.
An Oct. 1 court ruling ahead of the trial has also blunted any potential intent by Bankman-Fried to apportion blame on FTX lawyers, as they were aware of many of the company dealings that now form part of the alleged crimes committed:
“The government disputes this - at least in the way it has been stated by the defendant. It seeks to preclude the defendant “from unduly focusing on the fact of attorneys’ involvement” in such matters or “suggesting that attorneys blessed, for instance, the loans, bank documents, or message deletions.”
Kaplan granted the government’s motion to bar Bankman-Fried from referring to the involvement of attorneys in his opening statement while requiring any future evidence, argument or testimony without notifying the court in the absence of the jury.
How long could SBF be in jail?
According to the DOJ, Bankman-Fried’s alleged crimes carry significant prison time.
The counts of wire fraud conspiracy, wire fraud and money laundering each carry a maximum sentence of 20 years. Meanwhile, charges of conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to defraud the United States carry five-year maximum sentences.
According to CNN, the 30-year-old could face over 100 years in prison if he is found guilty of the many charges brought against him by the U.S. government.
Biggest fraud case in U.S. history?
Legal experts have already suggested that Bankman-Fried’s trial could represent one of the most significant fraud cases in U.S. history, with $8.9 billion of customer deposits and investor funds going missing in the wake of FTX’s collapse. An estimated $7.3 billion of liquid assets have since been recovered through bankruptcy proceedings.
The Bernie Madoff trial arguably remains the most significant fraud case in recent U.S. history, with the recent rendition of his $19 billion Ponzi scheme in a Netflix documentary highlighting the grand scale of his influence and shadowy scheme.
While Bankman-Fried may not have caused as much financial harm as Madoff, his image and that of FTX’s brand as a visibly active cryptocurrency proponent has thrust the story into the spotlight as a modern-day parallel of the late Madoff’s 17-year fraud.
Bankman-Fried also became involved in the U.S. political landscape, donating over $40 million to Democratic Party committees and candidates in 2022. The former FTX CEO reportedly even considered paying Donald Trump $5 billion to not run for president in the United States, according to author Michael Lewis’s upcoming biography.
Bankman-Fried maintains his innocence, having pleaded not guilty to all charges brought against him in August 2023.
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