Former cryptocurrency king Sam Bankman-Fried goes on trial for ‘biggest fraud in history’
Sam Bankman-Fried’s trial 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 facing trial for alleged financial crimes stemming from the collapse of the business in November last year.
The 31-year-old faces seven counts of conspiracy and fraud over allegations he diverted investors’ money for risky bets and other illegal purposes.
He has been accused by the Manhattan U.S. attorney’s office of using FTX client funds to cover mounting loan expenses at sister hedge fund Alameda, as well as purchasing lavish properties and paying millions in political donations.
Bankman-Fried, the son of two Stanford professors, has denied all charges. A conviction on all charges could mean 115 years in prison.
Disgraced: FTX founder Sam Bankman-Fried faces seven counts of conspiracy and fraud over allegations he diverted investors’ money for risky bets and other illegal purposes.
The first stage of the trial began yesterday in New York when the jury selection process began.
U.S. District Judge Lewis Kaplan told 50 potential jurors gathered in the Manhattan courtroom that he would ask them questions to narrow them down to 12 and six alternates.
“The goal is to select a jury of individuals who, regardless of what they may or may not know about these parties or this case, are willing and able to decide this case in a manner that is fair and impartial to both parties based solely on the evidence.” Kaplan said.
The judge also told Bankman-Fried, who was wearing a striped suit and tie and his once unkempt curly hair more groomed than often, it would be his decision whether to testify in his own defense. When asked if he understood, Bankman-Fried said: “Yes.”
The judge noted that opening statements in the case could begin today.
Defense attorneys have pointed to plans to undermine the credibility of witnesses, including members of Bankman-Fried’s inner circle who pleaded guilty to fraud charges and agreed to cooperate with prosecutors.
These include Caroline Ellison, 28, Bankman-Fried’s ex-girlfriend and former CEO of Alameda Research, as well as Gary Wang, 31, co-founder of FTX and the defendant’s former roommate.
Lawyers will argue that Bankman-Fried had no criminal intent despite making mistakes that led to the collapse of the exchange.
The FTX empire suffered a spectacular fall from grace when it filed for bankruptcy 11 months ago after attempts to raise £7bn in funding failed.
High profile: Bankman-Fried on conference panel with Tony Blair and Bill Clinton
This crash had a dramatic impact on the broader market: last year it wiped more than $1 trillion off the cryptocurrency market capitalization.
It also undermined trust in those behind cryptocurrencies. Bankman-Fried was once worth almost £22bn and also shared speaking stages with the likes of Tony Blair and Bill Clinton.
Prosecutors say Bankman-Fried built her reputation on lies and bolstered it with endorsements from celebrities and star athletes.
FTX was backed by high-profile people like supermodel Gisele Bundchen (pictured)
FTX was endorsed by high-profile people such as supermodel Gisele Bundchen and American basketball player Stephen Curry.
“We became overconfident and careless,” Bankman-Fried wrote on X, formerly Twitter, five days after FTX filed for bankruptcy. And trouble was brewing. Bigger than he thought.
He was arrested in the Bahamas in December last year before being extradited to the US on charges of allegedly stealing billions from exchange customers to offset losses at Alameda.
And FTX’s collapse is estimated to have affected thousands of investors in Britain, with regulator the Financial Conduct Authority noting that 8 per cent of its million customers were in the UK, equivalent to 80,000.
Although Bankman-Fried was released on £200 million bail, one of the largest in US history, this was later revoked after he was accused of attempting to tamper with potential witnesses, including attempting to contact with his ex-girlfriend Ellison.
But the trial itself represents a key moment for the industry that is still trying to recover from the fallout of FTX.
Walid Koudmani, chief analyst at broker XTB, said the test could “shape the fate of the crypto industry” and called it a “defining moment.”