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Sam Bankman-Fried trial: Billion dollar crypto fortune was ‘built on lies’, prosecutors say

Fallen crypto billionaire has gone on trial accused of stealing billions in cash and cryptocurrency from FTX investors

Bevan Hurley
From the Daniel Patrick Moynihan United States Courthouse in Manhattan
Wednesday 04 October 2023 20:49 BST
FTX trial begins: Bankman-Fried charged with fraud, money laundering

Sam Bankman-Fried built a multi-billion dollar empire on “lies” by stealing customers’ investments in the now-bankrupt FTX crypto exchange to prop up his failing hedge fund, prosecutors said in opening statements of his blockbuster fraud trial.

Mr Bankman-Fried funded a life of untold wealth by channelling billions in cash and cryptocurrencies through a secret backdoor between FTX and Alameda, his crypto hedge fund, assistant US attorney Thane Rehn told a federal jury in Manhattan on Wednesday.

“His face was on magazine covers. He had wealth. He had power. He had influence. But all of that, all of it, was built on lies,” the prosecutor said, employing evocative language as he tried to simplify the esoteric world of crypto for jurors.

The 31-year-old former billionaire had been “on top of the world” before the collapse of FTX last November, Mr Rehn said.

He lived in a $30m apartment in the Bahamas, jetted around the world on private planes and hung out with celebrities including Tom Brady and Bill Clinton. But on day two of his trial, prosecutors focused on how fragile that persona had been.

“Behind the curtain, Sam Bankman-Fried was not who he appeared to be,” Mr Rehn said.

Mr Bankman-Fried, once known for his unkempt curly locks, T-shirts and cargo shorts, wore a tan suit and sported a freshly cropped bowl haircut in court.

He stared directly at the jury box as Mr Rehn thrust out an accusing finger in his direction.

Barbara Fried and Joseph Bankman, parents of FTX founder Sam Bankman-Fried, arrive at a Manhattan federal courthouse on Wednesday (Associated Press)

Prosecutors outlined how Mr Bankman-Fried bought up swathes of luxury property for himself, his parents and friends, and also sought to gain access to celebrities and acquire political influence in Washington DC through his stolen billions.

Mr Bankman-Fried, known by his initials SBF, founded Alameda Research in 2017, before launching the FTX trading platform two years later.

FTX made money by claiming a percentage of transactions and was promoted to customers as the “most trusted way to buy and sell Bitcoin” in TV and internet commercials, Mr Rehn said.

Mr Rehn said that the former crypto golden boy began making risky investments through  Alameda by syphoning funds from unsuspecting customers.

But when cracks began to emerge and FTX customers tried to withdraw their funds, they found out their accounts had been drained, Mr Rehn said.

“Alameda didn’t have enough money to pay its bills. He doubled down – the defendant pulled even more money out of FTX.”

Mr Bankman-Fried installed his former girlfriend Caroline Ellison as the CEO of Alameda, while continuing to “call the shots”, the prosecutor said.

Ms Ellison is one of three former executives who have pleaded guilty to crimes related to the downfall of FTX and Alameda, and who are expected to appear as prosecution witnesses.

FTX filed for bankruptcy in November, and Mr Bankman-Fried was arrested and extradited from the Bahamas late last year. The trial in Manhattan federal court is expected to last six weeks.

FTX founder Sam Bankman-Fried leaves Manhattan federal court in June (Associated Press)

And in the defence’s opening statement, his lawyer Mark Cohen described Mr Bankman-Fried as someone who had been misunderstood.

He said his client had been portrayed as a cartoon villain, when in reality, he was a “math nerd” who didn’t “drink or party”.

Mr Cohen argued that Mr Bankman-Fried had acted in good faith and had not intended to defraud anyone, but instead found himself out of his depth.

“Things were happening quickly, very quickly,” Mr Cohen said. “Sam and others were making hundreds of decisions a day.”

“And as a result, some things got overlooked … things an older company would have built out over time.”

The defence will seek to blame Ms Ellison for failing to protect Alameda’s investments and ignoring Mr Bankman-Fried’s advice, Mr Cohen said.

Mr Bankman-Fried has pleaded not guilty to seven counts including fraud, conspiracy to commit wire fraud and money laundering.

He faces up to 110 years in prison if convicted.

His parents Joseph Bankman and Barbara Fried, both Stanford Law School professors, were in court on Wednesday and are expected to testify at trial.

Prosecutors have said they plan to call former White House director of communications Anthony Scaramucci, whose investment firm Skybridge Capital once owned a stake in FTX.

Martin Shkreli, the so-called “Pharma bro” who was sentenced to seven years prison for securities fraud and conspiracy, was among the onlookers watching on from an overflow room at the federal court in lower Manhattan.

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