Prosecutors and the defense of Sam Bankman-Fried, founder of the bankrupt FTX platform, clashed this Wednesday in the first statements for the trial that is trying the businessman for alleged fraud and money laundering. The discussion revolved around whether the firm collapsed due to “massive” fraud or errors in business management. According to Bankman-Fried’s defense, he overlooked risk management when creating FTX, but he did not steal customers’ money. For prosecutors, he is a thief and fraudster.
The 31-year-old businessman has pleaded not guilty to the charges he faces, which revolve around using client funds for investments and his own expenses. The defense maintains that he believed that loans for risky private investments he made to Alameda Research, his investment arm, were permissible. These investments accelerated the collapse of the platform.
The Prosecutor’s Office accuses Bankman-Fried of appropriating about $10 billion from clients to invest in cryptocurrencies from Alameda. Living a life surrounded by luxury, “everything was based on lies,” he considered. “He used his company, FTX, to commit large-scale fraud, and the money to build his empire was stolen from clients,” said prosecutor Thane Rehn.
The Prosecutor’s Office trusts that former Bankman-Fried associates, such as the former Alameda manager and her ex-partner, Caroline Ellison, and former FTX executives Nishad Singh and Gary Wang, will testify against the entrepreneur, who maintains that he acted in good faith. They could prove that he was aware of the customer theft or that he was lying when talking about the security of deposits on his platform. All three have pleaded guilty and agreed to cooperate with prosecutors. Bankman-Fried “had wealth, he had power, he had influence, but all of that was based on lies,” Rehn told the jury. “He was committing massive fraud and taking billions of dollars from thousands of victims.”
Known for his casual look and mop of unkempt curls, Bankman-Fried has sported a stylish haircut and wore a suit and tie in court on both Tuesday and Wednesday. He has been in prison since August 11 after the judge ended his house arrest for alleged witness tampering. His defense states that the fall of the platform was caused by poor management in Alameda, where the risky investments made were not covered. Thus, he tried to get rid of the blame.
To defend the founder of FTX, his lawyer also fell into contradictions. At one point he assured that “cryptocurrencies are not for everyone”, just the opposite of what he preached about the platform with his slogans, with which he opened the crypto world to the general public. “Claims about FTX keeping customer money safe were a lie,” Rehn suggested.
The process, which will last about six weeks, then moved on to the questioning of witnesses, beginning with an investor who saw his investment evaporate with the fall of FTX and recounted how he unsuccessfully tried to withdraw his deposit of 100,000 dollars, about 95,000 euros, in cryptocurrencies, according to The New York Times. Bankman-Fried could spend the rest of his life behind bars if he is convicted of the seven counts of fraud he faces.
