Sam Bankman-Fried, who was once hailed as a virtuoso in cryptocurrency trading, is on trial over the collapse of FTX, the financial exchange he founded.
Bankman-Fried is accused of shuffling billions in customer funds from FTX into Alameda Research, a hedge fund he also founded.
Federal prosecutors in Manhattan have also accused Bankman-Fried of using clients’ money for personal expenses and massive political contributions to Democrats and Republicans.
Bankman-Fried, 30, has maintained his innocence. He will remain in jail throughout trial, which began on Tuesday, following allegations that he sought to sway witnesses in advance of the proceedings. His representative did not comment on the case in advance of proceedings.
Here’s what you need to know.
Bankman-Fried is accused of cheating FTX clients and Alameda’s lenders
The one-time crypto wunderkind faces seven counts, on fraud and conspiracy charges. Manhattan federal prosecutors allege that Bankman-Fried’s fraud ran from 2019 to November 2022, when FTX collapsed. The prosecution alleges that he “misappropriated and embezzled” FTX customers’ deposits and funneled “billions in stolen funds” to line his pockets and bankroll risky investments.
They claim that the diverted funds propped up his luxe lifestyle. This “exorbitant spending unrelated” to FTX, they claim, covered his personal expenses –– including more than $200m in Bahamas real estate, wild investments, and to also repay entities that had loaned money to Alameda.
Bankman-Fried allegedly threw customer money into politics
Federal prosecutors also contend that Bankman-Fried used customer money to cover more than $100m in campaign contributions to both Democrats and Republicans.
In recent court filings, prosecutors pointed at text messages from former FTX executive Ryan Salame.
Salame, who in September pleaded guilty to conspiracy in relation to unlawful political contributions and defrauding the Federal Election Commission, allegedly wrote to a family member in 2021 that Bankman-Fried “want[ed] to donate to both democtratic [sic] and republican candidates in the US”. Salame allegedly wrote that Bankman-Fried wanted to use these donations “to weed out anti crypto dems for pro crypto dems and anti crypto repubs for pro crypto repubs,” and that he would probably “route money through me to weed out that republican side”.
Bankman-Fried’s ex-girlfriend, Caroline Ellison, is expected to be prosecutors’ star witness
Ellison, who occupied dual roles as Alameda Research CEO and Bankman-Fried’s sometimes girlfriend, is expected to take the stand against him during the proceedings. Ellison pleaded guilty in December to her role in the companies’ stunning collapse. One key piece of evidence is an audio recording from an Alameda meeting on 9 November, during which she tried to soothe jittery employees.
“Starting last year, Alameda was kind of borrowing a bunch of money via open-term loans and used that to make various illiquid investments … Then with crypto being down, the crash, the – like, credit crunch this year, most of Alameda’s loans got called,” Ellison allegedly told employees. “And in order to, like, meet those loan recalls, we ended up borrowing a bunch of funds on FTX which led to FTX having a shortfall in user funds.” One staffer asked: “Who else knew about FTX’s issues?” She said Bankman-Fried. A staffer urged: “Who made the decision on using user deposits?” She replied: “Um … Sam, I guess.”
Bankman-Fried faces decades behind bars if convicted
The failed crypto whiz faces a maximum 110 years behind prison if convicted on all counts. While the likelihood of Bankman-Fried receiving the maximum sentence is low, the judge overseeing his case, Lewis Kaplan, warned that he would be poised to impose a lengthy sentence, per Reuters.
In explaining why Bankman-Fried shouldn’t be bailed pending trial, Kaplan said: “Your client in the event of conviction could be looking at a very long sentence.” Kaplan reportedly also said: “If things begin to look bleak … maybe the time would come when he would seek to flee.”
