Sam Bankman-Fried, center, shown in August, is accused of stealing billions of dollars in FTX customer deposits. Bebeto Matthews/Associated Press
NEW YORK — Federal prosecutors described former cryptocurrency entrepreneur Sam Bankman-Fried to jurors on Wednesday as a fraudster who knowingly stole billions of dollars from his customers and investors, as arguments in his criminal trial got underway in a downtown Manhattan courtroom.
Bankman-Fried’s lead attorney, Mark Cohen, rebutted those charges by presenting a starkly different picture of a well-intentioned – if at times overwhelmed – executive who made good-faith decisions as he built two multibillion-dollar businesses on the fly in just a few years.
A jury made up of 10 women and two men, finalized Wednesday morning, will sift through six weeks’ worth of evidence and witness testimony to determine which version they believe.
Bankman-Fried is accused of defrauding customers and investors in the FTX crypto exchange by funneling more than $8 billion of their money into risky side bets, luxury real estate and political contributions. He has pleaded not guilty to seven charges, including wire fraud and conspiracy to commit money laundering and securities fraud.
The trial represents a stark reckoning for the former crypto executive, who just 11 months ago aspired to become the first trillionaire. The man who rubbed shoulders with world leaders and celebrities, graced magazine covers and influenced the Washington debate over crypto’s future has spent the past several weeks in a notoriously squalid Brooklyn jail.
Nathan Rehn, an assistant U.S. attorney for the Southern District of New York who delivered the government’s opening statement, repeatedly referred to Bankman-Fried as a liar who sacked customer deposits to fund his lavish lifestyle and accrue wealth and influence.
“Behind the curtain, Sam Bankman-Fried was not who he appeared to be,” Rehn said. “He was committing a massive fraud and taking billions of dollars from thousands of victims” and “spending it on himself.”
Cohen, meanwhile, gave a detailed history of the rise and fall of the defendant’s two businesses – the crypto trading platform FTX and the crypto-focused hedge fund Alameda Research, which provided the liquidity for the platform’s launch – to argue that there was “nothing wrong” with the relationship between the two entities.
Bankman-Fried and his team, Cohen said, were “building the plane while they were flying it,” a dynamic he called common to start-ups, noting that FTX never named a chief risk officer.
Far from the “cartoon of a villain” the prosecution portrayed, Bankman-Fried is a “math nerd who didn’t party or drink,” Cohen argued. And even as his crypto empire entered a tailspin in November, Bankman-Fried continued to pursue “reasonable business practices,” Cohen said.
“Taking something out of context and in hindsight and calling it improper is not proof beyond a reasonable doubt,” Cohen added.
Rehn also previewed testimony from three key witnesses – Caroline Ellison, Gary Wang and Nishad Singh, all former top lieutenants of Bankman-Fried’s – who have pleaded guilty to crimes associated with their conduct at his crypto companies.
Rehn referred to Ellison – former head of Alameda Research and Bankman-Fried’s sometimes-girlfriend – as a “front” while the executive “called the shots” behind the scenes.
But Cohen later cast doubt on their motives, telling jurors to be wary of their testimony given that they want to earn more-lenient sentences by cooperating with the government. Those comments follow a submitted request by the defense on Tuesday morning to block testimony from FTX customers, investors and co-conspirator witnesses, arguing they were irrelevant to the case.
The jury also heard from the first witnesses of the trial. Marc-Antoine Julliard, a London-based commodities broker, described being drawn to invest in crypto with FTX based on its outward appearances of legitimacy. He said he ultimately lost about $100,000, a significant portion of his savings, when the platform collapsed and he was unable to withdraw any of his assets.
Jurors then took in the beginning of testimony from Adam Yedidia, a college friend of Bankman-Fried who worked at FTX as a software developer and lived with the defendant and other colleagues in a Bahamian penthouse. Yedidia said that he quit the company in November when he learned that FTX customer funds had been used to pay back loans to Alameda creditors – and that he hasn’t spoken to Bankman-Fried since.
Yedidia is expected to continue testifying Thursday.
Jurors are also set to hear this week from Wang, an FTX co-founder and chief technology officer who has pleaded guilty to fraud charges and is cooperating with prosecutors. Regulators have said Wang created the software code that allowed Alameda to siphon FTX customer funds. Rounding out the witness list this week is Matt Huang, co-founder of Paradigm, a crypto-focused investment firm that backed FTX.
By all accounts Bankman-Fried has been heavily involved in crafting his legal defense. But he and his team are facing a tough challenge. Four of Bankman-Fried’s former top lieutenants have pleaded guilty to crimes related to their conduct at FTX. Three of them are cooperating with the government and are expected to testify against Bankman-Fried. And prosecutors have accumulated millions of pages of internal company records, according to court filings.
Among the selected jurors are a pregnant physician assistant, a retired corrections officer, a high school librarian and a special-education teacher. A number of prospective jurors said they already knew something about the case, mostly from following media reports. Five of them said they had watched the most recent episode of “60 Minutes,” which featured author Michael Lewis describing his latest book, a biography of Bankman-Fried, as a “letter to the jury.” Critics have called the book too sympathetic.
But the presiding judge, Lewis A. Kaplan, said Tuesday that familiarity with FTX’s collapse would not disqualify anybody from serving on the jury. And he told others who reported having invested in crypto – all resulting in losses – that they were cleared to serve, too, as long as they affirmed they would judge the facts of the case impartially.
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