Summary of the day
The criminal trial of the former cryptocurrency mogul Sam Bankman-Fried has completed its second day. Court will be back in session at 9.30am on Thursday, with Bankman-Fried’s former friend Adam Yedidia returning to the witness stand.
Here’s a recap of the day’s developments:
Jury selection was completed on Wednesday after a slow start on Tuesday. A panel of 12 with six alternates was selected to hear the case before attorneys for each side began presenting their opening arguments.
In his opening argument, prosecutor Thane Rehn alleged that Bankman-Fried built his empire “on lies” and lived a glamorous life of wealth and power while duping the people who invested in his companies.
The prosecution alleged that money from customer deposits was effectively going directly into Bankman-Fried’s pocket, claiming that their funds never made it into the FTX exchange and instead were funneled elsewhere without notice.
Defense attorneys countered by presenting Bankman-Fried as a “math nerd” with good intentions who got in over his head. “Sam didn’t defraud anyone. Sam didn’t intend to defraud anyone. Sam acted in good faith,” Mark Cohen said. “There was no theft.”
The defense argued that any mismanagement at FTX was the result of the company’s rapid growth which overwhelmed Bankman-Fried’s ability to make decisions. “Some things got overlooked … things an older company would have built out over time,” Cohen said.
The prosecution’s opening argument teased blockbuster testimony from Caroline Ellison – Bankman Fried’s on-again, off-again girlfriend and the one-time head of Alameda, who they claimed could describe how she and Bankman-Fried siphoned money to Alameda.
Cohen also appeared to cast Ellison as the reason behind FTX’s downfall, alleging that she ignored Bankman-Fried’s financial advice and left the companies exposed to market shocks.
The prosecution’s first witness, commodities trader Marc-Antoine Julliard, told the court he was unable to withdraw about $100,000 from FTX in early November. He said Bankman-Fried came across to him as someone who wanted “to do good towards the industry”.
The second witness, Adam Yedidia, told the court that he was a longtime friend who lived with Bankman-Fried and that he resigned shortly before the firm declared bankruptcy because he had learned Alameda used FTX customer deposits to pay back its loans to creditors.
Updated
FTX developer tells court: 'I may have unwittingly contributed to a crime'
The second witness, Adam Yedidia, said he last saw Sam Bankman-Fried in November 2022 and has not spoken to him since.
The week FTX declared bankruptcy, “I received a phone call from another developer at the company,” Yedidia said in explaining his departure.
I heard that Alameda Research had used FTX customer profits to pay back its loans to creditors.
“After you learned that, what did you do?” prosecutor Danielle Sassoon asked.
I resigned.
The company went bankrupt some time after he resigned.
Yedidia was asked why he was testifying with an immunity order.
I was concerned that, as a developer for FTX, I may have unwittingly written a code that contributed to a crime.
Updated
Longtime friend of Bankman Fried is prosecution's second witness
Adam Yedidia was the second prosecution witness to testify, and did so under an immunity order – meaning he couldn’t be charged based upon his testimony, so long as it was truthful.
Yedidia explained that he was Sam Bankman-Fried’s friend from MIT. He also worked at FTX.
“We were close friends,” Yedidia said. They lived together at times. They also worked together. At one point, that came to include FTX. Prosecutor Danielle Sassoon asked him to explain what FTX was.
“FTX was a cryptocurrency exchange,” Yedidia said. Asked to elaborate, Yedidia said:
A cryptocurrency exchange is a website where people can go [to] buy and sell cryptocurrency to each other.
Updated
Marc-Antoine Julliard said that he decided to hold his money, in part, because Bankman-Fried projected positivity with his tweets in early November 2022 despite the hits FTX and Alameda were taking.
Among the tweets was one missive from Bankman-Fried which claimed “a competitor is trying to go after us with false rumors. FTX is fine. Assets are fine.”
Julliard changed his mind about a day later. But he wasn’t able to withdraw any money from the exchange which, comprising four bitcoins and 20,000 USD at the time, was about $100,000 total.
The prosecution asked him whether he was ever able to withdraw his funds.
“Never,” Julliard told jurors.
His testimony is done. The next witness is Adam Yedidia. Prosecutors revealed that they may call Gary Wang, FTX’s co-founder, later in the week.
Marc-Antoine Julliard, the first witness to testify in the trial, said he “saw pictures of [Sam] Bankman-Fried with politicians”.
Julliard: I saw pictures of Mr. Bankman-Fried with politicians
— Inner City Press (@innercitypress) October 4, 2023
SBF's lawyer: We'd like a limiting instruction.
[So the photo is shown]
Julliard: That is Bankman Fried... and Bill Clinton... and Tony Blair
He identified Bankman-Fried in a photograph alongside Tony Blair and Bill Clinton.
“Did you ever see any advertisements about FTX?” the prosecution asked the witness, Marc-Antoine Julliard.
Julliard said he remembered FTX sponsoring Formula One. What about celebrities or influencers? “I do remember one,” Julliard said.
A model, Gisele. I don’t know her last name.
Indeed, the supermodel Gisele Bündchen and then-husband, NFL star Tom Brady, appeared in FTX advertising.
Prosecutors are using discussion of the ubiquitous advertising to show how hapless investors were lured into putting their money into the exchange by seeing familiar faces and Bankman-Fried’s successful PR campaign.
Updated
The prosecution has called its first witness to the stand.
The witness, commodities trader Marc-Antoine Julliard, said that he learned about FTX from a friend. He searched FTX online, combing through Google results and scouring social media.
“I was about to commit significant amounts of money to trading cryptocurrency, and I wanted to be sure … I wanted to assess the exchange,” said Julliard, who trades in chocolate.
He followed FTX and Bankman-Fried’s Twitter accounts.
“He would come across to me as the future face of the general crypto industry,” Julliard said.
How did he stand out? the prosecution asked.
Wanting to do good towards the industry, giving access to customers, retail customers like me … seemingly just wanted to develop the industry, really.
Updated
First witness takes stand in trial
The first witness in the trial, Marc-Antoine Julliard, has been called take the stand to testify.
Julliard tells the court that he is a “cocoa broker”.
Martin Shkreli, the “Pharma Bro” entrepreneur who became a symbol of corporate Wall Street greed after he increased the price of a life-saving drug by 5,000%, tweeted that he was at the Manhattan courthouse where Sam Bankman-Fried is on trial today.
Shkreli was released from prison in May 2022 after he was convicted in 2017 of defrauding investors in two hedge funds he ran, and scheming to defraud investors in drugmaker Retrophin Inc, where he had been chief executive.
Opening statement recap:
— Martin Shkreli (e/acc) (@wagieeacc) October 4, 2023
DEFENSE: Cohen took a mild-mannered nonchalant approach with defending SBF. He frequently said “Nothing wrong with that.” It was less convincing than the government’s argument. All of the money is gone and he was supposed to safeguard the assets. The…
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Sam Bankman-Fried trial: what is he accused of and does he face prison time?
Sam Bankman-Fried was once hailed as a cryptocurrency virtuoso. Now he’s in a Manhattan courtroom, accused of shuffling billions in customer funds from FTX into Alameda Research, the hedge fund he also founded.
Federal prosecutors have also accused Bankman-Fried of using clients’ money for personal expenses and huge political contributions. Bankman-Fried, 30, has maintained his innocence.
Here’s what you need to know now the trial is underway.
An empire ‘built on lies’, or the unintentional missteps of an altruistic ‘math nerd’?
While we wait for court to resume, and the first witness to take the stand, catch up on our full coverage of opening statements where lawyers for the prosecution and the defense painted two different pictures of Bankman-Fried.
Updated
With opening statements concluding about 1:40pm local time, the proceedings will resume at 2:40pm.
At that time, prosecutors are expected to call their first witness.
According to the Guardian’s reporter at the court, Victoria Bekiempis, the court is now taking a brief break following opening statements from the prosecution and defense.
We’ll have more coming up when proceedings resume shortly.
Updated
SBF’s attorney Mark Cohen has already planted the seeds to cast former Alameda CEO Caroline Ellison as culpable for the companies’ shaky position – and tried to distance Bankman-Fried from their operations.
“Over time, Sam stepped away from the day-to-day at Alameda, because he was running FTX,” he said. He installed Ellison.
He entrusted her to act as CEO, manage the day-to-day.
In 2021, Bankman-Fried worried about the market. What if crypto tanked?
“He spoke to Ms Ellison, the CEO, and he urged her to put on a hedge,” Cohen said.
She didn’t do so at the time, and this also becomes an issue later on.
In May, you’ll learn, that a series of market shocks took place, the price of bitcoin, the leading crypto currency, dropped by 70 percent. The entire crypto world was affected.
“Sam acted in good faith and took reasonable business measures,” Cohen said.
But because of Ellison, they weren’t as protected as they could have been, Cohen said.
Earlier in the year, Ms. Ellison did not put on the hedges for Alameda, which would have offset some of this.
Bankman-Fried’s attorney, Mark Cohen, argued that any lapses that might have happened were effectively growing pains.
“Things were happening quickly, very quickly. Sam and others were making hundreds of decisions a day,” Cohen said.
And as a result, some things got overlooked….things an older company would have built out over time.
At FTX, some of these things were still “works in progress”, he said.
Bankman-Fried 'a math nerd who acted in good faith', says his attorney
Bankman-Fried’s attorney, Mark Cohen, painted a dramatically different portrait for jurors in his opening.
“Sam didn’t defraud anyone. Sam didn’t intend to defraud anyone. Sam acted in good faith,” he said.
There was no theft.
Bankman-Fried thought the loans were “permitted”, he said. He also slammed prosecutors’ portrayal of Bankman-Fried as callously money-minded.
They’d have you think he was quite the villain — almost the cartoon of a villain.
In reality, Bankman-Fried was a normal guy, Cohen said.
He was a math nerd who didn’t drink or party.
Bankman-Fried looked toward Cohen during his opening. During the prosecutor’s opening, he appeared to look forward.
SBF's ex-girlfriend Caroline Ellison will testify how he 'took customer money again and again', says prosecution
The prosecutor also explained how former Alameda CEO Caroline Ellison will play a role in the trial.
She will tell u about how she and the defendant stole the money that customers had entrusted to FTX. She will testify that she and the defendant took customer money again and again to spend it and invest it through Alameda.
Prosecutor Thane Rehn described how the alleged financial crimes snowballed.
Sam Bankman-Fried started slowly, by taking some of the money from the bank accounts and FTX depositors, shuttling it to Alameda.
For a while, customers were able to make withdrawals from their accounts because he left some money in FTX.
As time went by, the defendant used Alameda to pull more and more customer money out of FTX and the money the defendant stole really started to add up. By the summer of 2022, the defendant had used Alameda to take more than $10bn of customer money out of FTX – $10bn, stolen from thousands of customers.
This, combined with Bankman-Fried’s bad calls on investments, created a perfect storm, he said.
“At his direction, Alameda had made a bunch of risky investments in crypto,” the prosecutor said.
Alameda didn’t have enough money to pay its bills. He doubled down – the defendant pulled even more money out of FTX.
Customers 'had no way to know SBF took billions of dollars and spent it', says prosecution
The prosecution also started to get into the inner-workings of the alleged financial misdeeds.
“Customers sometimes deposited dollars [into] FTX to trade crypto. When customers sent dollars to FTX, the company would tell them that the money was in their accounts at FTX,” Thane Rehn said.
The money never actually made it to FTX. Instead, the defendant opened a bank account that was under the control of Alameda, his other company.
So when customers thought their money was going into the exchange, they were actually sending their money right into the defendant’s pocket.
The defendant took billions of dollars in FTX customer deposits from Alameda bank accounts and he spent it – and the customers had no way to know that their money was being used in this way.
Bankman-Fried 'used Caroline Ellison as a front', says prosecution
Prosecutor Thane Rehn alluded to Caroline Ellison’s role in the companies’ downfall, describing her as his romantic partner installed as Alameda’s leader.
He was using her as a front — in reality, he was still calling the shots at Alameda.
Ellison, the former chief executive to FTX sister company Alameda Research, pleaded guilty late last year to seven offences including wire fraud, securities fraud and money laundering.
Updated
Prosecutor Thane Rehn is painting a portrait of Sam Bankman-Fried as a sort of Pied Piper of crypto –allegedly luring hapless victims into believing their money was safe by repeatedly reassuring them.
“The defendant assured customers that FTX was holding their money for them and that they would be able to withdraw their money whenever they wanted,” Rehn said.
He also said that FTX would not use customer money for itself… In other words, the defendant promised customers that the money they put into FTX was still there money — it was not FTX’s money.
The defendant put commercials on TV and the internet like this one saying that FTX was the most trusted way to buy and sell bitcoin. That’s right, FTX’s advertising slogan was about how customers could trust it.
Bankman-Fried's wealth and power 'built on lies', says prosecution
The prosecution’s opening statement just started. Prosecutor Thane Rehn quickly described how Sam Bankman-Fried’s high-flying life was built on a fraudulent house of cards.
One year ago, it looked like Sam Bankman-Fried was on top of the world. He ran a huge company called FTX. He lived in a 30m apartment in the Bahamas. He jetted around the world on private planes. He hung out with celebrities like Tom Brady and politicians like Bill Clinton.
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. Behind the curtain, Sam Bankman-Fried was not who he appeared to be. He was using his company, FTX, to commit fraud on a massive scale. And the money he was spending to build his empire- it was money he was stealing from FTX’s customers. He was committing a massive fraud and taking billions of dollars from thousands of victims.
Sam Bankman-Fried, the defendant, was committing a massive fraud and taking billions of dollars from thousands of victims.
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There are already issues with jurors. One man who was selected is asking to be dismissed, saying that he works the graveyard shift, making it hard to come to court in the morning.
Another juror asked to be excused because he doesn’t have “background as far as the legal issues are concerned and he works two jobs,” Kaplan said.
The man who had a non-refundable plane ticket for Friday asked about when court would end, so that he could re-book his flight (at a cost of some $1,000, he noted in a note to Kaplan.) One woman expressed concern over missing a medical appointment.
Kaplan is irked.
He told the juror who begged off, citing unfamiliarity with legal issues, that he’d learn about them at trial.
As for the man who works the graveyard shift, Kaplan was unmoved. He told the man that he would have likely been excused if he’d mentioned this earlier.
The ship has sort of sailed, so do the best you can.
“It’s not going to be the first time that happened, and there it is,” Kaplan said of the overnight shift-to-jury service schedule.
I don’t mean to be mean or anything, [but] we just excused a whole lot of people these past two days.
The jury for Sam Bankman-Fried’s trial has now been selected, paving the way for opening statements to begin this afternoon.
Attorneys and US district judge Lewis Kaplan reduced a pool of 45 prospective jurors to a jury of 12 with six alternates which includes a 47-year-old high school librarian who lives with her sister and has two cats, and a 68-year-old retired investment banker who attended Stanford Business School, according to Reuters.
Bankman-Fried’s parents, Stanford Law School professors Joseph Bankman and Barbara Fried, were seen arriving at the federal courthouse in lower Manhattan in the morning. They had not attended the trial on Tuesday.
Opening statements due in trial after jury selection completed
The final stages of jury selected have now been completed at the fraud trial of Sam Bankman-Fried in New York. A short break has been called.
Opening statements are expected to begin this afternoon, where Bankman-Fried has entered not guilty pleas to seven charges.
Updated
Trial resumes with jury selection
A microphone is being passed around the courtroom to prospective jurors, allowing them to tell the parties about their occupations, age, family situations and whether they’ve ever served on a jury. This is a normal proceeding.
One woman, in describing her family situation, mentioned that she had a cat, specifically a “British shorthair.”
The possible panelists hail from a variety of backgrounds. One is a social worker. Another is a train conductor.
One man drew the ire of Judge Kaplan. He said:
I have a non-refundable plane ticket to California.
It was for his daughter’s parents’ weekend at college, he said.
Kaplan sighed heavily into the mic, and said something to the effect of, “Well that’s all well and good.”
The man asked Kaplan if he wanted him to provide more information. The judge replied in the affirmative.
Alright, we’ll come back to you.
Updated
Sam Bankman-Fried’s trial entered its second day Wednesday with still more jury selection.
The prospective jurors filed back into the courtroom at 9:59am. Judge Lewis Kaplan, who is presiding over the proceedings, said Tuesday that he expected jury selection would wrap this morning and expected opening statements shortly thereafter.
As the possible jurors walked into the stately courtroom at 500 Pearl Street in downtown Manhattan, Bankman-Fried, once again wearing a gray suit, stood with his hands clasped in front of him.
His gaze alternated between the phalanx of jurors and the jury box.
When the prospective jurors were seated, Bankman-Fried looked at his laptop screen, sometimes typing.
Sam Bankman-Fried’s parents arrive at court
Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, were spotted arriving at the Manhattan courthouse for the second day of their son’s trial.
Sam Bankman-Fried's parents, Joseph Bankman and Barbara Fried, have arrived at the courthouse for Day 2 of their son's trial.
— CoinDesk (@CoinDesk) October 4, 2023
Here's @btschiller's take on how the trial is a family affair 👉 https://t.co/QP3l3iXAsy pic.twitter.com/n7RDxnRmQT
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Sunil Kavuri is not a novice investor. Sure, he hasn’t always been involved in finance: 20 years ago, he was a model. He and his identical twin brother were the stuff of local newspaper human-interest stories, straight-A lads from Rugby in Warwickshire who got firsts in economics, were both on the way to do master’s degrees in finance at Cambridge and got picked up by O2 to do the adverts for Big Brother. You might remember the ad: two floppy-haired guys horseplaying on a sofa.
After that, though, Kavuri worked for Deutsche Bank, Morgan Stanley and then JP Morgan, leaving in 2012 to do his own investing. In 2015, he started investing in cryptocurrencies, mainly bitcoin, which he saw as “digital gold”: “It has all the attributes of gold, but it’s easier to store, so it’s better than gold.” The premise of bitcoin is that the supply is fixed at 21m, so it’s a finite resource. “I saw bitcoin as a better, more portable version,” he says. “It has finance supply, it’s perfectly divisible, it’s fungible.”
But then, in the autumn of 2022, the value of crypto nosedived. As a creditor of the crypto exchange platform FTX, founded by Sam Bankman-Fried, Kavuri lost $2.1m (£1.8m). He is trying to retrieve those funds as part of a class-action lawsuit.
This leaves lay folk such as me with a number of questions. When people say they lost millions of dollars, was any of that money real? How was the hype around Bankman-Fried any different from tulip mania or other speculative bubbles? What exactly are we looking at, with the collapse in crypto last year? Was it an Enron-style event – a sound business brought down by bad actors? Or was it more of a 2007-style event – a dysfunctional system in which every person who should have known better had a hand? In fact, is that distinction real, or is the line between functional and dysfunctional a little more blurred?
What will the defense be?
Some court filings from Sam Bankman-Fried’s team have hinted that his defense wants to cast him as a misunderstood figure whose behavior was motivated by desire to help the needy, not garden variety greed.
“The defendant in this case has ADHD, which might affect things like his physical behavior, body language, or eye contact,” Bankman-Fried’s lawyers want to note. His lawyers also want to ask about effective altruism.
Court filings also indicate that his team wants to mount an “advice of counsel” defense – that is, that Bankman-Fried’s coterie of lawyers didn’t apprise him of wrongdoing, indicating that he lacked criminal intent. Judge Lewis Kaplan gave them the green light to question government witnesses about recreational drug use, within certain parameters.
Sam Bankman-Fried’s confidants were along for the ride. At his side was Caroline Ellison, Alameda’s CEO and his on-again, off-again lover.
Ellison, too, projected tech bro-like eccentricities, waxing philosophical about free love and drugs. She wrote in a now-notorious tweet.:
Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is.
The duo and eight others comprising the financial whiz’s inner circle shared a tony penthouse in the Bahamas, a living arrangement that some, including tech mogul Elon Musk, reportedly described as a “polycule”– that is, “a connected network of people and relationships, all of whom are in some way involved emotionally, sexually, or romantically with at least one other person”.
The unorthodox cohabitation reportedly also included easy access to performance-enhancing drugs, with an in-house psychiatrist at the ready to prescribe prescription stimulants.
Bankman-Fried also claimed to ascribe to effective altruism, a philanthropic movement popular among some megarich techies based on the principle of strategically donating so as to accomplish the greatest good for the greatest number of people.
Some proponents have encouraged an “earning to give” mentality, where amassing a great fortune is a moral goal as it can be donated.
The doling-out-money mantra extended to politics. He dumped more than $40m into 2022 campaign contributions; most went to Democrats and related committees. But Bankman-Fried also made substantial “dark” donations to Republican candidates and even speculated that he might be the “second or third biggest” GOP donor during the 2022 midterm election cycle, CBS News said.
At his height in 2022, Bankman-Fried rubbed elbows with the likes of Tony Blair and Bill Clinton at a crypto conference in the Bahamas, where he had moved FTX in 2021 in part over its use of a trading mechanism prohibited in the US, per the New York Times. He even recruited the then married Tom Brady and Gisele Bündchen to hawk FTX in TV commercials.
For several years, Sam Bankman-Fried was crypto’s rising star, a seemingly razor-sharp and legitimate figure in the largely opaque world.
As founder of the crypto exchange FTX and its associated hedge fund, Alameda Research, Bankman-Fried wooed private investors and lawmakers alike with his pitch of a crypto trading platform that was safer and more risk-averse than those that had preceded it.
As FTX boomed, Bankman-Fried’s profile rose. FTX and its leading competitor, Binance, would come to process most crypto trades around the world. By the age of 30, Bankman-Fried had amassed billions.
The founder played the part, known for his T-shirt-and-shorts uniform and philosophic pronouncements. Raised by Stanford law professor parents who studied utilitarianism – simply, the idea that moral action is what accomplishes the greatest good for the greatest number of people – he’d view business transactions from a similarly calculated lens.
One of the biggest questions hovering over the trial is whether Sam Bankman-Fried will himself testify.
It’s rare that defendants take the stand during their trials, as doing so carries the risk that they could incriminate themselves or leave jurors with a bad impression.
But Bankman-Fried has been an unusual defendant, appearing to find it hard to stay silent and giving frequent statements to the media following his arrest.
Judge Lewis Kaplan ultimately revoked Bankman-Fried’s bail in August, on the grounds that his interactions with the media were an attempt to intimidate witnesses such as the former head of Alameda and his on-again, off-again girlfriend, Caroline Ellison.
Before jury selection started on Tuesday, Kaplan advised Bankman-Fried of his right to take the stand in his own defense.
“You have the right to testify in your own defense in this case and decide whether or not to testify – it’s solely a decision for you,” Kaplan said. “Do you understand this?”
Bankman-Fried leaned forward in his chair, and said “Yes.”
Sam Bankman-Fried entered the courtroom on Tuesday just before 10am.
His signature look of baggy shorts and ill-fitting T-shirts had been replaced with a gray suit, and his usually unkempt hair was trimmed down. He nodded to his lawyers and took his seat.
He appeared alert as the jury selection began, powering up his laptop in front of him and at one point smiling at his lawyer. Despite potentially facing decades of imprisonment, he projected an upbeat demeanor.
As more prospective jurors entered the courtroom in the afternoon, Bankman-Fried repeatedly turned to watch them each file in. As jury selection plodded along, he seemed increasingly comfortable in the courtroom.
Sam Bankman-Fried’s cryptocurrency fraud trial entered its second day on Wednesday morning, with additional jury selection set to begin at the Manhattan federal court.
The first day of jury selection got off to a slow start. Bankman-Fried was not at the courthouse in advance of the proceedings; the judge overseeing his case, Lewis Kaplan, revealed shortly afterwards that Donald Trump’s civil trial across the alley had derailed his arrival. Kaplan said:
We can thank the delay to what’s going on in the other courtroom nearby.
After Bankman-Fried arrived, and prospective jurors filed into the courtroom at 10.37am, and so began the elimination process.
Several possible panelists said that they had read about the case. One man said that he had heard analysis of the case on Joe Rogan’s podcast, prompting strained groans in the press room.
One woman said that she could not attend, as it conflicted with her work for an upcoming Miss Universe pageant, in El Salvador, which she couldn’t miss.
Another woman said her employer had invest money in FTX and Alameda. Did they make or lose money? Kaplan asked. She replied:
Lose money.
One man claimed he could not attend due to financial hardship. Specifically, the man said he “just bought a cello, I’m paying off $600 a month.”
Updated
Bankman-Fried’s ex-girlfriend expected to be prosecutors’ star witness
Several of Bankman-Fried’s deputies and executives at the exchange, including the former head of Alameda Research and his on-again, off-again girlfriend, Caroline Ellison, are expected to testify in the trial.
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.
Ellison allegedly told 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.
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.
“Who else knew about FTX’s issues?” one staffer asked. Ellison replied Bankman-Fried. A staffer urged: “Who made the decision on using user deposits?” She replied:
Um ... Sam, I guess.
What will happen if he is convicted?
Sam Bankman-Fried 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, has warned that he would be poised to impose a lengthy sentence.
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.
What is Sam Bankman-Fried accused of?
Sam Bankman-Fried, who was once hailed as a virtuoso in cryptocurrency trading, faces seven counts, on fraud and conspiracy charges.
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 Research, a hedge fund he also founded.
In an indictment filed against the 31-year-old former billionaire in August, prosecutors also allege that Bankman-Fried used stolen customer funds to make more than $100m in campaign contributions ahead of the 2022 US midterm elections. They say he concealed the fact that FTX customer deposits were a source of those donations by directing that money from FTX’s sister trading firm, Alameda, be wired to FTX executives’ personal bank accounts. Those executives then make donations in their own names, evading restrictions on certain types of political contributions, and “thereby maximize FTX’s political influence”.
Bankman-Fried made more than $40m in donations in 2022, according to a CBS News analysis. Most of those donations were to Democrats, but Bankman-Fried has said he donated equally to Republicans using undisclosed “dark” donations.
What to expect from the trial of Sam Bankman-Fried
Good morning and welcome to our live blog coverage of the criminal trial of Sam Bankman-Fried, the former cryptocurrency mogul who faces charges on finance crimes stemming from the shocking collapse of the financial exchange he founded, FTX.
The trial caps off nearly a year of freefall for the one-time crypto wunderkind who faces seven counts, on fraud and conspiracy charges, for allegedly siphoning billions of dollars in investors’ money into risky trades and other unlawful purposes.
Additional jury selection is set to begin at the Manhattan federal court after a slow first day on Tuesday. Bankman-Fried was not at the courthouse in advance of the proceedings, and it was later revealed that Donald Trump’s civil trial across the alley had derailed his arrival.
Federal prosecutors have accused Bankman-Fried of using customer funds to plug losses at FTX’s associated hedge fund, Alameda Research, as well as buying up high-priced real estate, funding his pet philanthropy projects and making extensive political donations.
Bankman-Fried has acknowledged inadequate risk management, but denied stealing funds. He is expected to argue that FTX’s Terms of Service did not prohibit the exchange from using customer funds for its own purposes, as long as it allowed users to withdraw their money.
The trial is expected to last about six weeks, and longtime federal Judge Lewis Kaplan will oversee the proceedings. Several of Bankman-Fried’s deputies and executives at the exchange, including the former head of Alameda and his on-again, off-again girlfriend, Caroline Ellison, are expected to testify in the trial. It is not yet clear whether Bankman-Fried himself will testify in his defense.
Bankman-Fried has pleaded not guilty to all seven charges. He will remain in jail throughout trial, following allegations that he sought to sway witnesses in advance of the proceedings. If convicted, he could face life in prison.
No cameras will be allowed in the courtroom.
