Sam Bankman-Fried’s $32billion crypto empire was ‘built on lies,’ prosecutors claim in opening statements of trial that could see the FTX fraudster face 115 years in prison
- Sam Bankman-Fried, 31, was in court Wednesday for opening statements in his fraud trial where prosecutors said his company was ‘built on lies’
- ‘Sam Bankman-Fried was committing a massive fraud and taking billions of dollars from thousands of victims,’ prosecutors said
- Bankman-Fried faces up to 115 years in prison if convicted on a slew of fraud charges
The jury has been sworn in and opening statements are underway in the fraud trial of embattled FTX founder Sam Bankman-Fried.
Bankman-Fried, 31, was in court at a bench between his two lawyers on Wednesday wearing a suit with his hair cut short at the sides. He tapped away on a laptop in front of him, which is not connected to the Internet, and stared into space, at one point putting his hand on his chin.
He sat as Assistant US Attorney Thane Rehn told the court, ‘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 $30million apartment in the Bahamas.
‘He jetted around the world in private planes, hung out with celebs 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 was built on lies.’
The jury has been sworn in and opening statements are underway in the fraud trial of embattled FTX founder Sam Bankman-Fried
Bankman-Fried, 31, was in court at a bench between his two lawyers wearing a suit with his hair cut short at the sides
Rehn said, ‘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 was money he was stealing from FTX customers.
‘Sam Bankman-Fried was committing a massive fraud and taking billions of dollars from thousands of victims.’
‘While the defendant told customers they could deposit money and FTX would keep it safe, in reality he was taking those deposits and spending them for himself
‘He spent the money on lavish houses for himself, his parents and his friends’.
Rehn said that Bankman-Fried spent the money to meet celebrities and to ‘gain influence’ in Washington by donating to politicians.
Rehn said: ‘He poured other people’s money into his own investments to try to make himself even richer.
‘Sam Bankman-Fried was committing a massive fraud and taking billions of dollars from thousands of victims,’ prosecutors said
‘A year ago, the truth started to come out. Customers tried to get their money back. That money, the customers’ money, was gone
‘The defendant had taken it.
‘FTX collapsed and its customers were left with billions of dollars in losses. That’s why we’re here today.’
The jury includes a physician’s assistant, a pediatric nurse, an unemployed social worker, a high school librarian, a retired corrections officer, a US Postal Service vehicle maintenance worker, an advertising executive and a special education teacher.
Before opening statements, Judge Lewis Kaplan read the jury through the charges including securities fraud and conspiracy.
An alternate who works night shifts at a hotel tried to get out of serving because he would be ‘tired and not able to pay attention in the case’.
But Judge Kaplan refused to let him step down, telling the juror, ‘I don’t mean to be mean,’ but said the juror should have made his working hours clear before they were chosen.
Bankman-Fried’s lawyer Mark Cohen said he ‘didn’t intend to defraud anyone’ and was ‘acting in good faith’.
He said that prosecutors had made Bankman-Fried to be ‘almost a cartoon of a villain’.
In reality he was a ‘math nerd who didn’t drink or party’ who studied at MIT before joining a trading firm on Wall St
Cohen said that FTX was a startup and that running it was ‘like building a plane as you’re flying it’.
He admitted that ‘some things got overlooked’ like having a proper risk management team which ‘became an issue when the storm hit’
Returning to the plane analogy, Cohen said that between May and November 2022, Bankman-Fried and others at FTX were ‘building the plane as they flew and about to fly into a perfect storm’
According to Cohen, Bankman-Fried saw FTX as a ‘good, innovative, profitable, dealing with a liquidity crisis and they could get through this’.
The company’s plight was not helped by Caroline Ellison, Bankman-Fried’s former girlfriend who was in charge of Alameda, who had not put on a risky bet that he requested her too in the summer.
Cohen mocked the prosecution’s focus on the apartments in the Bahamas as ‘that’s what a bad guy does, steals money, goes to the Caribbean and buys apartments’.
In fact they were to attract top talent from Google and Facebook, Cohen claimed.
The FTX adverts had been ‘taken out of context to make Sam look like a bad guy’ but were ‘appropriate’ for the business at the time
Cohen told the jury: ‘It’s not a crime to try and get Tom Brady to go on adverts for your company’.
He also took aim at the prosecution witnesses who were due to testify.
He said they were going to be ‘spinning things that were good faith decisions that they were fine with but are now claiming were sinister and deceitful’.
Brady and Bankman-Fried are pictured together in a clip they shared on social media
Bundchen is pictured on stage with FTX founder Sam Bankman-Fried in 2022 at a cryptocurrency conference in the Bahamas. She was an ambassador for the company
Bankman-Fried was arrested in his penthouse in the Bahamas as prosecutors accused him of fraud for using the company as his ‘personal piggy bank’.
They claimed that he illegally used investors’ money to buy multi-million pound properties and to fund large political donations.
Up to one million people were left out of pocket after FTX went bankrupt last November as crypto prices tumbled amid fears of a recession.
Bankruptcy lawyers have been trying to claw back some of the more than $8billion of customers’ money that vanished.
The collapse of FTX was a moment of reckoning for the unregulated crypto industry and caused a crisis that has been likened to the 2008 financial crash.
FTX was backed by numerous celebrities including Gisele Bundchen, Shaquille O’Neal and Naomi Osaka, and Bankman-Fried was hailed as its Steve Jobs-like savant.
Among those who have already pleaded guilty and are expected to testify against Bankman-Fried are his former girlfriend Caroline Ellison, who ran Alameda Research
He became famous for his mop-like hair and for wearing shorts and t-shirts as he appeared at conferences with the likes of Bill Clinton and Tony Blair and graced the cover of Fortune magazine.
FTX spent millions in political donations including $5 million to Joe Biden’s reelection campaign, vowed to give his fortune away and paid for high profile sponsorship deals including the stadium for the Miami Heat basketball team.
But now prosecutors claim the image was a tool to lure in investors and con them out of $1.8billion (£1.4billion) and pump up the value of FTX, which was $32billion (£26.2billion) at its peak.
Bankman-Fried has denied 13 counts between 2019 and 2011 including wire fraud, money laundering and violations of campaign finance laws which could see him jailed for 115 years.
Seven of them are being dealt with at this trial with the rest next year.
The indictments describe how Bankman-Fried and other executives ‘misappropriated customer funds for their own use and benefit’.
FTX declared bankruptcy last November at which point Bankman-Fried resigned and said his wealth had dropped from $20billion (£18.5billion) to about $100,000 (£80,000)
The company was taken over by bankruptcy expert John Ray, who previously oversaw the winding up of scandal-plagued energy company Enron.
Ray has said that he had never seen ‘such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here’.
According to Ray, Bankman-Fried and his henchmen were ‘grossly inexperienced and unsophisticated individuals’.
In court were Bankman-Fried’s parents, Stanford law professors Barbara Fried and Joseph Bankman, who were gifted $10million (£7.6million) by their son before FTX collapsed.
In court were Bankman-Fried’s parents, Stanford law professors Barbara Fried and Joseph Bankman, who were gifted $10million by their son before FTX collapsed
The 30-year-old’s penthouse is at the Albany marina. He set up the company’s headquarters there in The Bahamas
The couple have been sued by Ray for allegedly enriching themselves off the company, which paid Bankman a $200,000 a year salary.
After being arrested, Bankman-Fried had been given bail and was living at his childhood home in California with his parents but it was revoked after repeated breaches including allegedly giving documents to journalists.
He is being detained at the grim Metropolitan Detention Centre, which has counted R Kelly and Ghislaine Maxwell as its previous inmates.
The story of FTX has spawned multiple documentaries, podcasts and a book by Michael Lewis, whose previous works include Liar’s Poker about Wall St excess, came out on the day jury selection took place.
Among the claims in the book is that Bankman-Fried considered paying Donald Trump $5 billion not to run for President in 2024.
Among those who have already pleaded guilty and are expected to testify against Bankman-Fried are his former girlfriend Caroline Ellison, who ran Alameda Research.
She may be quizzed on her and Bankman-Fried’s drug-fueled polyamorous lifestyle where employees of FTX routinely switched partners with each other.
The SEC, the US financial regulator, filed separate civil securities fraud charges against Bankman-Fried.
Gary Gensler, chair of the SEC, has said: ‘Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto’.
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