Current:Home > Contact-usSam Bankman-Fried set to face trial after spectacular crash of crypto exchange FTX-LoTradeCoin
Sam Bankman-Fried set to face trial after spectacular crash of crypto exchange FTX
View Date:2024-12-23 20:46:23
Sam Bankman-Fried's trial is set to kick off on Tuesday, with the founder of failed cryptocurrency exchange FTX facing a potential prison term of more than a century if convicted of federal fraud and money-laundering charges. The case also thrusts the emerging crypto trading industry, tarnished by a series of high-profile bankruptcies and questions about investor risks, into the spotlight.
FTX blew up over a four-day period in November, and Bankman-Fried was arrested the following month. The man who once cast himself as a benign presence in a dog-eat-dog industry, he is accused of running a scam in which billions were swiped from customers to fund outside ventures including political contributions and the purchase of luxury real estate.
"House of cards"
Bankman-Fried has pleaded not guilty to charges including securities fraud, wire fraud and money laundering. Jury selections starts in U.S. District Court in Manhattan, with the proceedings expected to last six weeks. Other charges were dropped, but may return at another trial in 2024.
"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," Securities and Exchange Commission Chair Gary Gensler said in announcing charges in December against the FTX cofounder and then CEO. The case "is a clarion call to crypto platforms that they need to come into compliance with our laws," Gensler added.
Bankman-Fried from the beginning was improperly shifting FTX customer deposits to cover trades by a hedge fund, Alameda Research, that he controlled, according to the SEC. That included "lavish real estate purchases and large political donations," regulators alleged.
Prosecutors are likely to focus on Bankman-Fried's use of customer money, rather than delving too deeply into the complex world of cryptocurrencies, according to one former federal prosecutor.
"Prosecutors are going to say, 'Look at where the money went and how it was spent,'" said Michael Zweiback, co-founder of the law firm Zweiback, Fiset & Zalduendo. "This case is less about complicated investments and all about garden-variety fraud."
Ex-colleagues expected to testify
Some cards are already stacked against Bankman-Fried, who has chalked up FTX's collapse to a series of mistakes. Four of his closest associates have pleaded guilty to fraud and other criminal charges, and three are expected to testify against him in exchange for lighter sentences.
That includes Caroline Ellison, the former CEO of Alameda and Bankman-Fried's off-and-on girlfriend, along with FTX co-founder Gary Wang.
"I expect the government is going to be able to show that Bankman-Fried knew what he was doing was wrong, and here are the people in the room who can corroborate that story," said Christine Adams, a former prosecutor and a partner at Adams, Duerk & Kamenstein.
The defense is expected to argue that while Bankman-Fried made mistakes, they don't equate to fraud and that FTX was among many such firms to collapse when the cryptocurrency market caved last year.
Another FTX executive, Ryan Salame, pleaded guilty on Sept. 7 to making illegal campaign donations to Republicans on behalf of Bankman-Fried, who was publicly donating to Democrats. It's not known if Salame will testify against Bankman-Fried.
Bankman-Fried has spent the past month and a half jailed in Brooklyn after getting his bail revoked by the judge in his case, who ruled that the crypto exec had tried to interfere with witnesses.
Before FTX imploded and filed for bankruptcy in November of 2022, Bankman-Fried was a titan in the world cryptocurrency, with a net worth on paper of $32 billion. Known for hobnobbing with politicians on both sides of the aisle, when smaller crypto firms began blowing up early last year, Bankman-Friedman publicly said he would help prop up the market.
A son of Stanford University law school professors, Bankman-Fried studied physics and mathematics at the Massachusetts Institute of Technology in the 2010s before landing at a Wall Street investment firm in 2014. He quit in 2017 to move to San Francisco, where he helped start Alameda and then FTX in 2019.
John Ray III, a restructuring expert in charge of cleaning up FTX in bankruptcy, has described conditions within FTX as worse than Enron, the energy-trading company behind one of the biggest accounting frauds in U.S. history.
The crypto industry is still finding its footing in the wake of FTX's collapse. Ethereum and bitcoin have lost two-thirds of their value from a year ago, and trading volume in crypto is half of previous levels.
Bankman-Fried's former rivals are also drawing scrutiny. The SEC this summer levied charges against Binance and its founder that are akin to those against FTX. The agency has also charged crypto exchange Coinbase with securities violations.
—The Associated Press contributed to this report.
veryGood! (6)
Related
- 'Survivor' 47, Episode 9: Jeff Probst gave players another shocking twist. Who went home?
- Statins vs. supplements: New study finds one is 'vastly superior' to cut cholesterol
- CDC issues new opioid prescribing guidance, giving doctors more leeway to treat pain
- This is America's most common text-messaging scam, FTC says
- UFC 309: Jon Jones vs. Stipe Miocic fight card, odds, how to watch, date
- Tesla's charging network will welcome electric vehicles by GM
- California voters enshrine right to abortion and contraception in state constitution
- Sorry Gen Xers and Millennials, MTV News Is Shutting Down After 36 Years
- Mike Williams Instagram post: Steelers' WR shades Aaron Rodgers 'red line' comments
- Bad Bunny and Kendall Jenner Soak Up the Sun on Beach Vacation With Friends
Ranking
- Massive dust storm reduces visibility, causes vehicle pileup on central California highway
- See pictures from Trump indictment that allegedly show boxes of classified documents in Mar-a-Lago bathroom, ballroom
- Russian state media says U.S. citizen has been detained on drug charges
- This is America's most common text-messaging scam, FTC says
- Daniele Rustioni to become Metropolitan Opera’s principal guest conductor
- Doctors who want to defy abortion laws say it's too risky
- Why China's 'zero COVID' policy is finally faltering
- RHONJ Preview: See Dolores Catania's Boyfriend Paul Connell Drop an Engagement Bombshell
Recommendation
-
Kevin Costner says he hasn't watched John Dutton's fate on 'Yellowstone': 'Swear to God'
-
Donald Trump indicted in documents probe. Here's what we know so far.
-
‘This Was Preventable’: Football Heat Deaths and the Rising Temperature
-
Fossil Fuels on Federal Lands: Phase-Out Needed for Climate Goals, Study Says
-
Man charged with murder in fatal shooting of 2 workers at Chicago’s Navy Pier
-
Medical bills remain inaccessible for many visually impaired Americans
-
Pruitt’s Anti-Climate Agenda Is Facing New Challenge From Science Advisers
-
Roberta Flack announces she has ALS