What to Know About Sam Bankman-Fried’s Fraud Trial

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Sam Bankman-Fried, the founding father of the collapsed FTX cryptocurrency alternate, is about to face trial, after a yearlong company saga that has made headlines around the globe and devastated the digital asset trade.

Right here’s what to learn about his case.

Federal prosecutors have charged Mr. Bankman-Fried with orchestrating an enormous scheme to siphon billions of {dollars} of FTX buyer cash into political contributions, actual property purchases, charitable donations and enterprise investments. He’s additionally accused of mendacity to his enterprise capital backers and to the businesses that lent FTX cash.

The scheme was uncovered in November when a run on deposits pressured FTX to close down withdrawals, with greater than $8 billion in buyer funds lacking. 5 weeks later, prosecutors in Manhattan charged Mr. Bankman-Fried with eight counts, together with wire fraud, securities fraud, commodities fraud, cash laundering and marketing campaign finance violations.

Prosecutors later dropped the marketing campaign finance cost, so Mr. Bankman-Fried faces solely seven counts. After his arrest, the prosecutors additionally accused him of further crimes, together with financial institution fraud and bribery of a overseas authorities, however these new prices have been punted to a potential second trial, scheduled for March.

Mr. Bankman-Fried oversaw two core companies: FTX and a hedge fund known as Alameda Analysis.

FTX served as a market for individuals to purchase and promote digital currencies; they might deposit {dollars} after which spend them on Bitcoin, Ether or a whole bunch of different newfangled cash, storing their financial savings on the platform. In some international locations, prospects may additionally borrow funds from FTX to enlarge bets on crypto costs, a dangerous sort of buying and selling that was banned in the USA.

Alameda was, at the very least in principle, merely a big buyer of FTX that used the platform to commerce digital currencies. However in keeping with prosecutors, Mr. Bankman-Fried allowed Alameda to borrow a nearly limitless quantity from FTX after which funneled a lot of that cash into different tasks. For instance, regulators say, Alameda used buyer funds to make giant loans to FTX executives, who spent the cash on political donations.

It’s not fully clear. However after FTX filed for chapter, Mr. Bankman-Fried blamed an accounting error that he mentioned had brought about billions of {dollars} of consumer funds to fade with out his data. He has additionally blamed his Alameda colleagues for failing to institute correct threat administration protocols. And in authorized filings, his legal professionals have mentioned they plan to argue that two giant legislation companies approved most of his actions at FTX.

Mr. Bankman-Fried faces an uphill battle in courtroom. His three closest colleagues — Alameda’s chief government, Caroline Ellison, and two FTX co-founders, Nishad Singh and Gary Wang — all pleaded responsible to fraud prices and agreed to cooperate towards him. (A fourth government, Ryan Salame, pleaded responsible with out signing a cooperation settlement.)

The decide overseeing the case, Lewis A. Kaplan, has repeatedly sided with the prosecution in procedural disputes main as much as the trial, rejecting a slate of professional witnesses the protection had hoped to name. Since August, Mr. Bankman-Fried has needed to put together his case from a jail cell in Brooklyn after Decide Kaplan revoked his bail, ruling that he had repeatedly tried to intrude with witnesses.

It’s slated to final six weeks, in keeping with courtroom filings.