Former FTX head Sam Bankman-Fried’s trial is set to begin on Tuesday. FTX crypto Sam Bankman-Fried, who once promoted himself as the ethical face of cryptocurrencies, faces multiple fraud and money laundering charges.
The next chapter in the fall of one-time crypto billionaire is set to begin Tuesday as the former FTX head Sam Bankman-Fried goes on trial in New York City. Jury selection in Bankman-Fried’s trial is scheduled to begin Oct. 3, while the trial itself is expected to last about six weeks.
Sam Bankman-Fried trial
Bankman-Fried, who was once viewed as a leader in digital currencies and a rare tech CEO who was attuned to ethics, will face federal charges of wire fraud, securities fraud and money laundering that defrauded customers of his digital currency exchange, FTX, and lenders to his cryptocurrency hedge fund, Alameda Research.
He has pleaded not guilty to two counts of wire fraud, two counts of conspiracy to commit wire fraud, one count of conspiracy to commit securities fraud, one count of conspiracy to commit commodities fraud and one count of conspiracy to commit money laundering, in U.S. District Court in New York City. Sam Bankman-Fried trial begins Tuesday and could run six weeks. Of those charges if convicted, several of the counts would come with maximum sentences of 20 years in prison.
FTX crypto Sam Bankman-Fried rise
He was popularly known as “SBF,” co-founded Alameda Research in 2017 and FTX in 2019. The latter offered low trading fees and benefited from the then booming crypto market. It snapped up competitors and marketed itself aggressively to become one of the largest players in the field. A celebrity-stuffed Super Bowl ad helped make it one of the best known as well.
FTX was also based in the Bahamas, temporarily putting it beyond the reach of U.S. regulators.
On paper, FTX’s valuation skyrocketed and estimates of Bankman-Fried’s personal wealth peaked at $26 billion. He became a significant political donor, giving publicly to Democrats and privately to Republicans, and breaking with other tech and crypto figures by calling for some regulation of the industry.
Sam Bankman-Fried financial fraud
On November 2, 2022, Coindesk reported that much of the balance sheet of Bankman-Fried’s trading firm, Alameda Research, was composed of a token, called FTT, issued by FTX itself, not by a separate asset with a known and established value. That was unusual, and a major financial liability for Alameda.
Days after that report, Changpeng “CZ” Zhao, CEO of rival crypto platform Binance, said his company would sell off all its FTT tokens. That huge sale tanked the value of FTT and badly damaged Alameda’s balance sheet.
Digital currency traders started pulling their money from FTX, and the platform soon blocked customers from further withdrawals. Binance agreed to buy FTX in a bailout, then backed out of the deal.
FTX U.S. bankruptcy filling
While FTX and Alameda were supposed to be separate businesses, it soon became clear that they were deeply intertwined and that FTX Sam Bankman-Fried was doing money laundering to Alameda so it could invest the funds. Bankman-Fried continued to try to raise money to save the business, but both firms, as well as FTX U.S., filed for bankruptcy on Nov. 11.
He was soon replaced as the CEO of FTX by bankruptcy expert John Ray, who said he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
Current scenario
He was scheduled to testify before Congress when he was arrested in December, in the Bahamas. He was extradited to the U.S. and initially remained on house arrest but was jailed in August after prosecutors said he had leaked diary entries by Caroline Ellison, his ex-girlfriend and the former CEO of Alameda, to The New York Times.
Ellison, like several other FTX insiders, is expected to testify against Bankman-Fried at the trial.
Sam Bankman-Fried is to be tried in March 2024 on five additional counts, including bribery of a foreign official. He has also pleaded not guilty to those charges.
