Sam Bankman-Fried, the founder of failed cryptocurrency exchange FTX, is on trial for seven counts of wire fraud and conspiracy.
Bankman-Fried founded FTX because he was frustrated with other exchanges used by his crypto trading firm Alameda Research, according to a profile from FTX investors Sequoia Capital. But FTX was a fraud “from the start,” the Securities and Exchange Commission alleges.
Bankman-Fried is accused of misappropriating and embezzling FTX customer deposits, according to the superseding indictment. He represented himself as the Good Boy of Crypto, “spending millions of dollars to promote FTX and its sister company FTX.US as safe places to invest in cryptocurrency,” the indictment says. Meanwhile, “FTX’s finances contained a multi-billion-dollar deficiency caused by his own misappropriation of customer funds from the exchange.”
The customer money was used by Bankman-Fried to, variously, make billions of dollars of investments, buy $200 million of real estate, and repay Alameda’s lenders, according to the indictment.
The entire scheme came to light after CoinDesk published a blockbuster article about Alameda’s balance sheet. It showed that FTX and Alameda were very closely linked and that a lot of the balance sheet consisted of the FTT token, which was issued by FTX. That article led to Binance CEO Changpeng “CZ” Zhao — a former investor in FTX — saying he would sell his holdings of FTT.
A series of events resulted, which ended in FTX’s bankruptcy and Bankman-Fried’s resignation from the company. Ellison was charged by the SEC with manipulating the price of FTT, which inflated Alameda’s balance sheet. That misled people about FTX’s risk exposure from Alameda.
Besides the financial shenanigans, there is also the salacious aspect of the case. Bankman-Fried’s ex-girlfriend and childhood friend are testifying against him. The court has ruled questions about recreational drug use and political donations are fair game.
You can follow along below for all the latest updates and regular updates from the trial.
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a:hover]:text-gray-63 [&>a:hover]:shadow-underline-black dark:[&>a:hover]:text-gray-bd dark:[&>a:hover]:shadow-underline-gray [&>a]:shadow-underline-gray-63 dark:[&>a]:text-gray-bd dark:[&>a]:shadow-underline-gray”>Photo illustration by Cath Virginia / The Verge | Photo by Drew Angerer, Getty Images The difficult part of a fraud case is usually establishing a defendant knowingly lied — unless, apparently, the defendant is Sam Bankman-Fried.
Today the government has made a brisk case for one count in the indictment and is close to making a case for a second one, as two of Bankman-Fried’s college roommates testified against him. We also heard about Bankman-Fried’s love life and bean bag chair.
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Full court press.
Liz Lopatto is on the ground, covering the Sam Bankman-Fried trial. But if you want even more curly-haired crypto baby in your life, our pals at New York will be reporting it out in their excellent newsletter Court Appearances.
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SBF Day 3: Bankman-Fried’s roommate’s testimony continues.
I expect to hear a lot more about that expensive Bahamas penthouse during today’s hearings in the case of the former FTX CEO, and possibly some fireworks on the cross, as Adam Yedidia is immunized from prosecution.
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a:hover]:text-gray-63 [&>a:hover]:shadow-underline-black dark:[&>a:hover]:text-gray-bd dark:[&>a:hover]:shadow-underline-gray [&>a]:shadow-underline-gray-63 dark:[&>a]:text-gray-bd dark:[&>a]:shadow-underline-gray”>Photo Illustration by Cath Virginia / The Verge I have never seen Sam Bankman-Fried so still as he was during the prosecution’s opening statement. The characteristic leg-jiggling was absent. He barely moved as the prosecutor listed the evidence against him: internal company files, what customers were told, the testimony of his co-conspirators and his own words.
His hair was shorn, the result of a haircut from a fellow prisoner, the Wall Street Journal reported. He wore a suit bought at a discount at Macy’s, per the Journal; it hung on him. He appeared to have lost some weight.
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Dogecoin shows up in court.
Per Matthew Russell Lee of Inner City Press, a witness in the ongoing Sam Bankman-Fried trial had to spell out “D-O-G-E” in response to a question from a prosecutor. It doesn’t look like there were any follow-up questions about a cryptocurrency based on a meme. It’s probably for the best.
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Today on The Vergecast: Big Tech goes to court.
The government is in the middle of a trial with Google, heading toward one with Amazon, and in general trying to change the way we think about monopolies. Also: Sam Bankman-Fried’s trial has begun, and it has already been eventful. All that, and an ebook debate, on the flagship podcast of the Sherman Act.
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Day 2: We expect opening arguments in the Sam Bankman-Fried trial today.
We don’t have a jury yet for the trial of the former crypto CEO, but we will soon. After that, it’s opening arguments and, if I’m lucky, our first witness.
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Day 1: Sam Bankman-Fried got a haircut and other matters.
The first day of the trial is over, but we haven’t selected a jury yet.
Bankman-Fried, who appeared with a shorter haircut and sporting a suit, wasn’t offered a plea deal because when the government raised the question of plea discussions, the defense said no, said Nicholas Roos, one of the federal prosecutors. Two prospective jurors lost money in crypto, one along with his twin brother; another potential juror’s fiancé lost in crypto as well.
There were a couple Madoff mentions, as well. We should have a jury and opening statements tomorrow.
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The scariest thing about prison for Sam Bankman-Fried is the lack of internet.
Michael Lewis, interviewed on his time with Sam Bankman-Fried, says:
I do think that if he had the internet, he could survive jail forever. Without having a constant stream of information to react to— I think he may go mad. If you gave Sam Bankman-Fried a choice (this is quite serious) of living in a $39 million penthouse in the Bahamas without the internet, or the Metropolitan Detention Center in Brooklyn with the internet, there’s no question in my mind he’d take the jail.
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a:hover]:text-gray-63 [&>a:hover]:shadow-underline-black dark:[&>a:hover]:text-gray-bd dark:[&>a:hover]:shadow-underline-gray [&>a]:shadow-underline-gray-63 dark:[&>a]:text-gray-bd dark:[&>a]:shadow-underline-gray”>Image: The Verge The trial of Sam Bankman-Fried is likely to be more consequential than just whether the man himself is found guilty. Depending on what evidence is introduced during the trial, it could be rough for the entire crypto industry.
“How much damage can this trial do to the already beaten-down reputation of the industry at this point?” asks Yesha Yadav, a law professor at Vanderbilt University. “This trial is going to be an excruciating moment for the industry because no one knows what kind of evidence might come out.”
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a:hover]:text-gray-63 [&>a:hover]:shadow-underline-black dark:[&>a:hover]:text-gray-bd dark:[&>a:hover]:shadow-underline-gray [&>a]:shadow-underline-gray-63 dark:[&>a]:text-gray-bd dark:[&>a]:shadow-underline-gray”>Illustration: The Verge; Image: Getty Images The lawyers who represent what’s left of FTX filed suit against Sam Bankman-Fried’s parents, saying they “exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars.” The point of the suit is to get that money back so it can be paid out to the people FTX owes.
Before all this, Barbara Fried and Joseph Bankman were already well-known and respected Stanford Law School professors. Last week, Bloomberg dropped a fascinating profile of the two of them.
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a:hover]:text-gray-63 [&>a:hover]:shadow-underline-black dark:[&>a:hover]:text-gray-bd dark:[&>a:hover]:shadow-underline-gray [&>a]:shadow-underline-gray-63 dark:[&>a]:text-gray-bd dark:[&>a]:shadow-underline-gray”>Photo by Jabin Botsford/The Washington Post via Getty Images Cryptocurrency has a lot of heels. Sam “SBF” Bankman-Fried was a face — until last week.
Before last week, Bankman-Fried ran FTX, crypto’s third-largest exchange by volume. The No. 1 largest exchange was (and is) Binance, run by Changpeng “CZ” Zhao. In recent months, Binance has lived with a cloud over its head — it’s being investigated by multiple federal agencies over its BNB token, insider trading, and money laundering.
