The founder of failed cryptocurrency exchange FTX “lied to the world” as part of an $15 billion AUD fraud, a court heard last night.
Sam Bankman-Fried ran a “fraud on a massive scale” and blew the money on private jets and a $45 million apartment in the Bahamas, prosecutors said.
He was accused of donating millions to political parties to win influence and hired celebrities such as NFL star Tom Brady, who appeared in glitzy adverts to lure people to deposit their cash.
FTX was worth $49 billion at its peak but the “house of cards” crashed down last November as cryptocurrency prices tumbled amid fears of a recession.
Bankman-Fried, 31, was arrested at his penthouse in the Bahamas — where FTX was based — and extradited to the US to face trial.
He has denied 13 counts between 2019 and 2011 including wire fraud and money laundering, which could see him jailed for 115 years.
Of those allegations, seven are being dealt with at this trial with the rest next year.
Assistant US Attorney Thane Rehn told Manhattan federal court: “One year ago it looked like Sam was on top of the world. He lived in a $30 million apartment in the Bahamas.
“He jetted around the world in private planes, hung out with celebrities like Tom Brady and politicians like Bill Clinton. But all of that was built on lies.
“He was using 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. The defendant lied to the world and he kept the truth a secret.”
Mr Rehn said Bankman-Fried used adverts to persuade people to put their money in FTX – and among the celebrities who promoted the platform were Mr Brady and US comedian Larry David.
His political donations included $5 million to Joe Biden’s re-election campaign.
The court heard that Bankman-Fried twice testified before Congress that FTX users’ money was safe.
But in private he committed the fraud by using a “smaller, more secretive” company called Alameda Research that he also set up and was run by his former girlfriend Caroline Ellison.
FTX customers’ money was sent to Alameda which used it to make risky investments, the court heard.
Customers “had no way to know their money was being used in this way”, Mr Rehn said.
By summer of 2022, Bankman-Fried had used Alameda to take more than $15 billion out of FTX.
In November last year crypto prices collapsed and media reports raised questions about FTX’s finances.
Thousands of customers realised that the company was a ‘house of cards’ but when they went to withdraw their money it wasn’t there.
But Bankman-Fried’s lawyer Mark Cohen insisted that while prosecutors had made Bankman-Fried out to be “almost a cartoon of a villain”, in reality he was a “math nerd” who “didn’t intend to defraud anyone”.
After being arrested, Bankman-Fried was bailed to his childhood home in California but it was revoked after he breached terms.
He is now detained at the grim Metropolitan Detention Centre in Brooklyn, which has counted Ghislaine Maxwell as its previous inmates.
The trial continues.
