Sam Bankman-Fried: Trial of ‘Crypto King’ begins

Former crypto billionaire Sam Bankman-Fried is staring down decades in prison, as his trial over what has been called one of the biggest financial frauds in US history gets under way.

Opening arguments in the case are expected later in New York, after jury selection on Tuesday.

The 31-year-old, who once ran one of the world’s biggest cryptocurrency exchanges, is accused of stealing billions from customers and investors.

He has denied the claims.

The son of Stanford law professors, Mr Bankman-Fried rose to fame after founding FTX, a platform where customers could trade digital currencies, in 2019.

He became a kind of crypto spokesman in Washington, known for his curly mop, sports sponsorships and hobnobbing with celebrities like American football star Tom Brady and comedian Larry David.

As crypto markets soured in 2022, he stepped in as a saviour for smaller firms, earning him the nickname, the “King of Crypto”.

But a few months later, he was arrested and charged with fraud, after FTX collapsed into bankruptcy, with more than $8bn (£6.6bn) reported missing.

Mr Bankman-Fried’s arrival at the federal courthouse on Tuesday kicked off what is expected to be a roughly six-week courtroom battle.

The moment drew dozens of reporters to the courthouse, some lining up as early as 5am for a glimpse of the man whose dramatic fall from grace seemed to force a reckoning for the wider crypto industry.

“All eyes are going to be on it,” said Renato Mariotti, a former federal prosecutor and a partner at law firm Bryan Cave Leighton Paisner.

“It has added significance given the state of the crypto industry and the state of regulation in the United States.”

The trial is expected to shine a light on the heady deal-making in a sector that has been dogged by questions of legitimacy since its start but for a time seemed to mint billionaires, at least on paper, almost overnight.

In its indictment, the Department of Justice alleged that Mr Bankman-Fried used customer funds placed at FTX to spend extravagantly, buying property and making more than $100m in political donations.

He also allegedly used the money to cover losses at his trading firm, Alameda Research, lying to investors and banks about the ties between the two companies.

In media interviews, including with the BBC, Mr Bankman-Fried has admitted to sloppy record keeping but denied intentional wrongdoing.

Administrators for the bankrupt FTX had recovered more than $7bn as of August. Mr Bankman-Fried’s lawyers have argued in court filings that he was following legal advice at key points.

But four of his closest business colleagues and allies – including ex-girlfriend and former Alameda chief Caroline Ellison – have already pleaded guilty. Three are expected to testify against him.

Analysts said the odds of winning favour the government, which has an overwhelming record in cases like this.

“I don’t hear a strong defence that he has created yet,” said John Coffee Jr, a professor at Columbia Law School. “He may convince people he’s kind of a bumbling fool but that’s not really a defence that will work very well when there are all these other people testifying against him.

“This is not a ‘he said, she said’ case. It’s a ‘he said and six other she saids’ saying the reverse,” he added, noting that it will be difficult for Mr Bankman-Fried’s lawyers to sow doubts about the credibility of so many witnesses.

Mr Bankman-Fried has been awaiting trial from prison since August, when Judge Kaplan revoked his bail after it was determined that he gave Ms Ellison’s private writings to a New York Times reporter.

Though he has remained unusually vocal since his downfall, it is not clear if he will speak in his own defence.

In court on Tuesday, where he appeared in a suit with his typically dishevelled locks trimmed, he told Judge Lewis Kaplan he understood that that would be his choice.

Lawyers for the two sides said a plea deal was never discussed.

Mr Bankman-Fried’s best hope is to find a sympathetic member of the jury, experts said.

“All you need is one juror to say, ‘Not guilty, the government hasn’t proven its case beyond a reasonable doubt,'” said Ira Lee Sorkin, a lawyer at Mintz & Gold who represented disgraced financier Bernie Madoff.

Danya Perry, a former assistant US attorney for the Southern District of New York, said the outcome of the trial was likely to determine the wider consequences of the FTX collapse, as Congress debates new rules for the industry and the government pursues legal battles with several other firms and founders.

“It’s really just a question of how far regulation goes to make sure something like this doesn’t happen again,” she said.

“That story is yet to be told – what the reverberations are going to be.”