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One of the most-watched fraud trials in years is about to begin in New York. In the dock is Sam Bankman-Fried, who once owned a $32bn business and seemed to have the world at his feet.
The 31-year-old was a dishevelled-looking whizzkid who had A-listers lining up to endorse and invest in his crypto exchange, FTX.
There were glossy TV ads for the Super Bowl with Larry David, Gisele Bündchen and Tom Brady. He donated millions of dollars to good causes, and said in interviews that he wanted to give most of his fortune away.
But his empire came crashing down, and investors lost billions. He’s been accused of building his fortune on lies, which he denies, and he faces up to 115 years in prison.
Who is Sam Bankman-Fried?
Born to prominent liberal academics and growing up in the shadow of Silicon Valley, Mr Bankman-Fried showed an astonishing aptitude for maths puzzles at an early age.
After graduating with a physics degree from the Massachusetts Institute of Technology (MIT), he joined the trading firm Jane Street. It was there that he started donating half his salary to charity and embracing effective altruism, a movement whose proponents say they take an evidence-based approach to charitable giving.
Bankman Fried once appeared on stage at a conference with former UK leader Tony Blair and former US President Bill Clinton
His parents were major influences – both are Stanford law professors who are well-known advocates for social equity. Michael Lewis, author of a new book about Mr Bankman-Fried, told the BBC he believes the entrepreneur simply saw cryptocurrency as a means to make money to change the world.
In 2017, Mr Bankman-Fried co-founded Alameda Research, a crypto hedge fund which he says was at one point making him a million dollars a day. Two years later he set up FTX in Hong Kong.
What was FTX?
FTX was launched in 2019 by Mr Bankman-Fried and his former MIT classmate Gary Wang.
The exchange acted like an unregulated bank, allowing people to trade money for crypto coins, such as Bitcoin, and store their funds for safekeeping.
At its peak, FTX executives said the platform was facilitating $10bn-$15bn trading every day.
In early 2022, FTX was valued at $32bn and was on its way to becoming a household name. It had even gave its name to an NBA stadium.
The implosion of Mr Bankman-Fried’s empire began after a bombshell investigation into FTX by news site Coindesk, which said that his companies were in a risky financial situation. Further reporting accused FTX of misusing customer funds.
Panicked customers raced to withdraw billions of dollars out of the FTX exchange platform, until it went bust and filed for bankruptcy on 11 November 2022.
What is Sam Bankman-Fried accused of?
According to US Attorney Damian Williams of the Southern District of New York, he committed one of the biggest financial frauds in American history.
The central allegation is that Mr Bankman-Fried used customer funds to prop up his own risky investments in Alameda Research. Prosecutors say he also spent millions, taken from deposits, on a luxury lifestyle and political donations – some of which are being considered illegal.
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Bankman-Fried was arrested in the Bahamas, where he stayed in a $30m penthouse apartment
When FTX collapsed, more than a million people were left out of pocket because they were unable to get their money out in time.
Several of Mr Bankman-Fried’s colleagues have already pleaded guilty, including his former girlfriend, Caroline Ellison.
What was Caroline Ellison accused of?
Ellison is the former CEO of Alameda Research and she joined the firm in 2018, reportedly because she wanted a high-paying job in order to give more money to good causes.
She pleaded guilty to wire fraud and money laundering in December last year and is preparing to testify against her former boyfriend at the trial.
In a recording made in November 2022, at time when it was clear that Alameda was going to collapse, she is heard telling staff that it was Mr Bankman-Fried’s idea to use FTX customers’ money.
How might the trial play out?
Mr Bankman-Fried has pleaded not guilty to all seven charges. In interviews he has acknowledged inadequate risk management, but denied stealing funds.
If the jury finds him guilty on the seven charges against him in this trial – more charges await him in a second trial next year – the judge could order the sentences be served concurrently, hence the potential for him to spend the rest of his life behind bars.
Inmates are not usually allowed extra clothes, but this month, Mr Bankman-Fried won the right to wear smart dress for the trial.
Well-known for dressing casually in shorts and T-shirts, the court has agreed to provide him with three suit jackets, four dress shirts and three pairs of trousers.
