NEW YORK (E24): FTX founder Sam Bankman-Fried is fighting a steep uphill battle in the court in New York, where he appeared in court today in one of the biggest fraud cases in American history.
CASE DOCUMENTS: A man pushes a trolley with binders labeled “United States vs. Samuel Bankman-Fried” into the courtroom in New York. The marking also shows that this is the defence’s documentation. Photo: Pete Kiehart / E24Published: Published:
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The short version
FTX founder Sam Bankman-Fried is on trial in New York as part of one of the biggest fraud cases in American history. Bankman-Fried, one of the world’s richest men, is on trial for, among other things, fraud and money laundering that cost investors and customers more billion dollars. At the heart of the case is the misuse of FTX customer deposits for political donations, speculative investments and luxury real estate purchases. Several former colleagues, including his ex-girlfriend Caroline Ellison, have pleaded guilty and will testify. So will former technical manager Nishad Singh and co-founder Gary Wang. After FTX’s bankruptcy, the company has also sued Bankman-Fried and his parents in an attempt to recover more lost money.
The summary is made by the AI tool ChatGPT and quality assured by E24’s journalists
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A year ago, Sam Bankman-Fried (31) was one of the technology industry’s golden boys.
With a fortune of over NOK 260 billion, he was one of the world’s richest men. He had shared the stage with political greats such as Bill Clinton and Tony Blair. Celebrities such as Tom Brady and Gisele Bündchen advertised his company, and his face graced the covers of Forbes and Fortune magazines.
Now he will fight federal prosecutors for the next six weeks, in a case referred to as one of the biggest financial frauds in American history.
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The billion drop in the Bahamas
The first day of the trial is devoted to jury selection, and the accused crypto-top entered the courtroom in Manhattan just before ten o’clock local time, wearing a dark gray suit and tie.
The characteristic bushy mop of curly hair is cut short, and the 31-year-old had a serious discussion with two defenders while occasionally taking notes.
E24 followed the proceedings via television broadcast in one side room, as did dozens of other members of the press. Several had been waiting outside in pitch darkness since 06.00 to secure a place inside the courtroom.
LONG QUEUES: The press gathered early outside the courtroom in Manhattan on the first day of the trial against Sam Bankman-Fried. Photo: Pete Kiehart / E24
The trial against Sam Bankman-Fried has received a lot of attention in the American media, partly because of the celebrity factor and the large sums of money involved. In addition, star author Michael Lewis launched a book about the entrepreneur on the opening day.
But the trial is also critical for an entire industry, says law professor Yesha Yadav at Vanderbilt University.
– This is without a doubt a really, really deeply important moment for the crypto industry – both positively and negatively, says Yadav to E24.
On the one hand, the industry will once again be associated with negative headlines in the media as the evidence becomes public. On the other hand, the trial provides an opportunity to move forward, the law professor believes.
– The crypto industry can try to present itself as an industry that has gotten rid of black sheep, and that holds them accountable, she says.
Violent rise
Sam Bankman-Fried founded the crypto exchange FTX in 2019, two years after he had helped start the crypto investment company Alameda Research.
Over the next two years, cryptocurrency took off, and in July 2021, FTX became appreciated to over DKK 180 billion.
In the same year, Sam Bankman-Fried moved the company to the Bahamas, where he and his colleagues dealt in luxury property for over NOK 1.2 billion, according to an overview prepared by Reuters.
At the same time, the crypto entrepreneur spent huge sums on political donations, and in 2022 he was the largest donor to the Democratic Party after George Soros, writes Washington Post.
FRAUD INDICTMENT: Sam Bankman-Fried was driven from a Brooklyn jail to Manhattan federal court on the first day of court. Here he leaves the court during an earlier procedure. Photo: Seth Wenig/AP
In November last year, everything unraveled.
The triggering revelation was that FTX had loaned NOK 82 billion of its customers’ money to Alameda Research – despite the fact that the two companies were supposed to be completely independent of each other.
Alameda spent the money on risky investments, including FTX’s own cryptocurrency. When customers rushed to withdraw their funds, the money was gone.
As a result of the liquidity squeeze, the company collapsed within just one week.
Read more details about the collapse in the fact box below.
FTX
Crypto exchange where customers can trade cryptocurrency, with headquarters in the Bahamas. Founded by Sam Bankman-Fried and Gary Wang in 2019. Was at most valued at over NOK 320 billion. Traded a number of different cryptocurrencies, but also had its own coin, FTT. 2. In November 2022, it became known that the lion’s share of the FTT holdings were with Alameda Research, an investment company owned by Bankman-Fried that was supposed to be completely independent of FTX. Bankman-Fried had previously been the general manager of the investment company, but left in October 2021.6 . In November, one of the world’s second largest crypto players, Chinese Changpeng Zhao, announced that he would sell his holdings in FTT. This created pressure on the price and started a banking crisis, where customers tried to sell their coins. FTX ended up in a liquidity crunch and was unable to pay out all customers and had to stop withdrawals. Then the price collapsed. Changpeng Zhao said on November 8 that it might be appropriate for his Binance to buy FTX, but he withdrew the next day, causing FTX to collapse completely. 11. In November, Bankman-Fried resigned as CEO, and FTX filed for bankruptcy protection. Later it became known that FTX had lent around NOK 82 billion in customer deposits to Alameda Research, which used them on risky and speculative investments. Over a million people may have lost money from the collapse. In December, Sam Bankman-Fried was arrested in the Bahamas, and later he was extradited to the United States. He is charged with several counts of fraud, but has pleaded not guilty. The penalty is up to 115 years in prison. The first of two Trials begin in New York, Tuesday, October 3.
Sources: E24, Wikipedia, Wall Street Journal, Bloomberg
Sea view
In December last year, Bankman-Fried was arrested in his luxury apartment in the Bahamas, and then extradited to the United States. The indictment against the former crypto top includes, among other things, fraud and money laundering, which may have cost investors and customers several billion dollars.
The ex-boyfriend testifies
The core issue is whether Bankman-Fried managed the misuse of FTX’s customer deposits to fund political donations, speculative investments and luxury real estate purchases.
E24 has been in contact with the crypto founder’s defenders, who have no opportunity to comment on the matter. The 31-year-old has pleaded not guilty to all charges.
After the bankruptcy was a fact, he started a kind interview pairwhere he repeatedly expressed that he lacked overview.
Vanderbilt professor Yesha Yadav thinks it seems like he’s trying to play that he was thinking long term and never intended to hurt anyone.
– And maybe he really strongly believes in it, she says.
EXTENDED: Crypto entrepreneur Sam Bankman-Fried spent ten days in Fox Hill Prison in the Bahamas before being extradited to the United States. This is considered one of the worst prisons in the Caribbean. Photo: Pete Kiehart / E24
Several of Bankman-Fried’s closest colleagues have in turn pleaded guilty and are cooperating with the prosecution. This applies, among other things, to Caroline Ellison, the 31-year-old’s on-and-off girlfriend, who was head of Alameda Research.
She will testify at the trial, along with co-founder Gary Wang and former technical director of FTX, Nishad Singh. All three of them lived together with Bankman-Fried in a penthouse for over NOK 300 million in the luxury complex Albany Resort in the Bahamas.
Read on E24+
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Authorities must prove intent, and the trio’s testimony could help strengthen their case considerably, according to Columbia University law professor Daniel Richmann, who previously worked for federal prosecutors.
– Having people who were present when he discussed or participated in the various transactions gives the authorities a degree of insight into his thoughts and actions that can make their case much easier, says Richmann to E24.
A LOT OF COVERAGE: Journalists discussed the new book by star author Michael Lewis, who had extensive access to Sam Bankman-Fried over a period of about two years. Photo: Pete Kiehart / E24
Prosecutors have collected several million pages of digital evidence, including transcripts, financial documents and emails, according to the report New York Times.
However, Richmann believes that his colleagues’ certificates will be one of the biggest challenges for the defenders.
Read on E24+
Lost almost 30 million during the “crypto winter”
Another is everything that has been written about the case until now, highlights Vanderbilt professor Yesha Yadav, which was also a topic during the jury selection.
– It is well known to the general public that there was a hole in the accounts of a whopping eight billion dollars, which should have been customer money, says Yadav.
– It really doesn’t look good.
Sued by own company
Real estate agent Andrew Gronek from Arizona is among the over a million people who may have lost money in the crypto collapse.
Gronek heard about FTX for the first time at the end of 2021. A few months later, he decided to buy cryptocurrency for around NOK 20,000 via the platform.
In addition, he made a deposit of just over 80,000 soon after. He still hopes that he will get everything refunded.
– I have submitted a claim, but I don’t know how much I will get back, says Gronek to E24.
The bankruptcy case is led by lawyer John Ray, formerly responsible for the restructuring of Enron – which collapsed in the aftermath of the dotcom bubble in the 2000s.
Of FTX, Ray said he had never seen “such a complete failure of corporate governance and an absence of credible financial information”.
DEFENDING THE CRYPTOTOP: One of Sam Bankman-Fried’s lawyers, Mark Cohen (front), arrives in court in New York on Tuesday morning. Photo: Pete Kiehart / E24
In an attempt to recover more money, FTX has now sued both Sam Bankman-Fried and his parents, Stanford professors Joseph Bankman and Barbara Fried. They received both money and luxury property as gifts for their son. The mother is said to have also advised the crypto-top to make anonymous donations to her fund-raising organization, according to the report CNBCcharges she denies.
Vanderbilt professor Yesha Yadav points out that the ongoing bankruptcy case could provide prosecutors with additional evidentiary advantages in the criminal trial against Bankman-Fried.
– This is a bankruptcy process where professional advisers have already been paid approximately 200 million dollars for their services, she says.
– It gives an idea of how much work they have put in to try to build up a picture of how FTX worked.
2023-10-03 20:18:26
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