Sam Bankman-Fried’s fraud trial is about to begin. Here’s what you need to know

New York

Eleven months ago, Sam Bankman-Fried was living in the Bahamas as a crypto superstar, running a celebrity-backed startup, surrounded by fans and friends who believed he was the real deal: an MIT math whiz. A visionary who abandoned the Wall Street path to chart his own course. A philanthropist builds up a fortune, he said time and time again, that he intends to give away entirely.

This week, he is set to go on trial in what federal prosecutors say is one of the largest frauds in American history.

31-year-old Bankman-Fried, known as SBF, made the plea Not guilty Seven counts of fraud and conspiracy related to the collapse of his crypto-trading platform FTX. If convicted and sentenced to the maximum sentence, he could spend the rest of his life in prison.

Here are the key things to know about the case and what we might see at the trial over the next few weeks.

SBF is facing seven cases including wire fraud and securities fraud.

Prosecutors allege that SBF stole billions of dollars from FTX client funds for his own use and to cover huge losses from Alameda Research, a crypto hedge fund he controlled.

They also claim that SPF defrauded FTX investors by covering up the scheme.

Solicitors Five other charges were dismissed in June Bankman-Fried was brought in after deportation from the Bahamas, where FTX was based. A separate trial into those allegations is set to begin in March.

FTX marketed itself as an easy, secure portal for cryptocurrency trading. It made money by charging clients trades like a regular brokerage.

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As digital asset valuations rose in 2021, so did FTX’s profile. At its peak, the company had a private valuation of more than $30 billion. It plastered its name on a Miami basketball arena and won celebrity endorsements Tom Brady and Larry DavidBoth have starred in Super Bowl commercials for FTX.

But crypto Market chaos took root By the spring of 2022, the value of the industry as a whole has been reduced from $3 trillion to $1 trillion.

Amr Alfiky/Reuters

FTX founder Sam Bankman-Fried was a crypto celebrity until November last year, when his business empire collapsed.

In November, cracks began to appear in FTX’s foundation, and it took more than a week for it all to go down.

In response, investors and customers began to panic A report from crypto news site Coindesk It raised serious questions about the financial ties between FTX and Alameda, two separate businesses founded by Bankman-Fried. According to a document obtained by Coindesk, the majority of Alameda’s assets consisted of FTT, a digital token created by FTX, which quickly lost value, leaving Alameda in shaky financial condition.

Customers rushed to withdraw their funds from FTX, which revealed an $8 billion shortfall.

FTX filed for bankruptcy on November 11, and Bankman-Fried resigned as CEO.

He was arrested in the Bahamas in December on charges including fraud and conspiracy and extradited to the United States in January.

Since his arrest, SPF again and again His view of the case has been talked about and written about: he was an inexperienced businessman who came out on his skis and never knowingly committed fraud.

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His attorneys have indicated in court documents that they will seek the “advice of counsel” argument. In other words, SBF did not know that his actions were illegal and he was following the direction of FTX’s lawyers.

Bankman-Fried’s personal writings, published by the New York Times, blamed Alameda’s losses on its CEO. Carolyn EllisonEven his ex-girlfriend.

Ellison, along with three other ex High level associatesHe pleaded guilty with the cooperation of prosecutors.

“SBF’s biggest challenge was that his former colleagues were going to testify against him,” said Howard Fischer, a partner at Moses Singer and a former senior litigator at the Securities and Exchange Commission. “Furthermore, FTX’s new management, led by a restructuring expert who had overseen the dissolution of Enron, was openly hostile to Bankman-Fried.” .

“This kind of collaboration is a godsend for prosecution,” Fischer said.

Another issue, Fischer said, is that the SBF, in its long series of blog posts, tweet threads, television media appearances and document leaks, “has consistently failed to convey an awareness of the seriousness of its situation.”

“Consumers don’t like know-it-alls who lack respect for the process … While a defendant in a case like this would be well advised not to take the stand, SBF’s apparently unshakable self-confidence may lead him to take that risk.”

Jury selection begins Tuesday, Oct. 3 in Manhattan federal court. The trial is expected to last up to six weeks.

At the time SBF will be He has been held at the Metropolitan Detention Center in Brooklyn since Judge Louis Kaplan revoked bail on August 11 over the SBF’s attempts to intimidate witnesses.

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If convicted on all seven counts and given the maximum sentence, SBF faces up to 110 years in prison.

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