Not long ago, Sam Bankman-Fried was described as "crypto's golden boy." But today, the 31-year-old founder of FTX is the poster child of everything that has gone wrong with cryptocurrencies — and he's facing the prospect of spending the rest of his life in prison.
On Tuesday, Bankman-Fried's high-profile trial will get underway. Federal prosecutors have accused him of defrauding customers and investors, and charged him with money laundering. If he is convicted on all seven criminal counts, the former crypto executive could be sentenced to more than 100 years in prison.
The trial marks a hard fall from grace for a crypto mogul who hobnobbed with celebrities, including model Gisele Bündchen, former President Bill Clinton, and and actor Orlando Bloom, during FTX's heyday.
Bankman-Fried started FTX in 2019, and before long, the company was valued at an eye-popping $32 billion. The company ran one of the largest cryptocurrency exchanges in the world, and it was the centerpiece of a crypto empire that spanned the globe.
Bankman-Fried also founded a crypto-focused hedge fund, called Alameda Research. Its relationship with FTX is central to the U.S. government's case. Prosecutors allege Bankman-Fried used money from FTX's customers to prop up Alameda.
In 2022, after reporters and one of Bankman-Fried's rivals raised questions about FTX's business practices, everything fell apart. Billions of dollars have gone missing, and Damian Williams, the U.S. attorney for the Southern District of New York, alleges Bankman-Fried is responsible for "one of the biggest financial frauds in American history."
Here's a look at Sam Bankman-Fried's trial, which starts with jury selection on Tuesday.
What charges does Sam Bankman-Fried face?
Sam Bankman-Fried has pleaded not guilty to seven criminal charges, including securities fraud, wire fraud, and conspiracy to launder money. Prosecutors intend to try him on several other counts in a separate trial that is expected to take place in 2024.
"Bankman-Fried and his co-conspirators stole billions of dollars from FTX customers," Williams explained to reporters, shortly after Bankman-Fried was arrested last December. "He used that money for his personal benefit, including to make personal investments, and to cover expenses and debts of his hedge fund, Alameda Research."
Prosecutors allege Bankman-Fried and other former FTX executives used customers' money without their knowledge to plug a multibillion-dollar hole in the hedge fund's balance sheet.
Two financial regulators, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, have brought parallel suits against Bankman-Fried, alleging similar misconduct.
Gurbir Grewal, the head of the Securities and Exchange Commission's division of enforcement, has said FTX "operated behind a veneer of legitimacy that Bankman-Fried created." But, "that veneer wasn't just thin. It was fraudulent."
What if Sam Bankman-Fried is found guilty?
If Sam Bankman-Fried is found guilty of all seven charges against him, he could spend the rest of his life in prison.
If a jury finds Bankman-Fried guilty, Judge Lewis Kaplan has discretion over sentencing. He could decide to allow Bankman-Fried to serve a concurrent sentence.
For more than a month, Bankman-Fried has been incarcerated in the Metropolitan Detention Center, a federal jail in Brooklyn, New York, as he awaits trial.
Kaplan sent the former FTX CEO there after Bankman-Fried violated the terms of his bail. He contacted a former colleague with an encrypted messaging app, used a virtual private network (VPN) without the court's consent, and showed a reporter for The New York Times private writings by Caroline Ellison, Bankman-Fried's ex-girlfriend and the former head of Alameda.
Author Michael Lewis shadowed Bankman-Fried for more than a year, for a book called "Going Infinite: The Rise and Fall of a New Tycoon" that hits store shelves on Tuesday.
In an interview with "60 Minutes," Lewis said he thinks the disgraced crypto mogul "may go mad" if he loses access to the Internet for a long stretch of time.
"If you gave Sam Bankman-Fried a choice of living in a $39 million penthouse in The Bahamas without the internet, or the Metropolitan Detention Center in Brooklyn with the internet, there's no question in my mind he'd take the jail," Lewis said.
What are the expected arguments in the trial?
According to Tarek Helou, a lawyer in private practice who spent more than a decade at the Department of Justice, there is a mantra among federal prosecutors: "Thin to win."
Attorneys will work very hard to distill a complex case into its very essence.
"You have to step back and look at it from the perspective of someone who knows nothing about it," Helou says. "You have to simplify it."
This case is novel because it involves a company that did business in the new world of crypto. But according to Helou, prosecutors will want to stress that this is just a financial fraud case, plain and simple.
"The Justice Department isn't going to say it's about cryptocurrency," Helou predicts. "They're going to simplify it, and say that it's just a case about lying and stealing."
Prosecutors will argue that Bankman-Fried willfully defrauded customers and investors out of billions of dollars, and amassed a considerable personal fortune as a result.
As for the defense, Bankman-Fried's attorneys are likely to argue Bankman-Fried was in over his head. From the get-go, he has claimed that FTX imploded because he made mistakes.
"I didn't ever try to commit fraud on anyone," Bankman-Fried told The New York Times days before he was arrested. "Clearly, I made a lot of mistakes that are things I would give anything to be able to do over again."
FTX was headquartered in The Bahamas, where employees and executives, many of whom were in their 20s, lived together in a $30 million penthouse as they ran a sprawling business.
Who is expected to testify during the trial?
Since Bankman-Fried was indicted, U.S. prosecutors brought separate charges against many of his deputies, including Caroline Ellison.
She pleaded guilty to several fraud counts shortly after Bankman-Fried was arrested last December, and three other executives have also pleaded guilty: Nishad Singh, Gary Wang, and Ryan Salame.
It's expected all four of them will testify against Bankman-Fried during the trial.
In addition to them, both sides have asked to call expert witnesses, and in a recent court filing, prosecutors said they plan to put FTX customers on the stand.
Are we likely to hear from Sam Bankman-Fried himself?
Former prosecutors say they think it is unlikely Bankman-Fried will testify, but they acknowledge it is possible he could.
In the days leading up to his arrest, and after he was living under house arrest on a $250 million bond, Bankman-Fried was pretty outspoken.
He used X, formerly known as Twitter, and started a newsletter on Substack. Bankman-Fried invited journalists to visit him at his parents' house where he had been placed initially after posting bail, and prosecutors say Bankman-Fried had around 1,000 phone calls with reporters.
It is unorthodox for a defendant facing such serious charges to talk so openly about his case, and it was a source of growing frustration to prosecutors and the judge, who decided to revoke Bankman-Fried's bail in August.
Who's the judge overseeing this trial?
Judge Lewis Kaplan has been a federal judge for almost three decades. He was nominated by former President Clinton, in 1994.
During his tenure, Kaplan has presided over a number of high-profile trials, including, most recently, columnist E. Jean Carroll's civil suit against former President Trump.
"He's an experienced, very well-respected judge," says Joshua Naftalis, an attorney with the law firm Pallas, who tried a case before Kaplan when Naftalis was a federal prosecutor. "He's no-nonsense, and he controls both sets of parties. And he runs an efficient courtroom."
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