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Sam Bankman-Fried, the founder of failed cryptocurrency exchange FTX, went on trial Tuesday, in what prosecutors have described as one of the biggest financial-fraud cases in U.S. history.
Bankman-Fried (a previous Semafor investor) has pleaded not guilty to all charges including money laundering, wire fraud, and securities fraud in a trial that could redefine the crypto industry.
He faces a separate trial in March 2024 for allegedly bribing Chinese officials, and has been jailed for the last several weeks after prosecutors accused him of witness tampering.
If convicted of all charges, Bankman-Fried faces more than 100 years in prison.
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Bankman-Fried’s defense will center on denying criminal intent, predicted Luc Cohen, a New York courts reporter for Reuters. The disgraced former crypto boss had “good faith belief,” according to his lawyers, that he was not improperly using FTX customers’ money to fund his hedge fund Alameda Research. But any testimony from witnesses that suggest Bankman-Fried knew Alameda was improperly borrowing FTX funds would undermine his defense, Cohen wrote. Bankman-Fried has already admitted to being “overconfident and careless” in funding Alameda and not realizing how much debt the firm had incurred.
The trial will likely go beyond the predicted six-week timeframe, experts told TechCrunch. “Crypto is so complicated and so new, the prosecution will have to devote a lot of time just to explain what distinguishes it from ordinary stocks and bonds,” said one professor. The extraordinary $8 billion amount allegedly defrauded from customers also makes it a “once-in-a-decade sort of trial,” said a lawyer, comparing the case to that of Bernie Madoff’s — the U.S. financier convicted for running the largest known Ponzi scheme in history after a six-month trial.
“It’s quite surprising” that no plea deal has been offered to Bankman-Fried, Vanderbilt University law professor Yesha Yadav told Slate. She speculates that’s because prosecutors, working at the same time as the FTX bankruptcy process is under way, have secured evidence that could “make a really airtight case against SBF.” Prosecutors are also trying to hold up Bankman-Fried “as a poster child for corruption,” aware that their hardline position on the case will send a message to those running the crypto industry, Yadav explained.
Bankman-Fried’s parents face their own legal troubles. FTX, under new leadership, has sued Barbara Fried and Joseph Bankman in an attempt to “claw back millions of dollars.” Both are law professors who previously taught at Stanford University: Bankman went on leave in 2021 to join FTX full-time, while Fried retired from teaching last year. Lawyers for FTX argue that the couple “wielded their influence and status as Bankman-Fried’s parents to enrich themselves at the expense of the FTX Group,” also saying the crypto founder wired a $10 million cash gift to his parents after Bankman complained to his son about his $200,000 FTX salary.
