The sharp decline came after a meteoric rise: Just over a year ago, Sam Bankman Fried was still the star of the cryptocurrency scene. The founder of collapsed cryptocurrency exchange FTX is now behind bars. From October 3, the 31-year-old with the distinctive curly head will have to stand trial in a US court for alleged fraud.
The famous Massachusetts Institute of Technology (MIT) graduate had previously amassed a personal fortune estimated at $26.5 billion in just a few years. At the peak of his career, the FTX logo was emblazoned, among other things, on the court of the American basketball team “Miami Heat”. Many athletes such as football star Tom Brady have advertised for the company. Bankman Fried also supported US President Joe Biden’s election campaign with millions.
“One of the largest financial frauds in history”
Instead of top politicians and celebrities, Bankman Fried, known in the cryptocurrency world by his initials “SBF,” is now surrounded by investigators and criminal defense attorneys. Authorities accuse the founder of FTX of embezzling billions of dollars in client funds. Among other things, the exchange secretly granted loans to Bankman Fried’s Alameda brokerage firm. For Attorney General Damien Williams, the FTX case is “one of the largest financial frauds in American history.”
“The allegations are completely false.”
The trial in New York court is scheduled to last six weeks. If convicted, Bankman-Fried could face up to 115 years in prison. Regardless, FTX customers want to file a class action lawsuit. Bankman Fried’s parents also have to go to court. The new management of FTX accuses them of being among the beneficiaries of funds embezzled by their son. Bankman-Fried’s lawyers reject these allegations, calling them “completely false.”
Also the former partner as a key witness
Three high-ranking former FTX employees who pleaded guilty serve as key witnesses for the prosecution. One of them is Caroline Ellison, a former partner of Bankman-Fried. According to an August ruling, the FTX founder attempted to discredit Ellison by leaking personal documents not confiscated by authorities to the press. He also blamed it on the cryptocurrency exchange’s lack of risk management. Due to witness tampering in at least two cases, Bankman-Fried’s initial house arrest was revoked and he must now await trial in prison.
Bankman-Fried has repeatedly denied the fraud allegations and pleaded “not guilty” at a preliminary hearing in January 2023. However, he admits to mismanagement of risks and personal mistakes. In a draft for a US Congressional hearing, he wrote that because of a “glitch” in internal controls, he had no idea how much money Alameda had borrowed from FTX. Bankman-Fried was arrested in December 2022, one day before he was scheduled to appear before Parliament.
“Not a criminal mastermind, just overwhelmed.”
“Bankman-Fried’s best strategy is to show that he is not a criminal mastermind, but simply overpowered,” explains defense attorney Mark Kasten of the law firm Buchanan Ingersoll & Rooney, which is not involved in the case. According to Paul Tuchman, a former prosecutor and partner at the law firm Wiggin and Dana, the point at which Bankman-Fried knew it could not repay FTX customers’ deposits was critical.
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