The first few days of Sam Bankman-Fried’s trial have not been going in his favor, general consensus seems to suggest. Prosecutors for the U.S. Department of Justice (DOJ) are establishing the case that the FTX founder was deeply involved in a long-term scheme to defraud customers and investors, throwing a wrench in the fallen crypto mogul’s legal defense that, while nominally in charge, he was oblivious to the rot taking shape at his exchange FTX and hedge fund Alameda Research.
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Bankman-Fried always faced an uphill battle in this much-watched trial. Published documents and allegations made by FTX’s current leadership, under the direction of Enron’s bankruptcy lead John Jay Ray III, as well as SBF’s ill-conceived “apology tour” following shortly after FTX closed shop have tainted public perception of the once beloved crypto savant. “SBF is going to be the victim of his own success,” Renato Mariotti, partner at Bryan Cave Leighton Paisner LLP who is watching the case, said on CoinDesk TV.
And his “tough, tough, tough case” doesn’t seem to be made any easier in the courtroom by defense attorneys with Cohen & Gresser. It’s been widely reported that District Judge Lewis Kaplan has appeared visibly annoyed by Bankman-Fried’s high-paid lawyers. Some on-lookers said during some attempts at cross-examination, “80%” of defense attorney Chris Everdell’s questions were shot down. In fact, prosecutors’ objection to misleading questions became so routine, Judge Kaplan at times sustained an objection before it was offered.
See also: Could Sam Bankman-Fried's Saga Happen Without Crypto? | Opinion
But it’s early days yet, in a trial that could last six weeks. It’s still unknown whether Bankman-Fried, sporting a new haircut, will testify. Mariotti, along with a seeming majority of lawyers, said that would be a gamble at best and like disastrous. Gary Wang, FTX co-founder and longtime friend to SBF, already admitted to committing fraud on the stand, referencing the “special privileges” offered to trading shop Alameda on FTX. While a ex-FTX developer Adam Yedidia said he quit in November 2022 after learning of the scheme to “defraud” customers, a strong point that was stricken from the record.
Here is a roundup of CoinDesk coverage — pulling out the major highlights and details — of the trial so far, and events happening outside the courtroom like revelations from Michael Lewis’ confounding biography of Bankman-Fried.
- FTX co-founder Gary Wang took the stand Thursday — the Department of Justice's fourth witness — and admitted the crypto exchange gave "special privileges” to SBF's hedge fund Alameda Research to allow it to withdraw unlimited funds. Wang also testified FTX and Alameda execs, including Caroline Ellison and Nishad Singh, knowingly committed wire fraud, securities fraud and commodities fraud.
- Venture firm Paradigm has "marked" its $278 million investment into FTX "to zero dollars," co-founder Matt Huang said during the SBF trial.
- A 2022 software bug that resulted from the unusual way FTX handled customer deposits overstated Alameda holdings by $8 billion, according to testimony from Adam Yedidia. FTX customers deposited fiat by wiring money to Alameda, ex-FTX dev Yedidia said, which "complicated" how the companies tracked debts owed to customers.
- Two luxury jets apparently owned by Sam Bankman-Fried (but reportedly never used by him) could be forfeited, as U.S. prosecutors continue to claw back assets. In a late Wednesday filing, a forfeiture bill issued by the DOJ listed two aircraft — a Bombardier Global and Embraer Legacy — as assets belonging to Bankman-Fried it is looking to seize.
- SBF changed the lock up period of SRM tokens after a massive rally in 2021, because he was concerned his employees would get too rich to work, according to Michael Lewis' biography "Going Infinite." “In the fine print of the employee Serum contract, he’d reserved for himself the right to extend Serum’s jail time, and he used it to lock up all employees’ Serum for seven years,” Lewis wrote.
- A physician’s assistant, a librarian, a nurse and nine others were picked as the jury that will ultimately decide if Sam Bankman-Fried committed fraud. Throughout the week, reporters and on-lookers have said the jury at times appears bored by the trial, with at least one juror reportedly nodding off.
- In its opening statement Wednesday, U.S. prosecutors called SBF’s crypto empire a “house of cards ... built on a lie.” Lying has become a repeated refrain during the trial, with FTX co-founder Gary Wang also saying SBF has “lied” about Alameda’s ability to rack up debt and leverage, putting FTX customer funds at risk.
- SBF’s lawyers, largely deemed ineffective in the early days of the trial, have focused on SBF’s “good faith” actions as they work to establish the argument that a mistake in business – even a colossal one like misplacing $8 billion – is not necessarily a crime.
- The Department of Justice said the absence of clear crypto regulations is not relevant to its criminal suit of FTX founder Sam Bankman-Fried, a point Judge Kaplan seemingly agrees with.
- Alameda Research lost almost all $170 million raised in its first funding round, backed primarily by “effective altruists,” according to Michael Lewis’s biography of Sam Bankman-Fried “Going Infinite.” Its high-frequency trading strategies were iffy apart from an arbitrage strategy to buy cheap bitcoin in the U.S. and sell it for profit in Japan. Alameda reportedly lost over $500,000 every day during one particular month.
- Sam Bankman-Fried sued his insurance provider, CNA, for allegedly failing to pay legal costs linked to his defense against fraud allegations. His legal complaint referenced a dozen civil and regulatory actions relating to his collapsed crypto exchange FTX, making clear his legal bills are mounting.
- Former FTX spokesman Kevin O’Leary said the era “crypto cowboys” is over as the industry shifts to being regulated, on CoinDesk TV. According to "Going Infinite," the Canadian TV personality was paid $15.7 million by FTX for “20 service hours, 20 social posts, one virtual lunch and 50 autographs,” though not all FTX executives, including Constance Wang, saw the value in the relationship. SBF reportedly said it was “shocking” but “true” that people listen to O’Leary for financial advice.