The so-called "trial of the century" in the cryptocurrency world has commenced, with former crypto magnate Sam Bankman-Fried (SBF) facing a decisive legal battle over multiple criminal charges.
October 4, Eastern Time, the trial for SBF began in a federal court in Manhattan, New York. Assistant U.S. Attorney Nathan Rehn alleged in court that during the establishment and operation of FTX, once the world's third-largest cryptocurrency exchange, SBF "lied to the world," revealing the truth only to his girlfriend and a few close friends.
According to Rehn, SBF was a calculated criminal who treated the funds deposited by FTX platform investors as his personal bank account. He allegedly misappropriated client funds extensively, with only those in SBF's inner circle being aware of his actions.
Rehn told the jury, "He (SBF) had wealth, power, and influence, but all of it was built on lies. He executed a massive scam, defrauding billions of dollars from thousands of victims."
During Rehn's statement, SBF remained expressionless. However, when the "billions in fraudulent activities" were emphasized, he quickly glanced at the jury before returning his gaze to his laptop.
SBF's defense attorneys argue that Rehn's portrayal of SBF as a cartoonish villain is inaccurate, describing him instead as a math-savvy nerd. One of the lawyers, Mark Cohen, said evidence would show a stark contrast between SBF's background and the image painted by Rehn. Cohen described SBF as a hardworking individual who neither drinks nor parties and is an MIT graduate. He emphasized that SBF "had no intention of deceiving anyone and no theft occurred."
Cohen argued that the rise and fall of FTX and its sister hedge fund, Alameda Research, reflect the volatile nature of the cryptocurrency industry. He stated that not everyone is suited for investment in this domain. Regarding the allegations of SBF misusing client funds for speculative trades with Alameda, Cohen contended that clients had reason to believe the loans provided by Alameda were permitted and backed by collateral.
Drawing an analogy, Cohen said running a startup is like building an airplane while simultaneously flying it.
Previously, Wall Street Journal had referred to the FTX case as "one of the largest financial fraud cases in U.S. history." Earlier this year, reports from FTX's new management revealed an $8.7 billion customer fund gap at the time of its bankruptcy filing.
SBF faces seven charges, primarily related to wire fraud and securities fraud conspiracies. Prosecutors accuse SBF of embezzling billions from FTX customer funds for personal use and covering Alameda Research's significant losses, alleging he deceived investors through his schemes.
The trial is expected to last six weeks. If found guilty on all charges, SBF could face up to 110 years in prison.
To date, SBF denies all allegations, portraying himself as an inexperienced businessman who never intentionally committed fraud.
However, SBF's former allies, including Alameda Research's ex-CEO and his former girlfriend, Caroline Ellison, and another FTX co-founder, Gary Wang, pleaded guilty last December.
During a hearing last December, Ellison admitted that from 2019 to the previous year, she and SBF had jointly planned everything. She revealed that Alameda had unrestricted credit access in FTX's accounts without needing collateral or maintaining a positive balance. Ellison claimed that to conceal the scale of Alameda's borrowing and the billions in loans Alameda provided to FTX executives and affiliates, she and SBF deliberately created unproblematic balance sheets.
