What to Expect from the Trial of Sam Bankman-Fried

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Last September, Sam Bankman-Fried was described on CNBC as the “Michael Jordan of crypto.” Just over a year later, on Oct. 3, the founder of the cryptocurrency exchange FTX will be transported from the Metropolitan Detention Center in Brooklyn, where he is currently in custody, to a federal courthouse in Manhattan, for the beginning of one of the most anticipated criminal trials of the year. Last November, Bankman-Fried’s FTX collapsed following a shocking rush of withdrawals, with the exchange unable to account for billions of dollars in customer funds. Federal prosecutors have now charged Bankman-Fried with fraud, conspiracy to commit money laundering, and several other counts. The trial, which will last an estimated six weeks, will likely feature highly anticipated testimony from those in Bankman-Fried’s inner circle, who have since agreed to cooperate with prosecutors in the case against him. It is expected to produce a media circus on the level of the trials of Bernie Madoff and Elizabeth Holmes. Here’s what to know about the trial. What is Sam Bankman-Fried charged with? Bankman-Fried’s FTX was a crypto exchange that allowed its users to buy, sell and hold cryptocurrencies, and use financial mechanisms to bet on those tokens’ price movements. Bankman-Fried told Congress in a February 2022 hearing that “as a general principle, FTX segregates customer assets from its own assets across our platforms.” But prosecutors allege that instead of keeping customer funds siloed, FTX officials loaned those deposits to Alameda Research, Bankman-Fried’s hedge fund, at the founder’s direction. Prosecutors allege, first, that Bankman-Fried oversaw a technical “backdoor” that allowed him to funnel money out of FTX customer accounts undetected—and, second, that he then used those funds to buy luxury real estate, donate to political campaigns, and repay Alameda’s lenders. Upon filing for bankruptcy, FTX owed its top 50 creditors alone $3.1 billion. Last month, court papers filed by Bankman-Fried’s lawyers said that he had a “good faith belief” that the way FTX and Alameda handled customer funds was permitted, Reuters reported. In December 2022, Bankman-Fried, 31, was arrested in the Bahamas, where FTX was based, and extradited to the U.S. He has since pleaded not guilty to all charges and has maintained that, while he made mistakes, he did not “knowingly” co-mingle funds. While he faces 13 charges in total, only seven of those will be heard during this initial trial. A separate trial is scheduled for March 2024, which will include allegations of campaign finance violations. In order to convict Bankman-Fried, prosecutors will have to establish intent: to prove that Bankman-Fried willfully lied and misled investors. Furthermore, they must prove his guilt “beyond a reasonable doubt,” a higher standard than in civil cases, and a jury would need to reach a unanimous verdict for a conviction. “Intent is the entire name of the game, and it’s maybe the most difficult element for the government to prove,” says Tim Howard, a partner at the law firm Freshfields and a former federal prosecutor with the U.S. Attorney for the Southern District of New York. “Ultimately, prosecutors will want to simplify this to: ‘SBF lied to a number of different parties to get their money.’” How will the trial unfold? The amount of evidence that will be considered during this case is staggering. Prosecutors have accumulated more than 6 million pages of documents and other records, amounting to one of the largest-ever collections of evidence in a white-collar securities fraud case. Bankman-Fried’s Google accounts amounted to 2.5 million pages alone. Prosecutors subpoenaed FTX employees and sought records from the political campaigns that Bankman-Fried contributed to, and are also likely to present audio recordings during the trial. All in all, they plan to introduce about 1,300 exhibits at the trial. In addition to documents, the in-person testimony of Bankman-Fried’s closest friends and collaborators will be crucial to the trial’s outcome. Caroline Ellison, who ran Alameda Research and dated Bankman-Fried at times, pleaded guilty to fraud charges and agreed to cooperate with prosecutors against Bankman-Fried. Their strained relationship has become central to the trial and its public drama: In July, Bankman-Fried leaked Ellison’s personal diary to the New York Times, which landed him back in jail after prosecutors accused him of trying to “discredit a witness.” (Bankman-Fried was originally released on bail in December 2022 and was living at his parents’ house in Palo Alto.) Judge Lewis Kaplan agreed with the prosecutors’ arguments, saying during his ruling that it seemed unlikely Bankman-Fried would have shared the especially intimate parts of Ellison’s diary “except to hurt, discredit or frighten the subject of the material.” “My conclusion is there is probable cause to believe the defendant tried to tamper with witnesses at least twice,” Judge Kaplan declared. (Bankman-Fried reportedly reached out to a second witness over Signal, expressing his desire to “have a constructive relationship” and “vet things with each other.” Two other top FTX executives—Gary Wang and Nishad Singh—pleaded guilty to fraud charges. Wang and Singh lived in a penthouse with Bankman-Fried in the Bahamas and were integral to both his professional and social life for many years. A third executive, Ryan Salame, pleaded guilty to conspiracy to make unlawful political contributions. Ellison, Wang and Singh are all now cooperating witnesses—and if they corroborate each others’ stories, it could prove damaging to Bankman-Fried’s case. “The fact that he’s got multiple folks in the inner circle who were probably in the same meetings together and can potentially testify consistently about things that were said by SBF or to SBF, can potentially be very devastating,” Howard says. How will Bankman-Fried defend himself? Bankman-Fried has passed around the blame for FTX’s failure. He has acknowledged that he made mistakes and inadequately managed risk at the company. But he has accused Ellison of being an incompetent investor and of ignoring his guidance. He says he was given bad legal advice and was the victim of larger market forces pushing crypto downward. He could also attempt to undermine the credibility of those who will testify against him. His new lawyers were recently granted permission to cross-examine witnesses about their recreational drug use. Bankman-Fried will remain in jail for the duration of the trial, meaning he will have little time to confer with his lawyers at the end of each trial day. Instead, he will be allowed to meet with his attorneys at 7 a.m. every morning of trial dates. His lawyers have claimed that he has been subsisting mostly on bread and water while in jail. It’s yet unclear whether Bankman-Fried himself will take the stand. He has embraced speaking opportunities in the past: he invited reporters to his home even while on house-arrest. There is precedent for high-profile defendants testifying. Disgraced Theranos founder Holmes took the stand in her own federal fraud trial, attempting to make an emotional appeal to the jury. Howard says that a defendant like Bankman-Fried choosing to testify comes with advantages but also “significant peril.” “It’s very powerful for the defendant to look the jury in the eye and explain what was going on in his mind,” he says. “But once you’re a defendant on the stand, as you saw with Elizabeth Holmes, I’d expect a lengthy, pointed cross-examination that will go through every statement he’s made and try to make him look silly and like a liar.” Howard predicts that Bankman-Fried’s lawyers would only put him on the stand as a last-minute contingency. “I suspect they’ll see how the government’s evidence comes in; how well they’re able to attack the credibility of the cooperators; the body language of the jury when they react to the cooperators–and make a strategic gametime decision,” he says. What are the stakes? Bankman-Fried faces a maximum sentence of 115 years. But some lawyers think that even if convicted, his actual jail time would be far less, because many of the charges are similar in nature. Judge Kaplan has full discretion; he could elect to make the charges concurrent as opposed to consecutive, says Howard. While a single man will be on trial, the whole crypto industry will be in the harsh spotlight. Many crypto insiders have argued that Bankman-Fried’s alleged crimes have nothing to do with crypto at all: That he is charged with carrying out old-school fraud in the vein of Bernie Madoff. But Bankman-Fried was the crypto industry’s American figurehead; he portrayed himself as the responsible steward of an unruly industry rife with scams. The trial will draw public attention once more to crypto crimes at a time when the industry desperately wants to move on. Bankman-Fried has blamed others in the crypto industry, most notably Changpeng Zhao, the CEO of rival exchange Binance, for FTX’s failures—and the whole spectacle could further challenge the industry. “With all the public attention on the money that’s been lost, you are going to basically encourage Congress and regulators to be more aggressive against the entire ecosystem,” Howard says. The courtroom drama will likely also serve as fodder for a very eager Hollywood. A slew of productions about Bankman-Fried are already in development, including an Apple adaptation of Michael Lewis’ book Going Infinite and an Amazon Prime drama series from the Russo Brothers. Contact us at letters@time.com.

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