Key events
Victoria Bekiempis
Sam Bankman-Fried’s confidants were along for the ride. At his side was Caroline Ellison, Alameda’s CEO and his on-again, off-again lover.
Ellison, too, projected tech bro-like eccentricities, waxing philosophical about free love and drugs. She wrote in a now-notorious tweet.:
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The duo and eight others comprising the financial whiz’s inner circle shared a tony penthouse in the Bahamas, a living arrangement that some, including tech mogul Elon Musk, reportedly described as a “polycule”– that is, “a connected network of people and relationships, all of whom are in some way involved emotionally, sexually, or romantically with at least one other person”.
The unorthodox cohabitation reportedly also included easy access to performance-enhancing drugs, with an in-house psychiatrist at the ready to prescribe prescription stimulants.
Victoria Bekiempis
Bankman-Fried also claimed to ascribe to effective altruism, a philanthropic movement popular among some megarich techies based on the principle of strategically donating so as to accomplish the greatest good for the greatest number of people.
Some proponents have encouraged an “earning to give” mentality, where amassing a great fortune is a moral goal as it can be donated.
The doling-out-money mantra extended to politics. He dumped more than $40m into 2022 campaign contributions; most went to Democrats and related committees. But Bankman-Fried also made substantial “dark” donations to Republican candidates and even speculated that he might be the “second or third biggest” GOP donor during the 2022 midterm election cycle, CBS News said.
At his height in 2022, Bankman-Fried rubbed elbows with the likes of Tony Blair and Bill Clinton at a crypto conference in the Bahamas, where he had moved FTX in 2021 in part over its use of a trading mechanism prohibited in the US, per the New York Times. He even recruited the then married Tom Brady and Gisele Bündchen to hawk FTX in TV commercials.
Victoria Bekiempis
For several years, Sam Bankman-Fried was crypto’s rising star, a seemingly razor-sharp and legitimate figure in the largely opaque world.
As founder of the crypto exchange FTX and its associated hedge fund, Alameda Research, Bankman-Fried wooed private investors and lawmakers alike with his pitch of a crypto trading platform that was safer and more risk-averse than those that had preceded it.
As FTX boomed, Bankman-Fried’s profile rose. FTX and its leading competitor, Binance, would come to process most crypto trades around the world. By the age of 30, Bankman-Fried had amassed billions.
The founder played the part, known for his T-shirt-and-shorts uniform and philosophic pronouncements. Raised by Stanford law professor parents who studied utilitarianism – simply, the idea that moral action is what accomplishes the greatest good for the greatest number of people – he’d view business transactions from a similarly calculated lens.
One of the biggest questions hovering over the trial is whether Sam Bankman-Fried will himself testify.
It’s rare that defendants take the stand during their trials, as doing so carries the risk that they could incriminate themselves or leave jurors with a bad impression.
But Bankman-Fried has been an unusual defendant, appearing to find it hard to stay silent and giving frequent statements to the media following his arrest.
Judge Lewis Kaplan ultimately revoked Bankman-Fried’s bail in August, on the grounds that his interactions with the media were an attempt to intimidate witnesses such as the former head of Alameda and his on-again, off-again girlfriend, Caroline Ellison.
Before jury selection started on Tuesday, Kaplan advised Bankman-Fried of his right to take the stand in his own defense.
“You have the right to testify in your own defense in this case and decide whether or not to testify – it’s solely a decision for you,” Kaplan said. “Do you understand this?”
Bankman-Fried leaned forward in his chair, and said “Yes.”
Sam Bankman-Fried entered the courtroom on Tuesday just before 10am.
His signature look of baggy shorts and ill-fitting T-shirts had been replaced with a gray suit, and his usually unkempt hair was trimmed down. He nodded to his lawyers and took his seat.
He appeared alert as the jury selection began, powering up his laptop in front of him and at one point smiling at his lawyer. Despite potentially facing decades of imprisonment, he projected an upbeat demeanor.
As more prospective jurors entered the courtroom in the afternoon, Bankman-Fried repeatedly turned to watch them each file in. As jury selection plodded along, he seemed increasingly comfortable in the courtroom.
Trial continues after slow first day of jury selection
Victoria Bekiempis
Sam Bankman-Fried’s cryptocurrency fraud trial entered its second day on Wednesday morning, with additional jury selection set to begin at the Manhattan federal court.
The first day of jury selection got off to a slow start. Bankman-Fried was not at the courthouse in advance of the proceedings; the judge overseeing his case, Lewis Kaplan, revealed shortly afterwards that Donald Trump’s civil trial across the alley had derailed his arrival. Kaplan said:
We can thank the delay to what’s going on in the other courtroom nearby.
After Bankman-Fried arrived, and prospective jurors filed into the courtroom at 10.37am, and so began the elimination process.
Several possible panelists said that they had read about the case. One man said that he had heard analysis of the case on Joe Rogan’s podcast, prompting strained groans in the press room.
One woman said that she could not attend, as it conflicted with her work for an upcoming Miss Universe pageant, in El Salvador, which she couldn’t miss.
Another woman said her employer had invest money in FTX and Alameda. Did they make or lose money? Kaplan asked. She replied:
Lose money.
One man claimed he could not attend due to financial hardship. Specifically, the man said he “just bought a cello, I’m paying off $600 a month.”
Bankman-Fried’s ex-girlfriend expected to be prosecutors’ star witness
Several of Bankman-Fried’s deputies and executives at the exchange, including the former head of Alameda Research and his on-again, off-again girlfriend, Caroline Ellison, are expected to testify in the trial.
Ellison pleaded guilty in December to her role in the companies’ stunning collapse. One key piece of evidence is an audio recording from an Alameda meeting on 9 November, during which she tried to soothe jittery employees.
Ellison allegedly told employees:
Starting last year, Alameda was kind of borrowing a bunch of money via open-term loans and used that to make various illiquid investments … Then with crypto being down, the crash, the – like, credit crunch this year, most of Alameda’s loans got called.
And in order to, like, meet those loan recalls, we ended up borrowing a bunch of funds on FTX which led to FTX having a shortfall in user funds.
“Who else knew about FTX’s issues?” one staffer asked. Ellison replied Bankman-Fried. A staffer urged: “Who made the decision on using user deposits?” She replied:
Um … Sam, I guess.
What will happen if he is convicted?
Sam Bankman-Fried faces a maximum 110 years behind prison if convicted on all counts.
While the likelihood of Bankman-Fried receiving the maximum sentence is low, the judge overseeing his case, Lewis Kaplan, has warned that he would be poised to impose a lengthy sentence.
In explaining why Bankman-Fried shouldn’t be bailed pending trial, Kaplan said:
Your client in the event of conviction could be looking at a very long sentence.
Kaplan reportedly also said:
If things begin to look bleak … maybe the time would come when he would seek to flee.
What is Sam Bankman-Fried accused of?
Sam Bankman-Fried, who was once hailed as a virtuoso in cryptocurrency trading, faces seven counts, on fraud and conspiracy charges.
Federal prosecutors allege that Bankman-Fried’s fraud ran from 2019 to November 2022, when FTX collapsed. The prosecution alleges that he “misappropriated and embezzled” FTX customers’ deposits and funneled “billions in stolen funds” to line his pockets and bankroll risky investments. They claim that the diverted funds propped up his luxe lifestyle. This “exorbitant spending unrelated” to FTX, they claim, covered his personal expenses – including more than $200m in Bahamas real estate, wild investments, and to also repay entities that had loaned money to Alameda Research, a hedge fund he also founded.
In an indictment filed against the 31-year-old former billionaire in August, prosecutors also allege that Bankman-Fried used stolen customer funds to make more than $100m in campaign contributions ahead of the 2022 US midterm elections. They say he concealed the fact that FTX customer deposits were a source of those donations by directing that money from FTX’s sister trading firm, Alameda, be wired to FTX executives’ personal bank accounts. Those executives then make donations in their own names, evading restrictions on certain types of political contributions, and “thereby maximize FTX’s political influence”.
Bankman-Fried made more than $40m in donations in 2022, according to a CBS News analysis. Most of those donations were to Democrats, but Bankman-Fried has said he donated equally to Republicans using undisclosed “dark” donations.
What to expect from the trial of Sam Bankman-Fried
Good morning and welcome to our live blog coverage of the criminal trial of Sam Bankman-Fried, the former cryptocurrency mogul who faces charges on finance crimes stemming from the shocking collapse of the financial exchange he founded, FTX.
The trial caps off nearly a year of freefall for the one-time crypto wunderkind who faces seven counts, on fraud and conspiracy charges, for allegedly siphoning billions of dollars in investors’ money into risky trades and other unlawful purposes.
Additional jury selection is set to begin at the Manhattan federal court after a slow first day on Tuesday. Bankman-Fried was not at the courthouse in advance of the proceedings, and it was later revealed that Donald Trump’s civil trial across the alley had derailed his arrival.
Federal prosecutors have accused Bankman-Fried of using customer funds to plug losses at FTX’s associated hedge fund, Alameda Research, as well as buying up high-priced real estate, funding his pet philanthropy projects and making extensive political donations.
Bankman-Fried has acknowledged inadequate risk management, but denied stealing funds. He is expected to argue that FTX’s Terms of Service did not prohibit the exchange from using customer funds for its own purposes, as long as it allowed users to withdraw their money.
The trial is expected to last about six weeks, and longtime federal Judge Lewis Kaplan will oversee the proceedings. Several of Bankman-Fried’s deputies and executives at the exchange, including the former head of Alameda and his on-again, off-again girlfriend, Caroline Ellison, are expected to testify in the trial. It is not yet clear whether Bankman-Fried himself will testify in his defense.
Bankman-Fried has pleaded not guilty to all seven charges. He will remain in jail throughout trial, following allegations that he sought to sway witnesses in advance of the proceedings. If convicted, he could face life in prison.
No cameras will be allowed in the courtroom.