Explosive Revelations Await: Inside Sam Bankman-Fried's Trial Today

The trial of Sam Bankman-Fried, a former crypto billionaire who is facing allegations of masterminding a multibillion-dollar fraud, is scheduled to commence in federal court in Manhattan on Tuesday. The process of selecting the jury is anticipated to occupy the majority of the first day, and opening arguments will take place later in the week.

In the coming weeks, attorneys will present two opposing stories regarding the unraveling of FTX, the bankrupt cryptocurrency platform owned by Bankman-Fried. This situation has left numerous customers in a state of uncertainty, as their deposits remain inaccessible. SBF, a 31-year-old also known as Bankman-Fried, has entered a plea of not guilty to seven charges of fraud and conspiracy related to the FTX collapse. This event has had a significant impact on the entire cryptocurrency sector, and its effects are still being felt.

SBF has consistently proclaimed his innocence since being arrested in December, attempting to deflect responsibility onto other individuals in his business empire, such as FTX's lawyers, and his former business partner and sporadic ex-girlfriend, Caroline Ellison.

Prosecutors have portrayed SBF as a mastermind akin to Bernie Madoff, accusing him of defrauding FTX's clients and deceiving investors through a long-term plan to enrich himself and his associates with extravagant real estate expenditures and over $100 million in political contributions within the United States.

Here are the key things to know about the case, and what we might see over the next several weeks at the trial.

What are the charges?

SBF is charged with seven counts, including wire fraud and securities fraud. Prosecutors claim that SBF embezzled billions of dollars from FTX customer funds for personal gain and to offset substantial losses experienced by his other controlled entity, Alameda Research, a cryptocurrency hedge fund.

SBF is alleged to have deceived investors in FTX by concealing the fraudulent scheme. Prosecutors decided in June to separate and postpone five additional charges filed after Bankman-Fried's extradition from the Bahamas, where FTX was headquartered. A distinct trial for those charges has been slated to commence in March.

What happened to FTX?

FTX marketed itself as an easy, safe portal into cryptocurrency trading. It made money by collecting fees on customers trades, much like a typical brokerage.

FTX's profile soared alongside the surging valuations of digital assets in 2021. At its pinnacle, the company achieved a staggering private valuation exceeding $30 billion. FTX further solidified its prominence by displaying its name prominently on a Miami basketball arena and securing celebrity endorsements from Tom Brady and Larry David, who appeared in FTX Super Bowl advertisements.

Unfortunately, the crypto market faced significant turbulence in the spring of 2022, leading to a drastic decline in the industry's total value from $3 trillion to a mere $1 trillion.

FTX founder Sam Bankman-Fried was a crypto celebrity until November last year, when his business empire collapsed.

Amr Alfiky/Reuters

By November, cracks in FTXs foundation were beginning to show, and it took just over a week for it all to come crashing down.

Following a report from crypto news site Coindesk, investors and customers were gripped with panic due to the raised concerns about the financial connections between FTX and Alameda. Interestingly, both businesses were seemingly independent but were founded by Bankman-Fried. Coindesk obtained a document revealing that a significant portion of Alameda's assets were comprised of FTT, a digital token developed by FTX. Unfortunately, the value of FTT was plummeting rapidly, leaving Alameda in a financially unstable position. Consequently, customers hurriedly withdrew their funds from FTX, uncovering a deficit of $8 billion.

FTX filed for bankruptcy on November 11th, and CEO Bankman-Fried subsequently resigned. He faced arrest in the Bahamas in December on various charges, including fraud and conspiracy, and was later extradited to the United States in January.

What will the defense be?

In regards to the case, SBF has consistently expressed his perspective following his arrest, stating that he was a novice in the business field, taking on more than he could handle, and asserting his innocence by affirming that he had no intentional involvement in any fraudulent activities.

His lawyers have hinted in court documents that they intend to utilize an "advice of counsel" defense. Essentially, SBF claims ignorance of the illegality of his actions as he was relying on guidance from FTX's legal team.

In Bankman-Fried's personal writings published by the New York Times, he attributes Alameda's losses to its 28-year-old CEO, Ellison, shifting the blame onto him.

Ellison, along with three other former high-level associates, has pleaded guilty in cooperation with prosecutors.

Ryan Salame

From Ryan Salame/Twitter

Ryan Salame, a former FTX executive, pleaded guilty to criminal charges and will be forfeiting $1.5 billion. According to Howard Fischer, a partner at Moses Singer and a former senior trial lawyer at the Securities and Exchange Commission, SBF's main challenge will be the testimony from his former colleagues. Additionally, FTX's new management, headed by a restructuring expert who managed the liquidation of Enron, has displayed hostility towards Bankman-Fried.

Fischer stated that this type of cooperation is highly beneficial for the prosecution. He also pointed out that SBF, through his lengthy blog posts, tweet threads, TV appearances, and alleged document leaks, consistently shows a lack of understanding of the severity of his situation.

"Juries often have a distaste for individuals who come across as arrogant and dismissive towards the legal proceedings. Though it is generally advisable for defendants in such cases to refrain from testifying, there remains a possibility that the seemingly steadfast self-assurance of SBF may compel him to take that chance."

How long will the trial last?

Jury selection commences on Tuesday, October 3rd, at the federal court in Manhattan. The trial is anticipated to endure for a maximum of six weeks.

Throughout this period, SBF will continue to be held at the Metropolitan Detention Center in Brooklyn, where he has been detained since August 11th. This occurred after Judge Lewis Kaplan revoked his bail due to SBF's attempts to intimidate witnesses.

What will happen if hes convicted?

If hes found guilty of all seven criminal counts and is given the maximum sentence, SBF would face the prospect of 110 years in prison.