UPDATE ON THE TRIAL OF FTX’s CEO, SAM BANKMAN-FRIED

Last Updated on November 13, 2023 by Ameer Hamza

Following the collapse of FTX, the then second-largest crypto exchange platform, its CEO, Sam Bankman-Fried, has been facing a criminal trial. Sam Bankman-Fried is facing criminal charges filed by the U.S. SEC on seven counts of fraud, conspiracy, improper use of customers’ funds, and money laundering, among others.

Events leading to the collapse of FTX

FTX began unraveling after CoinDesk published an article outlining how Alameda Research heavily depended on FTX’s token, FTT. In addition, a leak in the balance sheet of FTX revealed a lack of diversification between the two companies. It also showed that most of Alameda’s capital from FTX was from customers’ assets.

The culmination of these revelations led to a drop in FTT’s value, prompting many customers to attempt to withdraw their funds on the crypto exchange. However, FTX could not meet these withdrawal demands and had to remove the withdrawal option. Subsequently, it could not pay the $8 billion gap, leading to it filing for bankruptcy. 

Although Binance, its primary counterpart in the crypto market, attempted to buy FTX to salvage the situation, Binance later backed out of the deal after realizing the issues surrounding FTX were deeper. He was finally arrested in the Bahamas on December 12 and arrived in the United States soon after.

Timeline of the trial of FTX CEO since the start

The trial of the FTX CEO began in earnest on October 3. It started with a jury selection, where 12 jurors and six alternatives were selected to be present for the trial. Sam Bankman-Fried pleaded not guilty to the seven counts brought against him.

Following the jury selection, both parties presented their opening statements. They brought arguments aimed at portraying their stance. The defense maintains that the FTX CEO is only a young entrepreneur who made a decision that didn’t work out. They believe that all transactions were legitimate and made in good faith. However, the prosecution contends that Bankman-Fried deliberately lied to customers to enrich himself.

Witness testimonies have been in focus since the start of the trial. For instance, Yedidia, a close friend of Bankman-Fried, testified in his favor. On the other, testimonies from witnesses like Gary Wang, the CEO of Alameda Research, and Carolina Ellison, co-founder of Alameda and ex-girlfriend of Bankman-Fried, highlight the fraud and money laundering conspiracy between Alameda Research and FTX. 

Worthy of note is the fact that FTX executives have pleaded guilty to the charges relating to FTX and are willing to testify for the prosecution during the trial. For instance, the prosecution’s star witness, Carolina Ellison, testified that it was Bankman-Fried’s idea to use customers’ money for Alameda.

Zac Prince, founder and former CEO of BlockFi, has also taken the stand to testify in the criminal charge. His testimony centers on the view that BlockFi would never have filed for bankruptcy without the FTX issue. 

The trial of the FTX CEO continues on Monday, October 16, with more witnesses coming forward. 

Conclusion

Aside from the pending criminal trial Sam Bankman-Fried is in; he also faces a civil lawsuit from FTX investors citing a case of false representation and deceptive conduct. However, the criminal trial is in the spotlight now, with Bankman-Fried facing up to 115 years in prison. The entire criminal suit is estimated to last about six weeks, throughout which he will remain in jail pending the judgment.