CEO of Future Exchanges Goes on Trial

By: Jordan Park and Jane Wilde

Local and Culture Editors 

Founder and CEO of Futures Exchange (FTX), Sam Bankman-Fried, is going to trial on several counts of fraud, money laundering, and the loss of eight billion dollars. 

Bankman-Fried founded his company in May 2019 after raising approximately two billion dollars from investors. The company operated in the Bahamas due to its risky trading operations that are not legal in the United States and specialized in cryptocurrency exchanges. It allowed customers to trade all types of currency and had native tokens known as FTT. The company announced its bankruptcy on Nov. 11, 2022, after Changpeng Zhao, chief executive of Binance, sold his stock in FTX, receiving FTT tokens, which he then sold. This scared thousands of customers and investors into doing the same and drove down the price of FTT. Also, in November of 2022, the sister company to FTX, Alameda Research, collapsed with customers unable to withdraw more than eight billion dollars.

Bankman-Fried, 31, grew up in the Bay Area, attending prestigious high schools and later studying physics with a minor in mathematics at the Massachusetts Institute of Technology. He became a crypto spokesperson in Washington and was known for his curly hair and interactions with the rich and famous. Bankman-Fried is also known as the “Crypto King” after he acted as a savior to smaller crypto firms during the surge in popularity of the cryptocurrency industry in 2022. 

Bahamian authorities arrested Bankman-Fried at an apartment complex in December of 2022 after the collapse of FTX, which led to investigations by the United States Justice Department and the S.E.C. After the arrest, Judge Lewis A. Kaplan sentenced Bankman-Fried to house arrest, where he remained in his parents’ home in Palo Alto, California. On Aug. 11, 2023, Judge Lewis A. Kaplan of the Federal District Court in Manhattan revoked that privilege, accusing him of influencing witnesses, and did not set bail. Local Police detained Bankman-Fried in the Metropolitan Detention Center in Brooklyn for several weeks before the trial.

The Department of Justice accused Bankman-Fried of stealing billions of dollars from customers and using said finances for pleasure, including investing in venture capital and purchasing luxury real estate. He also faces criminal charges of wire fraud, wire fraud conspiracy, securities fraud, and securities fraud conspiracy. Many of his co-workers at FTX and Alameda Research executives have pleaded guilty, some of whom have agreed to cooperate and testify: Caroline Ellison, Alameda’s chief executive, and Bankman-Fried’s on-and-off girlfriend, and co-founders of FTX, Gary Wang and Nishad Singh. The co-founders admitted to conspiring with Bankman-Fried to defraud customers. Ryan Salame, a fourth-level executive of FTX, also pleaded guilty, unwilling to cooperate. Bankman-Fried pleaded not guilty and, if convicted, could receive a life sentence.

The trial began on Oct. 4 at the Federal District Court in Manhattan with Bankman-Fried’s parents, Barbra Fried and Joseph Bankman, in attendance. The prosecution “accumulated more than six million pages of documents and other records,” The New York Times says. The prosecution also plans to exhibit more than 1,300 records at trial. Head prosecutor Thane Rehn told the court, “It looked like Sam Bankman-Fried was on top of the world, all of it was built on lies.” Bankman-Fried’s Lawyers contradicted the statement, claiming he ran his business in “good faith” and intended to prevent his cryptocurrency exchange from failing. They also plan to state that outside law firms authorized his actions at FTX, along with an accounting error that caused the loss of customers’ money.

The trial will continue for another four weeks, with another trial set to begin in March of 2024, addressing the other charges against Bankman-Fried. 

(Sources: BBC, New York Times, Sky News)

Categories: National

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