Trial begins in New York
FTX founders face up to 115 years in prison
October 3, 2023, 6:36 a.m
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The founder of the crypto exchange FTX is accused of embezzling billions of dollars in customer funds. Now Bankman-Fried has to answer in court. If convicted, he could spend the rest of his life behind bars.
Meteoric rise and steep fall: Just over a year ago, Sam Bankman-Fried was still the superstar of the crypto scene. The founder of the collapsed crypto exchange FTX is now behind bars. From October 3rd, the 31-year-old with the distinctive curly head will have to answer in a US court for alleged fraud. The graduate of the renowned Massachusetts Institute of Technology had previously amassed an estimated personal fortune of $26.5 billion within just a few years.
At the height of his career, the FTX logo was emblazoned, among other things, on the arena of the US basketball team “Miami Heat”. Numerous athletes such as football star Tom Brady advertised for the company. Bankman-Fried also supported US President Joe Biden’s election campaign with millions. Instead of top politicians and celebrities, Bankman-Fried, known in the crypto scene by his initials “SBF”, is now surrounded by investigators and his criminal defense lawyers. The authorities accuse the FTX founder of embezzling billions of dollars in customer funds. Among other things, the stock exchange secretly granted loans to Bankman-Fried’s Alameda brokerage house. For prosecutor Damian Williams, the FTX case is “one of the largest financial frauds in American history.”
Bankman-Fried faces up to 115 years in prison
The trial in the New York court is scheduled to last six weeks. If convicted, Bankman-Fried could face up to 115 years in prison. Regardless, FTX customers want to file a class action lawsuit.
Bankman-Fried’s parents also have to go to court. The new management of FTX accuses them of being among the beneficiaries of the funds embezzled by their son. Bankman-Fried’s lawyers reject the allegations as “completely false.” Three former high-ranking FTX employees who have pleaded guilty are serving as key witnesses for the prosecution. One of them is Bankman-Fried’s former partner Caroline Ellison. According to an August ruling, the FTX founder attempted to discredit Ellison by leaking personal documents not seized by authorities to the press.
He also blamed her for the crypto exchange’s lack of risk management. Because of witness tampering in at least two cases, Bankman-Fried’s initial house arrest was revoked and he must now await trial in prison. Bankman-Fried repeatedly denied the fraud allegation and pleaded “not guilty” at an initial hearing in January 2023. However, he admits poor risk management and personal mistakes. In a draft for a US congressional hearing, he wrote that due to a “quirk” in internal controls, he had no idea how much money Alameda had borrowed from FTX.
Bankman-Fried was arrested in December 2022, a day before he was scheduled to appear in Parliament. “Bankman-Fried’s best strategy is to show that he is not a criminal mastermind, but was simply overwhelmed,” explains defense attorney Mark Kasten of the law firm Buchanan Ingersoll & Rooney, which is not involved in the case. According to Paul Tuchmann, a former prosecutor and partner at the law firm Wiggin and Dana, the point at which Bankman-Fried knew that he could not repay FTX customers’ deposits was crucial.