Theft or mistakes? Bankman-Fried jurors hear competing explanations for
FTX collapse
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[October 05, 2023]
By Luc Cohen, Jody Godoy
NEW YORK (Reuters) -Sam Bankman-Fried's lawyers and federal prosecutors
clashed on Wednesday in opening statements over whether the former
billionaire's FTX cryptocurrency exchange collapsed due to "massive"
fraud by its founder or errors in business judgment.
Bankman-Fried, 31, has pleaded not guilty to charges he used FTX
customer money from the exchange's 2019 launch until its November 2022
bankruptcy in order to prop up his hedge fund, Alameda Research, buy
luxury real estate, and donate to U.S. political campaigns and
candidates.
The trial kicked off with jury selection on Tuesday, nearly a year after
the collapse of FTX shocked financial markets and tarnished the budding
entrepreneur and philanthropist's reputation as an honest actor in a
crypto sector prone to scams and purported get-rich-quick schemes.
In his opening statement on Wednesday, defense lawyer Mark Cohen
portrayed the Massachusetts Institute of Technology physics graduate as
a "math nerd" who overlooked risk management in building FTX, but did
not steal customer money.
Cohen acknowledged that FTX lent money to Alameda, but said Bankman-Fried
"reasonably believed" that those loans were permitted and backed up by
collateral. He said some key aspects of FTX's business, such as risk
management, were "overlooked" as the startup grew rapidly.
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"Sam and his colleagues were building the plane as they were flying it,"
Cohen said. "No one person - no one CEO, certainly not Sam, could be
everywhere and do everything."
But prosecutor Thane Rehn said Bankman-Fried took more than $10 billion
from unsuspecting FTX customers, and that he "doubled down" when
Alameda's risky investments in cryptocurrency began to lose money in May
and June of last year.
"All of it was built on lies," Rehn said. "He was using his company, FTX,
to commit fraud on a massive scale, and the money he was spending to
build his empire - it was money he was stealing from FTX customers."
JURORS TO HEAR FROM INNER CIRCLE
Prosecutors are expected to call three former members of Bankman-Fried's
inner circle - former Alameda chief executive Caroline Ellison and
former FTX executives Nishad Singh and Gary Wang - to testify against
him. All three have pleaded guilty and agreed to cooperate with
prosecutors.
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![](../images/100523PIX/news_a20.jpg)
Indicted FTX founder Sam Bankman-Fried arrives at the United
States Courthouse in New York City, U.S., July 26, 2023. REUTERS/Amr
Alfiky/File Photo
![](http://archives.lincolndailynews.com/2023/Oct/05/images/ads/current/businessdirectory_dailycover_2023.png)
"They will give you an insider's view of how the crimes occurred,"
Rehn said in his opening statement, without naming the witnesses.
Cohen suggested they may "spin" Bankman-Fried's good-faith decisions
that they agreed with at the time as deceitful in hindsight. He also
said Bankman-Fried urged Ellison to hedge Alameda's crypto bets, but
that she did not.
"Here in the real world, cooperation means testifying against Sam in
a way that will help the government's case," Cohen said.
Jurors are expected to hear from Wang by the end of the week,
another prosecutor, Danielle Sassoon, said in court.
Earlier on Wednesday, a jury of 12 primary members and six
alternates was selected from a pool of residents of Manhattan, the
Bronx, and New York City's northern suburbs. The group includes a
retired investment banker, a school librarian and a train conductor.
Bankman-Fried's parents, Stanford Law School professors Joseph
Bankman and Barbara Fried, were seen arriving at the federal
courthouse in Lower Manhattan on Wednesday morning. They had not
attended the trial's first day.
Once known for his casual attire and mop of unkempt curls, Bankman-Fried
sported a trim haircut and wore a suit and tie in court on both
Tuesday and Wednesday.
He has been detained at the Metropolitan Detention Center in
Brooklyn since Aug. 11, when U.S. District Judge Lewis Kaplan jailed
him for likely tampering with witnesses, including by sharing
Ellison's private writings with a reporter. Bankman-Fried and
Ellison were at times romantic partners.
![](http://archives.lincolndailynews.com/2023/Oct/05/images/ads/current/rainbowgutter_sda_FHG_2023.png)
(Reporting by Luc Cohen and Jody Godoy in New YorkEditing by Amy
Stevens, Nick Zieminski and Matthew Lewis)
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