Welcome to Day Two
Good morning and welcome to day two of WIRED’s live coverage of the trial of Sam Bankman-Fried.
Jury selection is expected to finish this morning, then we move on to opening arguments, which should take no more than two hours. Depending on how long it takes to finish voir dire, we could hear from witnesses by afternoon. Here’s the view outside the courtroom this morning.
As predicted, there was little in the way of movement on the first day of the trial, which had been set aside for jury selection. As part of that process a list was released of the individuals and companies that are likely to come up in testimony, offering a glimpse of the topics the prosecution will cover as it lays out its case against Bankman-Fried.
Binance, the world’s largest crypto exchange and previously a competitor to FTX, is on the list, for example. As we explained in our guide to the trail, the fractious relationship between Bankman-Fried and Changpeng Zhao, Binance CEO, was central to the series of events that led to customers rushing to pull funds off the FTX exchange in November 2022, thus exposing the alleged fraud.
Other organizations expected to come up in testimony include Silvergate and Signature, two banks that collapsed in March, partly as a consequence of their ties to FTX and the broader crypto industry, as well as BlockFi and Genesis, two crypto lenders that went bankrupt after FTX fell.
So what can we expect from the opening arguments today? It’s a key point in the trial as it gives both the prosecution and defense the chance to set the scene for jurors and lay out the most salient facts, as they see them.
The greatest unknown is how Bankman-Fried will seek to defend himself—and opening arguments will offer the first real indication. In all likelihood, legal sources say, the defense will attempt to argue that Bankman-Fried did not intend to commit fraud and that the problems at FTX were instead a product of his inexperience and lack of business acumen.
At this stage, both sides are restricted to simply setting out the evidence they intend to present, but opening arguments will still tell us something about how Bankman-Fried will try to support this interpretation of events.
Sam Bankman-Fried’s parents, Barbara Fried and Joseph Bankman, arrived for their son’s trial earlier this morning.
A note on timings. The court will recess for lunch at around 12:30 pm ET and proceedings are expected to wrap up each day at 4:30 pm ET. We’ll have updates from inside the court shortly after the lunch recess begins and also after the court adjourns for the day.
The Key Witnesses
In the ten months since Bankman-Fried’s arrest, the prosecution has secured guilty pleas on fraud-related charges from three members of his inner circle, who are now set to testify against him. They are expected to speak to the totality of Bankman-Fried’s control over the FTX operation, as well as the deliberate and calculated manner of the alleged fraud. The co-conspirator witnesses include:
Caroline Ellison: The CEO of Alameda Research and on-and-off romantic partner of Bankman-Fried. The pair met at Jane Street, a quantitative trading firm where they both worked after college.
Gary Wang: The cofounder of FTX and Alameda Research and CTO for both firms. Wang met Bankman-Fried in high school, and the pair were later roommates at MIT.
Nishad Singh: The director of engineering at FTX. Singh worked as an engineer at Meta before being headhunted by Bankman-Fried.
The opening arguments have ended and the court is taking a break for lunch.
The prosecution told the story that has been circulating since last November: that Sam Bankman-Fried knowingly diverted customer money from FTX to Alameda and then used that money to enrich himself by buying property and influence.
The defense, meanwhile, argued that SBF acted in good faith and everything was open and above board, even if mistakes were made, because it isn’t a crime “to be the CEO of a company that later files for bankruptcy.”
This is, the jury was told, “the story of the crypto world between 2017 and 2022” and how a risky, volatile market can take down well-intentioned businesses. Working at a startup is like “building a plane while you’re flying it,” the defense argued—and though a more mature company would have been more careful of risk, there was, the defense said, no intent to deceive.
Bankman-Fried remained stoic throughout the opening arguments. One other interesting line to come out of the court this morning centered on the code backdoor created between FTX and sister company Alameda Research that allowed Alameda to borrow from customers on the exchange without permission. The defense argued this system was not a secret and that “any senior developer at FTX” could see it.
The trial will resume at 2:40 pm ET with prosecutors expected to call on their first witness.
With the afternoon session underway, let’s take a quick look at one of the most important figures in the courtroom: Judge Lewis Kaplan.
Kaplan, who is overseeing Sam Bankman-Fried’s trial, has three decades of experience with high-profile cases at the US District Court for the Southern District of New York. Kaplan, 78, was nominated to the bench by then-US president Bill Clinton in 1994. He took senior status in 2011.
In recent years, he’s presided over the civil trial of actor Kevin Spacey on accusations of sexual assault (Spacey was cleared), another civil case against former US president Donald Trump (the civil jury found Trump was liable for sexually abusing and defaming advice columnist E. Jean Carroll), and a lawsuit brought against Prince Andrew by Virginia Giuffre, which was settled out of court in March 2022 without going to trial.
We’re expecting today’s proceedings to wrap up soon and will have an update on everything that’s happened in court soon.
The opening statements, however, have already set the tone of the trial. For the defense, Bankman-Fried was a math nerd who didn’t defraud anyone. The prosecution, meanwhile, argued his wealth and power were the result of an elaborate fraud.
“One year ago it looked like Sam Bankman-Fried was on top of the world,” assistant US Attorney Nathan Rehn, pictured below, said in court this morning. “He had wealth, power and influence. All of it was built on lies.”
The Trial’s First Witness
The prosecution’s first witness this afternoon was London-based broker Marc-Antoine Julliard, who lost about $100,000 to FTX—clearly an attempt by the prosecution to put a victim of FTX’s collapse front and center.
The second witness was far closer to the case. Adam Yedidia, SBF’s “close friend” from MIT, is an immunized witness and is protected from being prosecuted based on his testimony. He worked at Alameda for two months in 2017 and then at FTX as a software developer starting in 2021. He resigned the week FTX went bankrupt when he received a call informing him that Alameda had been using customer deposits.
The prosecution also showed Yedida photos of the $30 million Bahamas penthouse he had lived in and then asked whether he had already been living in and working in the Bahamas before moving into the penthouse—or whether he moved to the Bahamas for the penthouse.
Yedida’s answer: Yes, he was already working for FTX in the Bahamas, but no, he didn’t move to the Bahamas for the penthouse—a direct rebuttal to the defense’s argument that the penthouse was a normal business expense necessary to convince people to move to the island nation.
Tomorrow will continue with testimony from Adam Yedidia. The prosecution also plans to call Matt Huang, cofounder of the crypto company Paradigm, and Gary Wang, FTX’s chief technology officer and the first of the witnesses from SBF’s “inner circle.”
A celebrity guest in the audience at the trial this afternoon: Martin Shkreli, who, in 2017, was convicted and sentenced to seven years in prison on fraud charges. Shkreli was released early in May 2022.
The trial of Sam Bankman-Fried continues tomorrow. We’ll have our story wrapping up today’s events soon.
That’s it for day two of our live coverage of the trial of Sam Bankman-Fried. We’ll be back tomorrow as the trial continues.
‘Lied to the World’ or Acted in ‘Good Faith’: Sam Bankman-Fried’s Trial Opens
Prosecutors said the FTX founder had lied to customers. Defense lawyers said he had just been trying to prevent his cryptocurrency exchange from melting down.
Oct. 4, 2023
Federal prosecutors on Wednesday opened the criminal trial of Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, with a simple message: He deliberately “lied to the world,” leading to one of the biggest financial frauds of a generation.
Mr. Bankman-Fried’s lawyer advanced a far different narrative. The former crypto mogul, the lawyer said, was simply a well-intentioned entrepreneur who acted “in good faith” to make his firm successful, with no intention to defraud anyone.
The dueling arguments are at the crux of Mr. Bankman-Fried’s trial, which has become the highest-profile reckoning for a business executive since the Theranos founder Elizabeth Holmes was convicted of fraud early last year.
A onetime crypto wunderkind, Mr. Bankman-Fried, 31, became a tousle-haired billionaire virtually overnight, only to see his company collapse last year and his fortune evaporate. He has been charged with orchestrating a conspiracy to use $10 billion that FTX’s customers had entrusted to him for all manner of personal projects, including venture capital investments, political donations and luxury real estate purchases.
“It looked like Sam Bankman-Fried was on top of the world,” Thane Rehn, a lead prosecutor, told a packed room at the federal courthouse in Manhattan on Wednesday. “All of it was built on lies.”
Mr. Bankman-Fried’s lawyer, Mark Cohen, soon hit back. “It’s not a crime to run a business in good faith that ends up going through a storm,” he said. He called the prosecution’s portrayal of his client a “cartoon of a villain” that distorted the facts.
Mr. Bankman-Fried, who has spent the last seven weeks in jail, appeared in court with close-cropped hair that had been cut recently by a fellow detainee. He wore a suit and tie and watched the proceedings flanked by his other lawyers, while his parents, the Stanford law professors Joseph Bankman and Barbara Fried, sat a few rows behind him.
His trial has become a closely watched referendum not only on the fall of FTX but on reckless behavior across the cryptocurrency industry. A frenzy over digital coins like Bitcoin and Ether swept up millions of everyday investors before the market imploded last year, wiping away people’s savings and sending a procession of start-ups into bankruptcy.
When FTX collapsed in November, Mr. Bankman-Fried became a symbol of the industry’s excesses. At the height of its power and influence, his company was valued at $32 billion and Mr. Bankman-Fried was widely hailed as a leader capable of bringing obscure crypto technology into the mainstream of global finance. He jetted back and forth from FTX’s base in the Bahamas to meetings in Los Angeles and Washington, where he rubbed shoulders with celebrities and politicians, and had his photograph plastered on billboards and magazine covers.
Now FTX is bankrupt and the crypto markets have cratered, leading to dozens of lawsuits and tens of billions of dollars in losses that have devastated the finances of individual investors around the world.
Mr. Bankman-Fried, who in private writings has called himself “one of the most hated people in the world,” has pleaded not guilty to seven counts of fraud and money laundering. If convicted, he could face what amounts to a life sentence in prison.
The FTX founder faces an uphill battle in the trial. Three of his top executives have pleaded guilty to fraud and agreed to cooperate against him — including his on-and-off girlfriend, Caroline Ellison, who ran Alameda Research, a hedge fund that Mr. Bankman-Fried started.
Prosecutors and defense lawyers said in court that they had not held any negotiations over a plea agreement, and that no deal had ever been offered to Mr. Bankman-Fried.
On Wednesday, Mr. Rehn accused Mr. Bankman-Fried of “fraud on a massive scale,” casting him as a schemer who was “not what he appeared to be.” He said Mr. Bankman-Fried had moved funds that customers deposited with FTX to Alameda, which then funneled the money into investments and donations.
Mr. Rehn repeatedly invoked the cooperating witnesses, stressing that people who say they participated with Mr. Bankman-Fried in the scheme would testify against him. He also pointed to Mr. Bankman-Fried’s posts on X, the social media service formerly known as Twitter, and commercials used to promote FTX, calling them lies intended to deceive customers.
“He was taking these customer deposits, and spending them for himself,” Mr. Rehn said. “The defendant was keeping his customers in the dark.”
Prosecutors have marshaled millions of pages of digital evidence, including text and email logs, as well as snippets of computer code that showed how FTX moved customer money to Alameda. They have an audio recording from the week of FTX’s collapse in which Ms. Ellison appears to admit that she and Mr. Bankman-Fried worked together to steal customer deposits. And they have won a series of pretrial disputes, allowing them to present evidence that Mr. Bankman-Fried has contested and prevent his legal team from mounting certain defenses.
Mr. Cohen, the defense lawyer, pushed back against the public narrative that Mr. Bankman-Fried was a con artist intent on stealing customer money.
“Sam didn’t defraud anyone,” he said. “Sam acted in good faith.”
Casting his client as “a math nerd who didn’t drink or party,” Mr. Cohen walked the jurors through FTX’s history, arguing that Mr. Bankman-Fried had acted in his customers’ interests, even if he didn’t always make the right decisions.
“No one person, no C.E.O., certainly not Sam, could be everywhere and doing everything,” he said.
Mr. Cohen also attacked the credibility of Ms. Ellison and the other cooperating witnesses, pointing out that they were trying to avoid long prison sentences. He said that Mr. Bankman-Fried had urged Ms. Ellison to put hedges on Alameda’s trading activity, but that she had ignored him, leading to some of the problems that caused the business empire to implode.
“You must consider what Sam did and said in real time,” he said. “He made business decisions that he thought were right when he made them.”
After the opening statements, prosecutors called their first witness, Marc-Antoine Julliard, an investor in London who lost more than $100,000 in cash and Bitcoin in FTX’s collapse. Mr. Julliard said he had thought FTX would keep his money safe.
Another witness, Adam Yedidia, a college friend of Mr. Bankman-Fried’s who worked at Alameda and FTX, said he had quit just before FTX filed for bankruptcy when he learned that its customer money had been siphoned off to Alameda. Testifying under immunity, Mr. Yedidia also discussed the lavish apartments in the Bahamas that prosecutors have said were bought with FTX customer money.
The opening statements and witness testimony began shortly after the judge overseeing the case, Lewis A. Kaplan swore in a jury of nine women and three men. During the selection process, one prospective juror said he and his twin brother had lost money in the crypto market, while another said she worked for a financial firm that had lost funds with FTX and Alameda. Both were excused.
A third candidate repeatedly said he didn’t know if he could be impartial because he didn’t understand how cryptocurrencies worked.
“You probably have a lot of company in this courtroom,” Judge Kaplan responded.
The prospective juror, who was excused, said the whole concept of crypto rubbed him the wrong way, reminding him of the Ponzi scheme carried out by the disgraced financier Bernard Madoff.
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