Sam Bankman-Fried, a name once synonymous with the rapid rise of the crypto industry, is merely a shadow of himself a year ago. The co-founder and former CEO of FTX, a now-bankrupt cryptocurrency exchange, is facing charges with a maximum sentence of 115 years. These charges include fraud and conspiracy to commit money laundering.
The trial began on October 3rd with jury selection. Prosecution witnesses included FTX co-founder Gary Wang and former Alameda Research CEO and SBF girlfriend Caroline Ellison. Both have already testified during the course of this trial.
Ellison, former CEO of Alameda Research, is arguably the star witness of this case. This crypto trading firm was lent a monetary sum of more than half of FTX’s customer funds, directly contradicting FTX’s terms of service. The former confidante of Bankman-Fried pleaded guilty to numerous charges, such as counts of wire fraud, conspiracy to commit security fraud, and conspiracy to commit money laundering. As part of her plea deal, she is now a witness for the prosecution in return for extensive immunity from future prosecutions. During the course of this trial, she has already stated that Bankman-Fried instructed her to falsify Alameda’s financial statements during market downturns in early 2022. Additionally, Ellison and Wang mentioned the Alameda Credit line worth $65 billion, as well as the illegal borrowing of customer funds.
Bankman-Fried has consistently blamed others for the downfall of FTX, most notably Changpeng Zhao, the CEO of market competitor Binance. On the 6th of November 2022, a balance sheet revealed that FTX was overly reliant on FTT as an asset, a crypto token issued by FTX itself. Zhao, in turn, published a tweet on X, formerly known as Twitter, that Binance was about to liquidate their FTT position worth hundreds of millions of dollars. This led to the subsequent downfall of FTX as more and more customers began to remove their funds from the website. In the course of this process, a deficit of $8 billion was discovered, leading to the collapse of a potential acquisition of FTX by Binance.
Even though the trial will once again draw the public eye towards FTX, Binance, and the cryptocurrency industry, it is very unlikely that the trial itself will have direct impacts on the industry as Bankman-Fried himself is on trial, not his company. However, the public attention on the trial could lead to increased attention from regulators and potential laws in the future. It has also been argued that the failure of FTX is mostly a failure of a centralized institution and lawmakers, with the argument that one must “separate the technology from the business.” As recently as October 16th, the defense will soon have the opportunity to argue their case based on Bankman-Fried’s portrayal as an ambitious man who was in over his head.
Written by Johannes Kuehn von BurgsdorffShare this: