The trial of Sam Bankman-Fried, the former FTX head and one-time crypto billionaire, is set to begin in New York City on Tuesday. Jury selection will start on October 3 and the trial itself is estimated to last six weeks.
Bankman-Fried is facing federal charges of wire fraud, securities fraud and money laundering that allegedly defrauded customers of his digital currency exchange, FTX, and lenders to his cryptocurrency hedge fund, Alameda Research. He has pleaded not guilty to all the charges, some of which carry a maximum sentence of 20 years in prison.
The tech CEO’s swift rise to fame began when he co-founded Alameda Research in 2017 and FTX in 2019. FTX was a low-fee exchange that capitalized on the booming crypto market, acquiring competitors and marketing itself aggressively to become one of the largest players in the field. A Super Bowl ad featuring celebrities greatly increased its visibility. As its value on paper skyrocketed, Bankman-Fried’s personal wealth peaked at $26 billion. He became a significant political donor and showed his support for some regulation of the industry.
Then, in November 2022, Coindesk reported that Alameda Research’s balance sheet was composed of a token, called FTT, issued by FTX itself. This led Binance CEO Changpeng Zhao to announce that his company would sell all the FTT tokens. The sale caused the value of FTT to drop drastically and damaged Alameda’s balance sheet. Digital currency traders started pulling their money from FTX, and the platform soon blocked customers from further withdrawals. Binance agreed to buy FTX but then backed out.
Bankman-Fried continued to raise money to save the business, but both firms, as well as FTX US, filed for bankruptcy in November. He was arrested in December in the Bahamas and extradited to the U.S. He will also be tried in March 2024 on five additional counts, including bribery of a foreign official.
Though Bankman-Fried had said he wanted to use his wealth to make the world a better place, his businesses’ collapse revealed a complete failure of corporate controls and lack of trustworthy financial information. Billions of dollars were missing, and insiders such as his ex-girlfriend and former CEO of Alameda, Caroline Ellison, are expected to testify against him.
