The criminal trial of Sam Bankman-Fried, which has been ongoing for a month, has now nearly finished.Those in charge of the verdict, the jury, are now deliberating over testimony from people who used to work for FTX or Alameda Research, as well as emails, text messages and photographs.Bankman-Fried denies guilt for all the charges against him, which could potentially see him given a life sentence.
On Thursday afternoon, the jury in the criminal trial of Sam Bankman-Fried, once deemed the king of crypto, found him guilty on seven charges related to wire fraud, securities fraud and money laundering. He could face a sentence of over 100 years in prison.Close to 20 witnesses were brought to the stand over the course of the month-long trial, with the prosecution submitting hundreds of exhibits to the jury who were tasked with determining Bankman-Fried's fate. The team for the 31-year-old founder of FTX was unable to provide the jury with enough evidence to disprove his guilt, leading to his quick conviction.Commenting on the case, Renato Mariotti, a former U.S. Justice Department prosecutor and trial partner at Bryan Cave Leighton Paisner said, “From beginning to end, Sam Bankman-Fried's team failed to come up with a real game changer. His fraud was brazen and difficult to explain away, and he lacked the discipline to keep his mouth shut even after it was apparent that he was under criminal investigation.”In addition to oral testimony, the government provided the jury with evidence that pointed to Bankman-Fried's excessive spending habits and affluent lifestyle, including encrypted text messages, emails, promissory notes, Google docs, spreadsheets, leaked videos and photos displaying his $35 million Bahamas condo.
For weeks, prosecutors have been demonstrating to the jury the ways billions of dollars from FTX customers were allocated into political donations, venture investments and expensive real estate. They tracked the hundreds of millions of dollars that made their way from company resources directly into Bankman-Fried's personal accounts. Showing the jury a series of uncomplicated promissory notes, two pages each, the prosecution established that Bankman-Fried and Caroline Ellison, who ran hedge fund Alameda Research, had agreed to borrow more than $1.1 billion in the twelve months before his companies filed for bankruptcy. Bankman-Fried himself admitted in court that there could be additional loans that had not been documented, thus the amount borrowed is believed to be greater than what was presented as evidence.
Much of the government's case against Bankman-Fried is based on the deposition of his previous employees who had betrayed him at the end of last year. In an email, prosecutors showed Bankman-Fried had promised to give special privileges to customers in the Bahamas who were trading on the FTX cryptocurrency exchange. In a message sent to Ryan Pinder, the Attorney General and Minister of Legal Affairs for the Bahamas, Bankman-Fried declared that FTX had "isolated resources for all Bahamian users" and disclosed they were "more than happy to open up withdrawals for all Bahamian users on FTX, so that they can, tomorrow, fully extract all of their assets, making them entirely compensated". The missive was sent on the 9th of November, only a day after FTX had halted withdrawal requests and two days prior to its bankruptcy filing. FTX customers altogether had withdrawn $5 billion from the platform in what can be described as a bank run.
Prosecutors allege that Bankman-Fried significantly misrepresented his role at Alameda Research. Two distinct email chains, they argue, illustrate this.
In a letter to Rob Creamer, CEO of Geneva Trading and Chairman of FIA Principal Traders Group, Bankman-Fried stated that Alameda had its own personnel that he did not oversee.
Bankman-Fried wrote in an email to a Wall Street Journal reporter that Alameda's account access was supposedly on par with that of other traders, with no special access to client information, marketdata, or trading. However, per the government, this has been disproven through witness testimony and internal company documents and text messages. Exhibits demonstrating Alameda's preferential treatment include the "allow negative" feature, as well as a line of credit on FTX that amounted to $65 billion, as opposed to the $150 million or less allocated to other customers of the exchange.
Executives at FTX and Alameda reportedly took to Google Docs and Sheets to share important financial information. Ellison would prepare alternate versions of balance sheets, some of them leaving out vital data such as the quantity of customer funds loaned by Alameda to cover its debts, and send them to Bankman-Fried for him to decide which ones to forward to creditors. Bankman-Fried would also ponder larger strategy choices in memos to his superiors. In a such a memo, he outlined the benefits of discontinuing Alameda, noting the "PR hit from both FTX and Alameda being in existence." The memo also suggested that the "present Alameda leadership is adequate, but not good enough to be trusted with such a significant operation." Additionally, he composed personal memos once the company had gone bankrupt.In a Google Doc dated December 25, Bankman-Fried mentioned his ownership of a more than $600 million share in Robinhood with Alameda's capital. He pondered whether he should "contact the broker the HOOD is operated by and see if they will just give me the shares without putting much thought into it."
Much of the government's assertion pertaining to Bankman-Fried centers around his purported allocation of funds at Alameda following his leave of absence from the hedge fund. Bankman-Fried demanded that Sun, FTX's general counsel at the time, facilitate a transfer of $250 million to Modulo Capital in a period of eight hours. Subsequently, Sun testified to the occurrence of the transaction in accordance to a non-prosecution deal with the government.
Prosecutors brought to the court's attention Bankman-Fried's associations with prominent figures along with his proclivity for investing immense sums in endorsement arrangements. They displayed a listing of his investments from 2021, which included $205 million for FTX's logos for the Miami NBA stadium, $150 million to Major League Baseball, $28.5 million to NBA All-Star Stephen Curry, $50 million to quarterback Tom Brady and his previous spouse Giselle Bundchen, and $10 million to comic Larry David. The value of the deals in the spreadsheet was a total of $1.13 billion.
Nishad Singh, serving as former director of engineering for FTX, made clear in his testimony that the $300 million investment Bankman-Fried put into firm K5 prompted his concern. According to the term sheet that Bankman-Fried sent to Singh, the owners, Michael Kives and Bryan Baum, were due hundreds of millions of dollars in bonuses. This measure followed a K5 dinner that Bankman-Fried attended along with Hillary Clinton, Katy Perry, Orlando Bloom, Leonardo DiCaprio, and the siblings Kris and Kylie Jenner.
Singh indicated he vocalised his worries to Bankman-Fried and believed the K5 investment was "not beneficial." He further questioned whether the investment had been made with his own funds or those of FTX. An accompanying spreadsheet indicated the money came from Alameda. On attempting to dismiss a complaint in bankruptcy court against K5, lawyers for the firm argued that the "plaintiffs' effort to attribute wrongdoings to Kives and Baum has no factual basis."
At a company gathering on Nov. 9, 2022, Alameda Research CEO Ellison addressed staff from the Hong Kong office and 10 others connected via video from the Bahamas. Ellison informed employees that the exchange had a "shortfall of user funds" and had borrowed from FTX. Present at the meeting, former software engineer Christian Drappi recalled Ellison's "sunken" demeanour and "kinda slouching" posture. On a recording of the meeting, Drappi can be heard asking Ellison if Alameda's loans were collateralized through the spot margin group. Ellison said they weren't and Drappi commented, "That seems pretty bad."
Out of the hundreds of objects admitted into trial as evidence, a bank of messages exchanged on the encrypted app Signal provide the most definitive evidence of Bankman-Fried's suspected offences. This thread, labelled as the “small group chat”, included Ellison, Bankman-Fried, and Joe Bankman - the accused's father who gave advice regarding tax-related matters and other affairs. Additionally, the group included Ramnik Arora, a former product lead for FTX; Ryne Miller, FTX's previous General Counsel; Constance Wang, ex-operating leader; and Ryan Salame, a prior executive of FTX.
On the morning of Nov. 7, the defendant proposed various different initiatives, including the halting of withdrawals, the sending of a “confident tweet thread” and the contacting of firms such as Silverlake, Sequoia and Apollo as they "woke up". Salame then linked to a tweet from an anonymous crypto trader suggesting they would be rewarded with tokens if they did not move any of their funds, while Bankman-Fried suggested different means of taking advantage of the situation, seemingly in order to deceive FTX customers into believing they would get free coins if they kept their money on the platform.
The day after, Ellison appealed for assistance in terms of messaging and optics. She queried, "should I recommend that everyone stall in responding to external parties about 'Alameda is solvent'? What should I suggest?"On this same day, FTX put a stop on all client money withdrawals. Consequently, the price of FTT, which is FTX's in-house token, dropped by more than 75%. With no other means, Bankman-Fried asked for help from Binance CEO Changpeng Zhao, who declared that he had inked a non-binding memorandum of understanding for taking over FTX.
On Nov. 9, Ellison again asked the group for advice on how to approach the widely-discussed all-hands meeting of Alameda's roughly 30 employees. She proposed communicating that "Alameda is likely to wind down" and that there wasn't an expectation to stay but that support with "things such as ensuring our creditors are paid" would be "greatly appreciated."Bankman-Fried proposed she mention the possibility of a "future of some kind for those interested".
Michael Lewis, who wrote a book that was released on the day the trial began, was talked about in some Signal exchanges.Bankman-Fried told a group consisting of Ellison and Singh on January 5, 2022, that Lewis was coming to the Bahamas in the following month for journalism.Ellison commented that her "instincts were to stay under the radar", to which Bankman-Fried, who loves press, replied that his were the exact opposite.As the situation failed months later, Ellison expressed her gratitude to Bankman-Fried through a private chat.She told him that she had experienced an "increasing dread" of that day and that now that it was actually happening, it was amazing for her to get it over with no matter the outcome.Bankman-Fried replied with "wow," "uh," and "congrats?" in three consecutive messages.Ellison then elaborated that she was feeling really relieved.
The fraud trial of Sam Bankman-Fried is now entering the deliberation stage.
The fraud trial of Sam Bankman-Fried is now progressing to the point where the jury will consider their verdict.
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