Sam Bankman-Fried was once hailed as the boy wonder of the crypto industry, an “altruistic” self-made billionaire who hung out with presidents and pop stars and had the ear of lawmakers from both parties in Washington DC.
Nearly one year after his cryptocurrency empire FTX imploded, the 31-year-old will go on trial in New York this week charged with committing one of the largest corporate frauds in US history.
Prosecutors are expected to argue that Mr Bankman-Fried siphoned billions of dollars from FTX customers to prop up his ailing hedge fund Alameda Research, while funding a luxurious life in the Bahamas.
They are expected to outline to the jury how he sought to gain political influence by making $100m in political donations prior to the 2020 presidential election to ensure light-touch regulations of the crypto industry.
In December, Mr Bankman-Fried was arrested at his $40m apartment complex in Nassau and indicted on fraud, money laundering, and campaign finance charges. He was extradited back to the US, and placed under house arrest at his parents’ Palo Alto home on a $250m bail.
His bail was revoked in August when a judge ruled that he had harassed his former girlfriend and fellow FTX executive Caroline Ellison, who is likely to be a star witness for the prosecution.
Mr Bankman-Fried has been held in the Metropolitan Detention Center in Brooklyn while awaiting trial.
Here’s what to know about the trial, which begins in Manhattan on Tuesday with jury selection.
FTX’s rise and collapse
Mr Bankman-Fried, known by his initials SBF, founded Alameda Research in 2017 after figuring out how to exploit a quirk in crypto values that saw Bitcoin trade for slightly less in Asia than in the US.
In 2019, he launched the FTX trading platform that was promoted to investors as a trusted, straightforward exchange. It made money by claiming a percentage of transactions.
When the value of Bitcoin soared in 2021, FTX became one of the largest crypto traders in the world worth an estimated $32bn.
Mr Bankman-Fried’s profile soared as he amassed a net wealth of around $16bn while receiving fawning media coverage for his so-called “altruistic” beliefs and austere lifestyle.
FTX enlisted a band of celebrity backers including Gisele Bundchen and Tom Brady, hired Larry Davis to front an expensive Super Bowl advert, and acquired the naming rights to the Miami Heat’s home arena.
Mr Bankman-Fried made around $100m in political donations to both parties, while attempting to influence cryptocurrency regulatory reform, prosecutors said in court filings.
When crypto prices collapsed in 2022, cracks began to emerge in SBF’s empire.
In November, the crypto trade publication Coindesk published a leaked balance sheet showing that Alameda and FTX were “unusually close” and Alameda’s value was built on a “foundation largely made up of a (digital) coin that a sister company invented”.
The story sent shockwaves through the crypto world, and FTX customers raced to withdraw their funds, exposing an $8bn deficit in FTX’s accounts.
Mr Bankman-Fried’s personal wealth fell by an estimated $16bn in a single day on 8 November. Within days, FTX filed for bankruptcy days after and Mr Bankman-Fried resigned as CEO.
He was arrested in the Bahamas on 12 December.
The collapse sent a contagion through the crypto industry that caused several exchanges to implode and prices to collapse.
What are the allegations against SBF?
Prosecutors will claim that Mr Bankman-Fried orchestrated a wide-scale conspiracy to defraud FTX investors and the Alameda Research hedge fund exchange.
The founder and CEO of FTX allegedly used billions of dollars of customer funds for his personal use, and to make millions of dollars of political contributions to federal political candidates and committees.
Mr Bankman-Fried built a “house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto”, the Securities and Exchange Commission chair Gary Gensler said in a statement last December.
Mr Bankman-Fried concealed the close ties between Alameda and FTX from investors, while effectively using customers’ funds as an unlimited line of credit to “make undisclosed venture investments, lavish real estate purchases, and large political donations”, Mr Gensler alleged.
Around 90 US-based investors collectively lost $1.1bn, the SEC said.
Bankman-Fried was charged in the Southern District of New York with seven counts of fraud and money laundering, some of which carry a maximum prison term of 20 years in prison.
In June, prosecutors severed five charges from the current trial which were brought after his extradition from the Bahamas. He is expected to be tried on the separate charges in March.
In August, prosecutors dropped several campaign finance violation charges against Mr Bankman-Fried.
What will SBF’s defence be?
Mr Bankman-Fried will have to convince jurors he didn’t have any intent to rip off FTX customers, white collar defence attorney Mark Kasten of Buchanan, Ingersoll & Rooney told The Independent.
Rather, his defence attorneys will argue he was out of his depth.
“He’s going to tell a story that starting a crypto company when he did was difficult, that this was the Wild West, and he wasn’t operating an entity that fell neatly into any existing regulatory category,” Mr Kasten, a member of the Blockchain and Crypto Assets Practice group, added.
Given Mr Bankman-Fried’s accomplishments, it will be challenging to paint him as a dunce.
“It’s going to be hard to say ‘he was just a kid moving too fast in a young industry and he didn’t know what he was doing’. Because by all accounts, he is a very smart individual,” Mr Kasten said.
Four former FTX executives have pleaded guilty to criminal charges related to the company’s collapse and could appear at trial after agreeing to cooperate with prosecutors.
Mr Kasten says that undercutting their claims will be critical to SBF’s chances.
“He has no chance of success if he doesn’t pick apart the testimony of those testifiers,” Mr Kasten said. “To juries, somebody’s right and someone is lying. And frankly, no one looks great here.”
Mr Kasten told The Independent that the courtroom confrontation between Mr Bankman-Fried’s attorneys and Ms Ellison could be critical.
SBF has spoken and written extensively about the reasons for FTX’s collapse in media interviews, lengthy tweet threads and on Substack.
And he is likely to have to take the stand to convince the jury of his innocence, an inherently risky strategy for any defendant, Mr Kasten said.
Meanwhile, prosecutors will try to move the focus away from cryptocurrencies and present the allegations as run-of-the-mill fraud.
“As much as Bankman-Fried wants to talk about how complicated cryptocurrency is, how new this was, the government will want to stay away from this,” Mr Kasten told The Independent.
“It’s about representations that he made to the public and to investors, it’s about taking money out of one company to make another one whole.”
Michael Lewis book
Acclaimed author Michael Lewis began working on a book about SBF prior to FTX’s collapse, gaining extraordinary access as the tycoon endured his dramatic fall from grace.
The new book Going Infinite: The Rise and Fall of a New Tycoon will reportedly show how Mr Bankman-Fried “was exploring the legality of paying Donald Trump” $5bn not to run for president in 2024.
Mr Lewis told 60 Minutes on CBS he intended the book to be a “Kind of letter to the jury”.
“There’s gonna be this trial. And the lawyers are gonna tell two stories,” he said. “And I think neither one of those stories is as good as the story I have.”