NEW YORK (AP) — Sam Bankman-Fried, a tech wunderkind who once promoted his FTX digital coin exchange as a safe way for regular people to get into cryptocurrency, faces the start of a criminal trial over allegations that he cheated thousands of customers.
Jury selection begins Tuesday in New York in a case in which the 31-year-old crypto mogul, once a billionaire, faces the possibility of a long prison term.
Prosecutors say he defrauded thousands of people who deposited cryptocurrency on the FTX exchange by illegally diverting massive sums of their money for his personal use, including making risky trades at his cryptocurrency hedge fund, Alameda Research. He’s also accused of using customer money to buy real estate and make big political contributions as he tried to influence government regulation of cryptocurrency.
U.S. Attorney Damian Williams, who is overseeing the prosecution, has called it one of the biggest frauds in the country’s history.
In interviews and social media posts, Bankman-Fried has acknowledged making huge mistakes while running FTX but insisted he had no criminal intent.
He has blamed FTX’s collapse last November, in something equivalent to an old-fashioned bank run, on vindictive competitors, his own inattentiveness and fellow executives who he said failed to manage risk properly.
“I didn’t steal funds, and I certainly didn’t stash billions away,” he said in a post earlier this year on the online platform Substack.
As recently as early last fall, Bankman-Fried portrayed himself as a stabilizing force in the cryptocurrency industry. He spent millions of dollars on celebrity advertisements during the 2022 Super Bowl that promoted FTX as the “safest and easiest way to buy and sell crypto” and “the most trusted way to buy and sell” digital assets.
Comedian Larry David, along with other celebrities such as football star Tom Brady and basketball star Stephen Curry, have been named in a lawsuit that argued their celebrity status made them culpable for promoting the firm’s failed business model.
Bankman-Fried is charged with wire fraud and conspiracy. The trial is expected to end before Thanksgiving.
Bankman-Fried agreed to be extradited to the United States after his arrest in the Bahamas last December, weeks after the FTX’s abrupt collapse as customers pulled deposits en masse amid reports questioning its financial arrangements.
While his plane to the U.S. was in the air, authorities announced that two of his top executives had secretly pleaded guilty to fraud charges and were prepared to testify against him. They were Bankman-Fried’s former girlfriend Carolyn Ellison, who had been the chief executive of Alameda Research, and Gary Wang, who co-founded FTX.
Initially freed on a $250 million personal recognizance bond, Bankman-Fried was confined to his parents’ home in Palo Alto, California, until Judge Lewis A. Kaplan ordered him jailed last month after concluding that he’d tried to influence witnesses including Ellison and an FTX general counsel.
His lawyers have appealed that decision and repeatedly said their client can’t properly prepare for trial. But the 2nd U.S. Circuit Court of Appeals rejected an appeal of the detention order, saying the judge had thoroughly considered all relevant factors and defense arguments were unpersuasive.