Prosecutors with the U.S. Attorney’s workplace in Manhattan say Bankman-Fried used FTX buyer cash from the alternate’s 2019 launch till its November 2022 chapter as a way to prop up his hedge fund, Alameda Research, purchase luxurious actual property, and donate to U.S. political campaigns and candidates.
Thane Rehn, a prosecutor, stated it regarded like Bankman-Fried was on prime of the world a yr in the past after amassing energy and affect. The former crypto tycoon claimed in tv commercials and in FTX’s phrases of service that prospects’ cryptocurrency would at all times belong to them, not the alternate, Rehn stated.
‘NOT WHO HE APPEARED TO BE’
But Bankman-Fried, Rehn stated, “was not who he appeared to be.”
“All of it was built on lies,” Rehn stated. “He was using his company, FTX, to commit fraud on a massive scale, and the money he was spending to build his empire – it was money he was stealing from FTX customers.”
Bankman-Fried didn’t take the cash , and a rising buyer base helped him paper over the theft, Rehn stated. But all alongside, Rehn stated he had been directing prospects to deposit their cash to accounts managed by Alameda, and had used FTX’s pc code to let Alameda withdraw deposits.
When Alameda’s dangerous investments in cryptocurrency started to lose cash in May and June of final yr, Bankman-Fried “doubled down” and took more cash from FTX than ever earlier than, Rehn stated. But he stated the scheme fell aside in November 2022, when a leaked Alameda monetary assertion set off panic by FTX prospects.
“In the end, the hole that the defendant had created at FTX was too big,” Rehn stated. “Once customers started asking for their money back, the whole thing came crashing down.”
Bankman-Fried’s attorneys are anticipated to offer their opening assertion in a while Wednesday. The former FTX chief has pleaded not responsible and is more likely to argue that whereas he didn’t handle threat adequately, he didn’t steal cash.
His attorneys are anticipated to attempt to shift the blame for FTX’s dramatic failure to the cooperating witnesses, and argue they’re implicating Bankman-Fried as a way to search lenient sentences.
Prosecutors are anticipated to name three former members of Bankman-Fried’s interior circle – former Alameda chief government Caroline Ellison and former FTX executives Nishad Singh and Gary Wang – to testify in opposition to him. All three have pleaded responsible and agreed to cooperate with prosecutors.
“They will give you an insider’s view of how the crimes occurred,” Rehn stated in his opening assertion, with out naming the witnesses.
Bankman-Fried’s trial kicked off on Tuesday, almost a yr after the collapse of FTX shocked monetary markets and tarnished the budding entrepreneur and philanthropist’s status as an sincere actor in a crypto sector vulnerable to scams and purported get-rich-quick schemes.
Earlier on Tuesday, a jury of 12 main members and 6 alternates was chosen.
Bankman-Fried’s dad and mom, Stanford Law School professors Joseph Bankman and Barbara Fried, have been seen arriving on the federal courthouse in decrease Manhattan on Wednesday morning. They had not attended the trial’s first day.
Their names have been each on a listing learn by a prosecutor on Tuesday of doable witnesses or people who could also be in any other case talked about in testimony, together with Bankman-Fried’s brother Gabriel Bankman-Fried and former Donald Trump staffer Anthony Scaramucci. That doesn’t essentially imply they are going to be known as to testify.
Once identified for his informal apparel and mop of unkempt curls, Bankman-Fried sported a trim haircut and wore a swimsuit and tie in courtroom on each Tuesday and Wednesday.
He has been detained on the Metropolitan Detention Center in Brooklyn since Aug. 11, when Kaplan jailed him for possible tampering with witnesses, together with by sharing Ellison’s non-public writings with a reporter. Bankman-Fried and Ellison have been at occasions romantic companions.