By Luc Cohen
NEW YORK (Reuters) – Sam Bankman-Fried’s fraud trial kicked off this week, nearly a year after the FTX cryptocurrency exchange he founded declared bankruptcy in a collapse that shocked markets and left the 31-year-old wunderkind’s reputation in tatters.
Bankman-Fried has pleaded not guilty to charges of stealing billions of dollars in customer funds to prop up his crypto-focused hedge fund, Alameda Research. The trial is expected to last up to six weeks. Here are five key moments from the trial’s first week:
PROSECUTOR SAYS BANKMAN-FRIED’S EMPIRE WAS ‘BUILT ON LIES’
Thane Rehn, a prosecutor with the Manhattan U.S. Attorney’s office, said in his opening statement on Wednesday that Bankman-Fried had been stealing FTX customer funds ever since the exchange was founded in 2019.
“He had wealth, he had power, he had influence. But all of that, all of it, was built on lies,” Rehn said. “The money he was spending to build his empire, it was money he was stealing from FTX’s customers.”
DEFENSE PORTRAYS BANKMAN-FRIED AS IN OVER HIS HEAD
Mark Cohen, Bankman-Fried’s lawyer, described the FTX founder as an ambitious and sometimes careless entrepreneur who “overlooked” risk management but never intended to defraud anyone.
“Sam and his colleagues were building the plane as they were flying it,” Cohen said in his opening statement on Wednesday.
BANKMAN-FRIED WAS CONCERNED MONTHS BEFORE EXCHANGE COLLAPSED -EX-FTX EMPLOYEE
Adam Yedidia, a college friend of Bankman-Fried’s who later worked for him at FTX, said Bankman-Fried told him in the summer of 2022 that he was worried Alameda’s debts to FTX were too big.
“The conversation began with me bringing up the large debt owed by Alameda to FTX and asking something like, ‘are things OK?'” Yedidia testified. “Sam said something like, ‘we were bulletproof last year but we’re not bulletproof this year.'”
A VENTURE CAPITALIST SAYS FTX DID NOT TELL HIM ABOUT ALAMEDA TIES
Matt Huang, the head of crypto-focused venture capital firm Paradigm, testified on Thursday that Bankman-Fried did not tell him that FTX commingled its funds with Alameda before Paradigm decided to invest $278 million in the exchange.
The firm has now written the value of that investment down to zero, Huang said.
EX-FTX EXEC SAYS HE COMMITTED CRIMES WITH BANKMAN-FRIED
Gary Huang, a former member of Bankman-Fried’s inner circle who has pleaded guilty and agreed to testify against him, took the stand on Thursday and said he committed financial crimes with Bankman-Fried, who he said told him to tweak FTX’s software code to allow Alameda to withdraw unlimited funds.
“We lied about this to the public,” Wang said.
(Reporting by Luc Cohen in New York; Editing by Matthew Lewis)
