Sam Bankman-Fried: I don’t think I tried to do anything wrong (From BBC) [3 Articles & 5 Relevant Links]
~ Tuesday, October 10, 2023 Blog Post ~
By BBC Technology, December 10, 2022
Sam Bankman-Fried, the disgraced boss of collapsed crypto-exchange FTX, tells BBC cyber reporter Joe Tidy he didn’t know customers’ money was being used to make risky financial bets.
“I’m not lying,” he says, when Joe reads him a comment by a former employee, who says Bankman-Fried must have known about the transfers from FTX to a hedge fund he founded, called Alameda Research.
Mr Bankman-Fried says: “I don’t think I tried to do anything wrong.”
He adds that he doesn’t know what the future will hold, but he will try to think of ways to pay back people who lost money.
Sources:
https://www.bbc.com/news/av/technology-63922928
Article #2: ‘Lied to the World’ or Acted in ‘Good Faith’: Sam Bankman-Fried’s Trial Opens (From The New York Times)
By David Yaffe-Bellany, Matthew Goldstein, and J. Edward Moreno, October 4, 2023
~ Reporting from the Daniel Patrick Moynihan U.S. Courthouse in Manhattan
Prosecutors said the FTX founder had lied to customers. Defense lawyers said he had just been trying to prevent his cryptocurrency exchange from melting down.
Federal prosecutors on Wednesday opened the criminal trial of Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, with a simple message: He deliberately “lied to the world,” leading to one of the biggest financial frauds of a generation.
Mr. Bankman-Fried’s lawyer advanced a far different narrative. The former crypto mogul, the lawyer said, was simply a well-intentioned entrepreneur who acted “in good faith” to make his firm successful, with no intention to defraud anyone.
The dueling arguments are at the crux of Mr. Bankman-Fried’s trial, which has become the highest-profile reckoning for a business executive since the Theranos founder Elizabeth Holmes was convicted of fraud early last year.
A onetime crypto wunderkind, Mr. Bankman-Fried, 31, became a tousle-haired billionaire virtually overnight, only to see his company collapse last year and his fortune evaporate. He has been charged with orchestrating a conspiracy to use $10 billion that FTX’s customers had entrusted to him for all manner of personal projects, including venture capital investments, political donations and luxury real estate purchases.
“It looked like Sam Bankman-Fried was on top of the world,” Thane Rehn, a lead prosecutor, told a packed room at the federal courthouse in Manhattan on Wednesday. “All of it was built on lies.”
Mr. Bankman-Fried’s lawyer, Mark Cohen, soon hit back. “It’s not a crime to run a business in good faith that ends up going through a storm,” he said. He called the prosecution’s portrayal of his client a “cartoon of a villain” that distorted the facts.
Mr. Bankman-Fried, who has spent the last seven weeks in jail, appeared in court with close-cropped hair that had been cut recently by a fellow detainee. He wore a suit and tie and watched the proceedings flanked by his other lawyers, while his parents, the Stanford law professors Joseph Bankman and Barbara Fried, sat a few rows behind him.
His trial has become a closely watched referendum not only on the fall of FTX but on reckless behavior across the cryptocurrency industry. A frenzy over digital coins like Bitcoin and Ether swept up millions of everyday investors before the market imploded last year, wiping away people’s savings and sending a procession of start-ups into bankruptcy.
When FTX collapsed in November, Mr. Bankman-Fried became a symbol of the industry’s excesses. At the height of its power and influence, his company was valued at $32 billion and Mr. Bankman-Fried was widely hailed as a leader capable of bringing obscure crypto technology into the mainstream of global finance. He jetted back and forth from FTX’s base in the Bahamas to meetings in Los Angeles and Washington, where he rubbed shoulders with celebrities and politicians, and had his photograph plastered on billboards and magazine covers.
Now FTX is bankrupt and the crypto markets have cratered, leading to dozens of lawsuits and tens of billions of dollars in losses that have devastated the finances of individual investors around the world.
Mr. Bankman-Fried, who in private writings has called himself “one of the most hated people in the world,” has pleaded not guilty to seven counts of fraud and money laundering. If convicted, he could face what amounts to a life sentence in prison.
The FTX founder faces an uphill battle in the trial. Three of his top executives have pleaded guilty to fraud and agreed to cooperate against him — including his on-and-off girlfriend, Caroline Ellison, who ran Alameda Research, a hedge fund that Mr. Bankman-Fried started.
Prosecutors and defense lawyers said in court that they had not held any negotiations over a plea agreement, and that no deal had ever been offered to Mr. Bankman-Fried.
On Wednesday, Mr. Rehn accused Mr. Bankman-Fried of “fraud on a massive scale,” casting him as a schemer who was “not what he appeared to be.” He said Mr. Bankman-Fried had moved funds that customers deposited with FTX to Alameda, which then funneled the money into investments and donations.
Mr. Rehn repeatedly invoked the cooperating witnesses, stressing that people who say they participated with Mr. Bankman-Fried in the scheme would testify against him. He also pointed to Mr. Bankman-Fried’s posts on X, the social media service formerly known as Twitter, and commercials used to promote FTX, calling them lies intended to deceive customers.
“He was taking these customer deposits, and spending them for himself,” Mr. Rehn said. “The defendant was keeping his customers in the dark.”
Prosecutors have marshaled millions of pages of digital evidence, including text and email logs, as well as snippets of computer code that showed how FTX moved customer money to Alameda. They have an audio recording from the week of FTX’s collapse in which Ms. Ellison appears to admit that she and Mr. Bankman-Fried worked together to steal customer deposits. And they have won a series of pretrial disputes, allowing them to present evidence that Mr. Bankman-Fried has contested and prevent his legal team from mounting certain defenses.
Mr. Cohen, the defense lawyer, pushed back against the public narrative that Mr. Bankman-Fried was a con artist intent on stealing customer money.
“Sam didn’t defraud anyone,” he said. “Sam acted in good faith.”
Casting his client as “a math nerd who didn’t drink or party,” Mr. Cohen walked the jurors through FTX’s history, arguing that Mr. Bankman-Fried had acted in his customers’ interests, even if he didn’t always make the right decisions.
“No one person, no C.E.O., certainly not Sam, could be everywhere and doing everything,” he said.
Mr. Cohen also attacked the credibility of Ms. Ellison and the other cooperating witnesses, pointing out that they were trying to avoid long prison sentences. He said that Mr. Bankman-Fried had urged Ms. Ellison to put hedges on Alameda’s trading activity, but that she had ignored him, leading to some of the problems that caused the business empire to implode.
“You must consider what Sam did and said in real time,” he said. “He made business decisions that he thought were right when he made them.”
After the opening statements, prosecutors called their first witness, Marc-Antoine Julliard, an investor in London who lost more than $100,000 in cash and Bitcoin in FTX’s collapse. Mr. Julliard said he had thought FTX would keep his money safe.
Another witness, Adam Yedidia, a college friend of Mr. Bankman-Fried’s who worked at Alameda and FTX, said he had quit just before FTX filed for bankruptcy when he learned that its customer money had been siphoned off to Alameda. Testifying under immunity, Mr. Yedidia also discussed the lavish apartments in the Bahamas that prosecutors have said were bought with FTX customer money.
The opening statements and witness testimony began shortly after the judge overseeing the case, Lewis A. Kaplan swore in a jury of nine women and three men. During the selection process, one prospective juror said he and his twin brother had lost money in the crypto market, while another said she worked for a financial firm that had lost funds with FTX and Alameda. Both were excused.
A third candidate repeatedly said he didn’t know if he could be impartial because he didn’t understand how cryptocurrencies worked.
“You probably have a lot of company in this courtroom,” Judge Kaplan responded.
The prospective juror, who was excused, said the whole concept of crypto rubbed him the wrong way, reminding him of the Ponzi scheme carried out by the disgraced financier Bernard Madoff.
What to Know About the Collapse of FTX
What is FTX? The now bankrupt company was one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. The company, based in the Bahamas, built its business on risky trading options that are not legal in the United States.
Who is Sam Bankman-Fried? He is the 30-year-old founder of FTX and the former chief executive of FTX. Once a golden boy of the crypto industry, he was a major donor to the Democratic Party and known for his commitment to effective altruism, a charitable movement that urges adherents to give away their wealth in efficient and logical ways.
How did FTX’s troubles begin? Last year, Changpeng Zhao, the chief executive of Binance, the world’s largest crypto exchange, sold the stake he held in FTX back to Bankman-Fried, receiving a number of FTT tokens in exchange. In November, Zhao said he would sell the tokens and expressed concerns about FTX’s financial stability.
What led to FTX’s collapse? Zhao’s announcement drove down the price of FTT and spooked investors. Traders rushed to withdraw from FTX, causing the company to have a $8 billion shortfall. Binance offered a loan to save the company but later pulled out, forcing FTX to file for bankruptcy on Nov. 11.
Why was Bankman-Fried arrested? FTX’s collapse kicked off investigations by the Justice Department and the S.E.C. focused on whether FTX improperly used customer funds to prop up Alameda Research, a crypto trading platform that Bankman-Fried had helped start. In December, Bankman-Fried was arrested in the Bahamas for lying to investors and committing fraud and was extradited to the United States.
What charges does he face? Since Bankman-Fried’s extradition, several charges have been added to and later dropped from his indictment. Prosecutors have also removed a charge that he violated campaign finance rules. He is currently standing trial on seven charge, including accusations that he defrauded customers and lenders of FTX.
David Yaffe-Bellany writes about the crypto industry from San Francisco. He can be reached at davidyb@nytimes.com. More about David Yaffe-Bellany
Matthew Goldstein covers Wall Street and white-collar crime and housing issues. More about Matthew Goldstein
J. Edward Moreno is the 2023 David Carr fellow at The Times. More about J. Edward Moreno
A version of this article appears in print on Oct. 5, 2023, Section B, Page 1 of the New York edition with the headline: ‘Liar,’ ‘Nerd’: Clash Opens FTX Trial. Order Reprints | Today’s Paper | Subscribe
Crypto Fraud Trial
- CoinDesk helped break some of the first stories on FTX. Now it faces troubles of its own.
- The potential witnesses in the trial include investors, family and more.
- The defense frames Sam Bankman-Fried as well intentioned, not a ‘cartoon villain.’
Source:
https://www.nytimes.com/2023/10/04/technology/sam-bankman-fried-ftx-trial.html
Article #3: Sam Bankman-Fried’s parents staying in Bahamas, fear his legal fees will ‘wipe them out’ (From New York Post)
By Thomas Barrabi, December 12, 2022
The law professor parents of disgraced FTX boss Sam Bankman-Fried reportedly fear the family will go broke while paying for his defense against mounting litigation.
Joseph Bankman and Barbara Fried — both well-known figures at Stanford University — have stayed with their ex-billionaire son in the Bahamas for more than a month as he faces a firestorm over FTX’s sudden collapse.
The parents “have told friends that their son’s legal bills will likely wipe them out financially,” the Wall Street Journal reported on Monday, citing sources close to the family.
“We hope this gives us some wisdom,” Bankman recently said, according to those sources. “Otherwise, it would be too hard to take.”
A spokesperson for Bankman-Fried’s parents reportedly declined to say whether they are actively advising their son on legal matters.
Bankman-Fried is facing a raft of legal and regulatory scrutiny, including an ongoing class-action lawsuit on behalf of furious FTX customers and a federal probe into whether he engaged in market manipulation within the cryptocurrency sector. The 30-year-old is accused of using FTX customer funds to prop up Alameda Research, the failed sister cryptocurrency trading firm he also owned.
As FTX careened toward bankruptcy, Bankman-Fried reportedly contacted his parents seeking advice. Bankman called his colleague, fellow Stanford law professor David Mills, who quickly realized the extent of the trouble.
“Sam needs lawyers, and desperately,” Mills told Bankman, according to the Journal.
When Bankman-Fried resisted internal calls to resign as FTX’s CEO, members of the doomed firm’s legal team reportedly appealed to his father. Bankman-Fried eventually relented and resigned on Nov. 11, the same day FTX declared bankruptcy.
In late November, Bankman-Fried claimed he was down to his last $100,000 and expressed uncertainty as to how he would pay for lawyers.
Despite being nearly broke, Bankman-Fried has hired defense attorney Mark Cohen — who formerly represented convicted sex offender Ghislaine Maxwell — and has sought advice from Mills, who specializes in criminal defense.
Bankman reportedly served as a paid employee at FTX for nearly a year before the company’s collapse. He accompanied his son to key meetings on Capitol Hill and helped guide the firm’s philanthropic efforts.
Additionally, Bankman purportedly introduced his son to his former law student, tech investment kingpin Orlando Bravo, whose firm later poured $130 million into FTX.
As The Post reported last month, Bravo admitted to investors that he was “shocked” by FTX’s sudden plunge into bankruptcy.
Bankman-Fried’s parents were also tied up in FTX’s dubious Bahamas real estate empire. In bankruptcy court, FTX’s new leaders have accused Bankman-Fried and his allies of pillaging company resources to snap up $300 million in ritzy real estate on the island.
Bankman and Fried are reportedly listed on the deed for a beach house within the exclusive Old Fort Bay gated community.
Reuters obtained documents showing the property was intended as a “vacation home” for the family. A spokeswoman for Bankman-Fried’s parents said they have since vacated the property.
“Joe and Barbara never intended to and never believed they had any beneficial or economic ownership in the house,” the spokeswoman said. “Over the summer, they requested FTX counsel and outside counsel take steps to clarify the company’s beneficial ownership of the house.”
Source:
https://nypost.com/2022/12/12/sam-bankman-frieds-parents-fear-his-legal-fees-will-wipe-them-out/
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