Sam Bankman-Fried has been painted as a “cartoon villain” by prosecutors whose case depends largely on hindsight, the former cryptocurrency tycoon’s lawyers told a Manhattan jury on Wednesday as they laid out their defence at the start of the hotly anticipated criminal trial.
In opening arguments earlier on Wednesday, US prosecutors had accused Bankman-Fried of committing “fraud on a massive scale”, lying to investors, lenders and customers of his FTX crypto exchanges.
“This man stole billions of dollars from thousands of people,” assistant US attorney Thane Rehn told jurors, pointing forcefully at Bankman-Fried, who sat impassively at the defence table.
Mr Bankman-Fried used the proceeds of a crypto empire “built on lies” to buy lavish houses and court celebrities such as Tom Brady, as well as politicians including former Democratic president Bill Clinton, Mr Rehn said.
But Mark Cohen, a lawyer for Bankman-Fried, responded in a soft-spoken opening that his client — whom he addressed as “Sam” — was the victim of a “hindsight case” and had acted in good faith.
“He was a math nerd who didn’t drink or party,” Mr Cohen told the jury. “Taking something out of context and in hindsight and calling it improper is not proof beyond a reasonable doubt.”
The duelling statements kicked off what is expected to be a six-week trial to decide the fate of the 31-year-old former billionaire, who was until last year one of the leading figures in the freewheeling world of cryptocurrency trading.
Mr Bankman-Fried, who sat in court wearing a grey suit, has formally denied the charges and maintained his innocence in numerous media interviews given before he was jailed in August for allegedly attempting to intimidate witnesses. Prosecutors confirmed on Tuesday that they had not at any time offered Mr Bankman-Fried a plea deal.
The prosecutors’ case rests heavily on the testimony of three central witnesses, former lieutenants to Mr Bankman-Fried who agreed to co-operate with the government. The first of these witnesses, FTX co-founder Gary Wang, a longtime friend of Mr Bankman-Fried’s, will probably take the stand before the end of the week, the government said.
Mr Rehn told the jury the witnesses “will give you an insider view of how the defendant’s crimes occurred”. He said Bankman-Fried used his former “girlfriend” Caroline Ellison — the chief executive of FTX’s sister firm, crypto hedge fund Alameda — “as a front” to help conceal his control of the company.
The trial will hinge on the credibility of these witnesses. “Be careful as you hear from them,” Mr Cohen told the jurors, saying their hopes of receiving lighter sentences gave them an incentive to confirm the government’s story.
Mr Cohen said Mr Bankman-Fried had urged Ms Ellison to hedge Alameda’s risky cryptocurrency investments in early 2022, but she did not, worsening the financial crunch when crypto prices collapsed later in the year.
“He relied on her and he trusted her,” Mr Cohen said. As a busy chief executive, Mr Bankman-Fried “could [not] be everywhere and do everything”.
Prosecutors said they will also call FTX investors to testify, as well as customers who suffered from the company’s bankruptcy.
A who’s who of top Silicon Valley and Wall Street investors backed FTX with about $1.8bn before its collapse. Matt Huang, from venture firm Paradigm, will be called to testify this week, prosecutors said.
The case is being heard by a jury of 12 members and six alternates, whittled down from a group of almost 50. The judge quizzed would-be jurors on their experiences with cryptocurrencies and prior knowledge of the case. The selected jury comprises three men and nine women, including a social worker, a high school librarian and a retired corrections officer.
Judge Lewis Kaplan asked the jurors if they had watched a Sunday interview with author Michael Lewis, who had shadowed Mr Bankman-Fried for months before and during his fall from grace for his latest book, which was published on Tuesday. Mr Lewis, who said FTX had “a great real business” told CBS News the book was intended to be a “kind of letter to the jury”.
On Wednesday afternoon, the jury heard from a London-based commodities broker who traded crypto on FTX and lost money when it collapsed. Prosecutors introduced Mr Bankman-Fried’s tweets from the company’s final week, which told customers their assets were “fine”.
The jury saw an explainer video on crypto produced by FTX, including a friendly cartoon of SBF lounging at his multi-screen trading desk. Prosecutors also played the FTX Super Bowl advertisement from 2022 featuring comedian Larry David, and showed pictures of the $30mn Bahamas penthouse where Mr Bankman-Fried lived with his closest associates.
One of the roommates, FTX developer Adam Yedidia, a friend of Mr Bankman-Fried’s since college at MIT, began testifying shortly before the court wrapped up for the day and will continue on Thursday.
After the session concluded, Mr Bankman-Fried’s parents, law professors Joe Bankman and Barbara Fried, stood silently watching their son from a short distance as he conferred with lawyers at the defence table.
Copyright The Financial Times Limited 2023