The nearly year-long FTX debacle — believed by many to be in large part caused by the misdeeds of the trading platform’s former CEO and co-founder Sam Bankman-Fried — has played out like a slow-moving car crash. With his criminal trial set to kick off next week, things are finally about to speed up, and while many uncertainties remain, one thing is certain — you’ll probably be watching all the twists and turns about to come with baited breath.
The exchange’s demise has caused countless people to suffer varying levels of emotional and financial heartache, and now all the angry customers, disgruntled former employees, eager creditors, and crypto advocates and skeptics alike will have their chance to see the fallen billionaire Bankman-Fried, who’s been couped up in a New York jail cell awaiting all the fun, face a jury. While it won’t be televised, a media circus is about to try and elbow its way into the courtroom to cover the happenings from about every angle imaginable.
With the excitement just around the corner, we had a few questions we assume you might share. We did our best to answer them.
First off, what will those first days of court look like for Bankman-Fried?
Jury selection will begin on Tuesday and could stretch into the remainder of the week. The court will start with a panel of potential jurors of about 20 to 30 at a time, then whittle the group down to around nine jurors, plus a handful of alternates, said Michael Popok, executive managing partner at law firm Zumpano Patricios.
Both sides can challenge the selection of certain jurors, potentially dismissing them for cause.
“By the end of Friday, they believe they’ll have the jury in the box, meaning ready to deliberate,” Popok said.
Only after that will the court hear opening statements, first from the prosecution and then the defense.
The prosecutors will likely highlight the fact that Bankman-Fried’s close friends are planning on testifying, including former colleague and ex-girlfriend Caroline Ellison, argued Popok. Drama ensued when Bankman-Fried was accused by prosecutors of leaking Ellison’s private diary to the New York Times this summer. He was subsequently sent to jail after the judge revoked his bail.
“They’re not going to bury the lede,” he said.
Ellison, who was the former CEO of FTX’s sister trading firm Alameda Research, could prove to be one of the prosecution’s star witnesses. In December, she pleaded guilty to criminal charges and began cooperating with authorities.
There will be certain things that Bankman-Fried won’t be able to tell the jury, including that he has been in jail. The judge for his case ruled recently that the former FTX CEO will not be able to argue or present evidence around his family background, age or health. He also won’t be allowed to argue or introduce “evidence regarding whether FTX needed to declare bankruptcy,” among other topics related to the crypto exchange’s bankruptcy.
Is Bankman-Fried going to take the stand?
Experts are mixed on whether Bankman-Fried will end up taking the stand or not. Ira Lee Sorkin, who represented the infamous Ponzi scheme mastermind Bernie Madoff, said it’s likely the former FTX CEO tries to defend himself in his own words.
“In this particular case, since Bankman-Fried has been clearly talking about the case, discussing the case in the press and so on — it’s likely that he will want to take the stand, but that’s between him and his lawyer,” said Sorkin, who is now a partner at law firm Mintz & Gold.
Bankman-Fried has the right to take the stand, but defendants can also remain silent, he added.
Popok can see it going the other way. “Sometimes you have to wait and see how the cases go,” he said. “I would say 95% or more … they don’t take the stand in a criminal case because the burden [of proof] is on the government,” he said.
Why hasn’t Bankman-Fried cut a deal?
The evidence against Bankman-Fried is “overwhelming,” according to Popok, and he has likely been offered a decreased sentence in exchange for pleading guilty. But the fact that he hasn’t cooperated with authorities makes sense, given the nature of Bankman-Fried’s persona, argued Popok.
“There is a delusional factor; you can see that in high functioning people that can pull off a fraud like this,” said Popok. “They are also still in that place when they need to make a decision about their freedom. It’s the same person. They are self delusional because that’s what enabled them to do the fraud for so long.”
As Bankman-Fried awaits his trial in jail, he and his lawyers have attempted to get him released arguing that it was necessary to prepare for his defense. That hasn’t gone well with the judge so far, who has denied that request a few times.
His lawyers, too, have argued about the conditions in the jail, including Bankman-Fried’s laptop not having a solid battery life, and accused the government of dumping millions of pages of documents of discovery close to the trial date.
Prosecutors have pushed back and said that Bankman-Fried has been given enough time, with access to a laptop to review discovery.
Why has this case garnered so much attention, and does it deserve it?
Cornell University law professor Valerie Hans believes the Bankman-Fried trial has so far been full of surprises.
“To observe a young person like Bankman-Fried who has had great financial success and celebrity status suddenly find himself in the crosshairs of the government, charged with multiple serious crimes, and jailed before his trial, is a surprise and a shock,” said Hans.
So many of the case’s unique aspects naturally make for a compelling story, said Sorkin. “This case has attracted the attention because it’s crypto and the amount of money involved, of course that he was educated at MIT, and that his parents are distinguished professors at Stanford. It’s a very sexy case for the press,” he said.
Popok, however, said at the end of the day, the average person probably doesn’t have a lot of invested interest in the trial’s outcome.
“Ninety-nine percent of America, even I would say, 80 percent of Manhattan, New York, doesn’t know who Sam Bankman-Fried is, unless they had a crypto account,” he said.
TikTok finance influencer Zaid Admani echoed Popok’s sentiments. “Are we making it a bigger deal because we live in this crypto bubble?” he asked.
Admani, who has nearly 400,000 followers on TikTok, said he’s undecided as to whether he’ll post daily or weekly recap videos once the trial begins. His most recent Bankman-Fried post was viewed far fewer times than videos on topics like Apple and Disney earnings.
Timed to the start of trial, acclaimed “Big Short” author Michael Lewis’ book which chronicles Bankman-Fried’s rapid rise and fall is set come out this week. Apple reportedly paid Lewis $5 million for the book rights before it was even finished.
How big of a role did those around Bankman-Fried play?
The backstory behind how Bankman-Fried’s well-connected Stanford professor parents may have played a part in their son’s meteoric rise is one point of lingering interest.
“The role that his parents played is still unclear and looks to be more and more mysterious every single day,” said Framework Ventures co-founder Vance Spencer, who admits he’s long been a critic of Bankman-Fried.
FTX’s new management has sued Joseph Bankman and Barbara Fried, Bankman-Fried’s parents, accusing them of exploiting their influence within the crypto exchange in order to siphon off millions of dollars.
Spencer also wonders how involved former Alameda Research co-CEO Sam Trabucco was in FTX’s death spiral. “The Sam [Trabucco] question is extremely strange,” he said. “You can even see in the documents that he was one of the people that apparently had unfettered access to the FTX accounts.”
Former Alameda Research employee Aditya Baradwaj also hopes more is revealed about Bankman-Fried’s inner circle, especially around the decision to use customer funds to pay back loans unrelated to the core business of FTX and Alameda.
“What was the extent to which Sam [Bankman-Fried] was influencing the others as opposed to them working together as a group,” he said. “I’d be interested in better understanding the timeline of when exactly these decisions were made … if they knew they were in this hole, why didn’t they try and raise some extra capital before the collapse?”
FTX customers and former employees are arguably the individuals hurt the most by Bankman-Fried’s alleged actions. What are their hopes for the trial?
Baradwaj says he began working as a software engineer at Alameda Research in late 2021. Like many other employees, caught up in FTX’s momentous growth, Baradwaj not only held a significant portion of his savings on the platform, he also purchased equity in FTX at a discounted rate. He said, like many FTX customers, he lost more than 90% of his liquid assets when FTX collapsed.
The millions of customers who lost money easily make up the largest group of people burnt by FTX’s spectacular failure. With customers likely to recover at least some of their funds as a result of the ongoing bankruptcy proceedings, anything from Bankman-Fried’s trial that might influence that outcome will be top of mind.
One spurned customer named Deb (she preferred to keep her last name confidential) told The Block back in November she lost about half her savings when FTX collapsed, unable to withdraw her funds. Now she wants to see justice served and those guilty punished.
Deb hopes Bankman-Fried “is sentenced to nothing less than 20 [years],” she said, adding that “Caroline [Ellison] absolutely needs to be indicted” as well. Ellison pled guilty to several fraud charges which carry a maximum penalty of 110 years in prison.
While SBF’s criminal trial is unlikely to materially impact the outcome of FTX’s bankruptcy, or how much money customers are able to recover, Thomas Braziel of 117 Partners said what ultimately happens to the $600 million generated after shares in Robinhood owned by FTX were seized by the U.S. Department of Justice and then sold back to Robinhood will likely only be determined once the trial concludes.
“The proceeds from the Robinhood shares, which should likely come back to the estate … that cash is going to sit in the Department of Justice coffers until the criminal trial is over,” said Braziel. Otherwise, “the criminal trial is kind of a sideshow” and shouldn’t significantly impact bankruptcy proceedings and the payment of customer claims. Through 117 Partners, Braziel has been actively buying FTX customer claims both for his firm and a large institutional player.
How do true veteran crypto advocates view the trial and its potential significance?
While much of the media will almost certainly clamor for interesting angles to cover the trial, some crypto proponents simply hope this is the last chapter in a painful saga.
“[Bankman-Fried] did some really fucked up stuff and I trust the law will punish him,” said Loomdart, who is both a founding member of crypto-native venture firm eGirl Capital and a vocal advocate of an FTX 2.0 reboot.
Loomdart, who said he isn’t particularly interested in trial, doesn’t expect the case will influence whether or not FTX rises from the ashes. “It may squash some misconceptions people have about FTX, but not stuff that will materially impact a reboot,” he said.
Framework’s Spencer is also ready to move on and hopes to see FTX’s disgraced founder disappear from headlines.
“Just having [Bankman-Fried] not be as much in the foreground is going to be really helpful,” he said. “At a certain point people are going to move on and this trial feels like the beginning of that, of people not associating crypto with this man who did so much damage to it in the public view.”
Broadly, there is hope that in the end, crypto will not only continue to mature regardless of the trial’s outcome, but also that those leading the charge will take heed of the damage done when public trust is betrayed.
“Many individuals are using the allegations against Bankman-Fried as cautionary tales, equating his actions with broader concerns about crypto,” said Joshua Garcia, an expert in fintech compliance and partner at the legal and consulting firm Ketsal. “It’s a reminder that the industry is closely scrutinized, and the actions of key figures like Bankman-Fried can have a significant impact on public perception.”
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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