FTX Founder Sam Bankman-Fried leaves Manhattan Federal Court docket after a courtroom look on June 15, 2023 in New York Metropolis.
Michael M. Santiago | Getty Photos
As legal professionals in Sam Bankman-Fried’s prison trial offered their closing arguments on Wednesday, prosecutors reminded jurors of the mountain of proof offered by key witnesses, whereas protection counsel accused the federal government of portraying the FTX founder as a “monster.”
The prosecution kicked off the proceedings, attempting to provide the 12 jurors a transparent sense of why they’ve spent the previous 4 weeks sitting in a decrease Manhattan courtroom.
“Virtually a yr in the past, hundreds of individuals from all around the world who deposited cash with FTX began withdrawing funds,” Assistant U.S. Legal professional Nicolas Roos informed the courtroom.
Roos mentioned there’s “no severe dispute” that $10 billion in buyer cash that was sitting in FTX’s crypto trade went lacking, with a few of it going to pay for actual property, investments, mortgage repayments and political donations.
The primary factor the jury has to determine, Roos mentioned, is whether or not Bankman-Fried knew that taking the cash was improper.
“The defendant schemed and lied to get cash, which he spent,” Roos mentioned.
Bankman-Fried, the 31-year outdated son of two Stanford authorized students and graduate of Massachusetts Institute of Expertise, faces a possible life sentence if convicted on prices, which embrace wire fraud, securities fraud and cash laundering, all tied to the collapse late final yr of FTX and sister hedge fund Alameda Analysis. He pleaded not responsible.
The trial, which started in early October and is ready to wrap up within the coming days, has largely pitted the testimony of Bankman-Fried’s former shut pals and prime lieutenants in opposition to the sworn statements of their former boss and, for a lot of of them, former roommate.
The federal government’s key witnesses included Caroline Ellison, Bankman-Fried’s ex-girlfriend and the previous head of Alameda, and FTX co-founder Gary Wang, who was Bankman-Fried’s childhood good friend from math camp. Each pleaded responsible in December to a number of prices and cooperated as witnesses for the prosecution.
FTX founder Sam Bankman-Fried is questioned by prosecutor Danielle Sassoon (not seen) throughout his fraud trial over the collapse of the bankrupt cryptocurrency trade at federal courtroom in New York Metropolis, U.S., October 31, 2023 on this courtroom sketch.
Jane Rosenberg | Reuters
When it was time for Bankman-Fried’s crew to mount a protection, lead counsel Mark Cohen left the majority of the case to his consumer, who spent three days on the stand telling the jury that he did not defraud anybody, did not take buyer cash and tried to work together with his deputies to maintain FTX from failing.
Roos spent Wednesday morning asking the jury to have a look at the proof. At one level, he requested, “Who’s accountable? He then stepped out from behind the rostrum and in direction of the protection desk, pointed on the defendant and mentioned, “This man, Samuel-Bankman-Fried.”
“A pyramid of deceit was constructed by the defendant,” Roos mentioned. “That finally collapsed.”
The details, as listed by Roos, have been that clients believed their deposits have been their very own and never for use by anybody else; that FTX advertisements regularly mentioned the trade was the most secure and easiest method to purchase cryptocurrency; and that $10 billion was lacking.
‘Uncomfortable to listen to’
Roos informed the jury that Bankman-Fried lied to them, reminding them how clean the defendant was in answering questions from his personal lawyer however how “he was a special individual” when it was the prosecutors’ flip. He had an ideal reminiscence on Friday, Roos mentioned, telling the jury that Bankman-Fried knew the small print in regards to the format of his Airbnb workplace in California, the explanation he went to Hong Kong and why he picked the Miami Warmth enviornment because the one for FTX to sponsor.
That each one modified when the federal government was asking the questions.
“It was uncomfortable to listen to,” Roos mentioned, including that Bankman-Fried mentioned “I can not recall” over 140 occasions throughout questioning by the federal government.
“To consider his story, you’d need to ignore the proof,” Roos mentioned. “You’d need to consider the defendant, who graduated from MIT and constructed two multibillion-dollar corporations, was truly clueless.”
Crucial to the failure of FTX was the usage of buyer funds to cowl losses in Alameda’s books following the plunge in crypto costs final yr. Roos mentioned Bankman-Fried is the one who gave particular privileges to Alameda, which he began earlier than founding FTX, permitting it to siphon buyer cash. He knew it was improper, Roos mentioned, which is why he saved it secretive.
Roos mentioned Bankman-Fried had been mendacity to the general public about Alameda’s “secret benefits,” and was being untruthful when he informed the general public and the media that Alameda was identical to everybody else.
“These have been lies,” Roos mentioned. Had they recognized the reality, “buyers would have run for the exits,” he mentioned.
Bankman-Fried blamed “messy accounting,” Roos mentioned, including “give me a break.” He mentioned these feedback contradicted what he informed Congress, that he’d reconciled the books.
Choose Lewis Kaplan, who presided over the trial, began courtroom nearly a half hour late on Wednesday as a result of a juror was caught in visitors. Then there have been technical points, because the second row of screens within the jury field stopped working. That led to a 1- minute break.
Later in Roos’s closing, he introduced up the notorious spreadsheet of the seven alternate variations of Alameda’s funds that Ellison had put collectively when third-party lenders have been asking for an replace. Bankman-Fried testified that he’d seen a spreadsheet however did not keep in mind the small print and did not ask Ellison questions on it. Roos known as the reason “implausible.”
FTX founder Sam Bankman-Fried is questioned by protection lawyer Mark Cohen as he testifies in his fraud trial over the collapse of the bankrupt cryptocurrency trade, at federal courtroom in New York Metropolis, U.S., October 30, 2023 on this courtroom sketch.
Jane Rosenberg | Reuters
Roos referred to metadata displaying that Bankman-Fried was a part of a gathering for about half-hour the place the opening in FTX’s steadiness sheet and repaying lenders have been mentioned. Metadata reveals he was finding out the Google Doc of the corporate’s funds, with numbers indicating the billions in borrowing from FTX.
Roos introduced up testimony from three firsthand witnesses who mentioned that they’d spoken with Bankman-Fried in regards to the big gap within the steadiness sheet. Ellison mentioned there was no solution to repay it, and Singh testified that Bankman-Fried admitted to him that “we’re just a little quick on deliverables.”
Bankman-Fried “had the conceitedness to suppose he might get away with it,” Roos mentioned.
Spending freely
One other level talking to the defendant’s intent, Roos mentioned, was his tweeting.
Bankman-Fried’s plan final November, when he knew there was solely sufficient cash to course of one-third of consumer belongings, was to ship a assured tweet thread. Singh testified that he wasn’t snug with the plan, but Bankman-Fried went on to tweet that “belongings are nice” because the financial institution run was underway, Roos mentioned.
Bankman-Fried knew Alameda had a unfavourable internet asset worth of $2.7 billion, Roos mentioned, however wished to make one other $3 billion in enterprise investments. The one approach to do this was with FTX buyer funds, he mentioned.
Moreover, Roos informed the jury, consumer cash went to $100 million in actual property bills, together with a $30 million penthouse within the Bahamas and $16 million for his dad and mom’ dwelling.
In referencing the Tremendous Bowl image with Katy Perry and others, Roos known as Bankman-Fried a “superstar chaser.”
Roos walked the jury by means of a timeline of key moments, as follows:
On Sept. 1, Bankman-Fried noticed that FTX had a $13.7 billion gap.On Sept. 7, Bankman-Fried wrote an extended memo proposing the shutdown of Alameda. Nonetheless, he spent $45 million for a stake in Skybridge Capital.Then, on Sept. 22, he paid $4 million to himself.4 days later, he despatched $250 million to Modulo Capital, a hedge fund within the Bahamas.And on Oct. 3, he funneled $6 million for political donations.
“That is all it’s essential know to search out him responsible,” Roos mentioned.
In closing the prosecution’s case, Roos referenced the seven prices dealing with Bankman-Fried and why he may be convicted of every.
In highlighting counts three and 4, which cost the defendant with wire fraud in opposition to Alameda’s lenders, Roos emphasised the significance of Bankman-Fried’s data of the choice steadiness sheet. For depend 5, conspiracy to commit securities fraud on FTX buyers, the first proof got here from buyers who expressed concern a few battle of curiosity between Alameda and FTX and who mentioned they would not have put in cash in the event that they knew the reality. Bankman-Fried additionally lied about income, Roos mentioned.
The prosecution reminded the courtroom that Bankman-Fried directed losses to be shifted to Alameda and that FTX’s insurance coverage fund had made up numbers. Add all of it up, Roos mentioned, and it debunks the protection’s major argument that Bankman-Fried acted in good religion and believed all the things would work out.
“This was a fraud that occurred on a large scale,” he mentioned.
‘Each film wants a villain’
Following the federal government’s closing argument, Cohen started his statements at just a little earlier than 3 p.m. He mentioned the federal government is portraying Bankman-Fried as a “monster” and depicting him as a “villain” and a “dangerous man.” Attorneys introduced out testimony about his intercourse life and confirmed photographs of him “wanting awkward with celebrities,” Cohen mentioned.
He mentioned Bankman-Fried would discuss to only about anybody who would hear, conduct that might make life messy however is not prison. He mentioned the prosecution has made the case right into a “film,” and the protection is displaying what it is like in the true world, the place issues are messy.
“Each film wants a villain,” Cohen mentioned.
He claimed the case in opposition to his consumer was constructed on the false premise that FTX was a fraudulent enterprise established to deliberately steal buyer funds from its “very earliest days.”
Cohen broke the case up into two time durations. The primary was 2019 to 2021, when there is not any indication of prison intent. Up till June 2022, everybody concerned thought they have been working probably the most profitable crypto trade on this planet, Cohen mentioned.
The second interval was from June to November of 2022. Crypto winter had led to the failure of numerous companies within the business. That is the primary time it grew to become clear that Alameda was utilizing buyer funds. Within the fall of that yr, Bankman-Fried noticed a liquidity drawback, not a solvency drawback, Cohen mentioned. He at all times thought there have been ample funds on and off the trade.
Whereas FTX’s lack of a threat administration system or chief threat officer mirrored poor system controls, dangerous enterprise choices aren’t crimes, Cohen mentioned.
The federal government carries the heavy burden of proving Bankman-Fried operated with prison intent, and “it has not,” Cohen mentioned. He added that prosecutors known as Bankman-Fried “evil” and “boastful” and described him as a “prison mastermind.” However in entering into particular actions, “there’s nothing wrongful about margin buying and selling,” he mentioned.
Cohen mentioned his consumer offered the courtroom with good religion solutions about what he remembered, and requested why a prison mastermind would go communicate in entrance of Congress. He described the federal government’s assumptions as “heads I win, tales you lose.”
Cohen informed the jury that if any members of Bankman-Fried’s internal circle really thought one thing nefarious was occurring, they’d choices, together with resigning, leaving the Bahamas or “blowing the whistle.” None of them did, he mentioned.
Throughout a lot of Cohen’s closing, Bankman-Fried had his head awkwardly turned to the proper towards the jury field. Close to the top, he was wanting down, combating again tears.
Court docket adjourned late Wednesday after Cohen completed together with his closing argument. The federal government will get its shot at rebuttal Thursday morning, after which the jury will get its directions forward of deliberations.
Choose Kaplan mentioned he wasn’t dashing jurors, however he mentioned he was prepared to remain late Thursday and that the federal government would cowl dinner and certain give jurors a free experience dwelling.
— CNBC’s Daybreak Giel contributed to this report.
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