Sam Bankman-Fried goes on trial for allegedly stealing billions from FTX users

Accused FTX founder Sam Bankman-Fried leaves the United States Courthouse in New York City on July 26, 2023. REUTERS/Amr Alfiky/File Photo Get license rights

NEW YORK, Oct 3 (Reuters) – Sam Bankman-Fried is set to go on trial on charges of stealing billions of dollars from customers of his FTX cryptocurrency exchange starting on Tuesday, nearly a year after the company’s collapse shocked markets and tarnished his reputation. .

Dozens of New York residents, many with jury summons in hand, began streaming into the federal courthouse in lower Manhattan ahead of jury selection, which is scheduled to begin at 9:30 a.m. EDT (1330 GMT).

Federal prosecutors say the 31-year-old ex-billionaire took FTX clients from its founding in 2019 through its November 2022 bankruptcy to shore up his hedge fund Alameda Research, buy luxury properties and donate more than $100 million to US political candidates.

Bankman-Fried pleaded not guilty to seven counts of fraud and conspiracy. He admitted to adequate risk management but denied stealing funds. His attorneys have signaled in court documents that they plan to argue that FTX’s handling of customer funds was correct and that FTX and others in Alameda were largely to blame for their failure.

The first step in the trial is the selection of a 12-member jury, which will weigh the competing stories in ultimately deciding whether Bankman-Fried is guilty.

U.S. District Judge Louis Kaplan will ask New York residents questions about their backgrounds and experiences in an effort to weed out any prospective jurors who might be biased.

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The trial is expected to last up to six weeks. Testimony will feature from three former members of Bankman-Fried’s inner circle who have pleaded guilty to fraud charges and agreed to cooperate with the Manhattan US Attorney’s Office.

Bankman-Fried’s attorneys have indicated they plan to challenge the credibility of those witnesses — who include former Alameda president Carolyn Ellison and former FTX executives Gary Wang and Nishad Singh — arguing they are motivated to target their client in order to get a lesser sentence. Strategy in White Collar Fraud Cases.

They laid the groundwork for arguing that Banker-Fried believed his exchange was allowed to invest customers’ deposits as long as customers could withdraw their funds, and that a series of business failures — not intentional fraud — left the exchange. Without sufficient funds to meet withdrawal requests.

Bankman-Fried is the most high-profile case U.S. attorneys have ever brought against a former cryptocurrency executive.

The indictment he filed last December marked a dramatic fall for Banker-Fried, who had built a reputation as a methodical operator in an industry.

Prosecutors say Bankman-Fried built that reputation with lies and enhanced it with endorsements from celebrities and star athletes.

After a judge found Ellison engaged in witness tampering — including sharing his personal writings with a reporter — Aug. Bankman-Fried has been held at the Metropolitan Detention Center in Brooklyn since 11. Ellison and Bankman-Fried were former romantic partners.

He is brought to court early on most days to allow him to prepare with his lawyers.

Reporting by Jodi Godoi and Luke Cohen in New York; Editing by Amy Stevens, Lincoln Feist and Nick Zieminski

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Jody Godoy reports on banking and securities law. Reach her at [email protected]

Reports on New York Federal Courts. Previously worked as a correspondent in Venezuela and Argentina.

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