Sam Bankman-Fried lawyer says government portrayed FTX founder as a ‘monster’

FTX Founder Sam Bankman-Fried leaves Manhattan Federal Court after a court docket look on June 15, 2023 in New York City.

Michael M. Santiago | Getty Images

As attorneys in Sam Bankman-Fried’s criminal trial offered their closing arguments on Wednesday, prosecutors reminded jurors of the mountain of proof offered by key witnesses, whereas protection counsel accused the government of portraying the FTX founder as a “monster.”

The prosecution kicked off the proceedings, making an attempt to present the 12 jurors a clear sense of why they’ve spent the previous 4 weeks sitting in a decrease Manhattan courtroom.

“Almost a 12 months in the past, 1000’s of individuals from all around the world who deposited cash with FTX began withdrawing funds,” Assistant U.S. Attorney Nicolas Roos instructed the court docket.

Roos stated there’s “no severe dispute” that $10 billion in buyer cash that was sitting in FTX’s crypto change went lacking, with a few of it going to to pay for actual property, investments, mortgage repayments and political donations.

The essential factor the jury has to resolve, Roos stated, is whether or not Bankman-Fried knew that taking the cash was unsuitable.

“The defendant schemed and lied to get cash, which he spent,” Roos stated.

Bankman-Fried, the 31-year outdated son of two Stanford authorized students and graduate of Massachusetts Institute of Technology, faces a potential life sentence if convicted on expenses, which embody wire fraud, securities fraud and cash laundering, all tied to the collapse late final 12 months of FTX and sister hedge fund Alameda Research. He pleaded not guilty.

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 mates and high lieutenants in opposition to the sworn statements of their former boss and, for a lot of of them, former roommate.

The 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. Both pleaded guilty in December to a number of expenses 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 change at federal court docket in New York City, U.S., October 31, 2023 on this courtroom sketch. 

Jane Rosenberg | Reuters

When it was time for Bankman-Fried’s workforce to mount a protection, lead counsel Mark Cohen left the majority of the case to his shopper, who spent three days on the stand telling the jury that he didn’t defraud anyone, 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 take a look at the proof. At one level, he requested, “Who is accountable? He then stepped out from behind the rostrum and in direction of the protection desk, pointed on the defendant and stated, “This man, Samuel-Bankman-Fried.”

“A pyramid of deceit was constructed by the defendant,” Roos stated. “That finally collapsed.”

The info, as listed by Roos, had been that prospects believed their deposits had been their very own and never for use by anybody else; that FTX adverts regularly stated the change was the most secure and simplest way to purchase cryptocurrency; and that $10 billion was lacking.

‘Uncomfortable to listen to’

Roos instructed the jury that Bankman-Fried lied to them, reminding them how easy the defendant was in answering questions from his personal lawyer however how “he was a totally different individual” when it was the prosecutors’ flip. He had a excellent reminiscence on Friday, Roos stated, telling the jury that Bankman-Fried knew the small print concerning the structure of his Airbnb workplace in California, the rationale he went to Hong Kong and why he picked the Miami Heat area as the one for FTX to sponsor.

That all modified when the government was asking the questions.

“It was uncomfortable to listen to,” Roos stated, including that Bankman-Fried stated “I am unable to recall” over 140 instances throughout questioning by the government.

“To consider his story, you’d should ignore the proof,” Roos stated. “You’d should consider the defendant, who graduated from MIT and constructed two multibillion-dollar corporations, was really clueless.”

Critical 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 12 months. Roos stated 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 unsuitable, Roos stated, which is why he stored it secretive.

Roos stated Bankman-Fried had been mendacity to the general public about Alameda’s “secret benefits,” and was being untruthful when he instructed the general public and the media that Alameda was identical to everybody else.

“Those had been lies,” Roos stated. Had they recognized the reality, “traders would have run for the exits,” he stated.

Bankman-Fried blamed “messy accounting,” Roos stated, including “give me a break.” He stated these feedback contradicted what he instructed Congress, that he’d reconciled the books.

Judge Lewis Kaplan, who presided over the trial, began court docket virtually a half hour late on Wednesday as a result of a juror was caught in visitors. Then there have been technical points, as the second row of displays 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 had 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 referred to 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 change, at federal court docket in New York City, U.S., October 30, 2023 on this courtroom sketch. 

Jane Rosenberg | Reuters

Roos referred to metadata exhibiting that Bankman-Fried was a part of a assembly for about half-hour the place the opening in FTX’s stability sheet and repaying lenders had been mentioned. Metadata exhibits he was learning 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 stated that they’d spoken with Bankman-Fried concerning the large gap within the stability sheet. Ellison stated there was no solution to repay it, and Singh testified that Bankman-Fried admitted to him that “we’re a little brief on deliverables.”

Bankman-Fried “had the vanity to assume he may get away with it,” Roos stated.

Spending freely

Another level talking to the defendant’s intent, Roos stated, was his tweeting.

Bankman-Fried’s plan final November, when he knew there was solely sufficient cash to course of one-third of shopper 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 advantageous” as the financial institution run was underway, Roos stated.

Bankman-Fried knew Alameda had a unfavorable internet asset worth of $2.7 billion, Roos stated, however needed to make one other $3 billion in enterprise investments. The solely approach to do this was with FTX buyer funds, he stated.

Additionally, Roos instructed the jury, shopper cash went to $100 million in actual property bills, together with a $30 million penthouse in the Bahamas and $16 million for his dad and mom’ dwelling.

In referencing the Super Bowl image with Katy Perry and others, Roos referred to as Bankman-Fried a “celeb chaser.”

Roos walked the jury by way 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 a lengthy memo proposing the shutdown of Alameda. Still, he spent $45 million for a stake in Skybridge Capital.
  • Then, on Sept. 22, he paid $4 million to himself.
  • Four 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’s all you might want to know to search out him responsible,” Roos stated.

In closing the prosecution’s case, Roos referenced the seven expenses going through Bankman-Fried and why he could 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 stability sheet. For depend 5, conspiracy to commit securities fraud on FTX traders, the first proof got here from traders who expressed concern about a battle of curiosity between Alameda and FTX and who stated they would not have put in cash in the event that they knew the reality. Bankman-Fried additionally lied about income, Roos stated.

The prosecution reminded the court docket 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 stated, and it debunks the protection’s essential argument that Bankman-Fried acted in good religion and believed every little thing would work out.

“This was a fraud that occurred on a large scale,” he stated.

‘Every film wants a villain’

Following the government’s closing argument, Cohen started his statements at a little earlier than 3 p.m. He stated the government is portraying Bankman-Fried as a “monster” and depicting him as a “villain” and a “dangerous man.” Lawyers introduced out testimony about his intercourse life and confirmed photographs of him “trying awkward with celebrities,” Cohen stated.

He stated Bankman-Fried would discuss to only about anybody who would pay attention, habits that might make life messy however is not felony. He stated the prosecution has made the case into a “film,” and the protection is exhibiting what it is like in the true world, the place issues are messy.

“Every film wants a villain,” Cohen stated.

He claimed the case in opposition to his shopper was constructed on the false premise that FTX was a fraudulent enterprise to deliberately steal buyer funds.

Cohen broke the case up into two time durations. The first was 2019 to 2021, when there isn’t any indication of felony intent. Up till June 2022, everybody concerned thought they had been working essentially the most profitable crypto change on the earth, Cohen stated.

The second interval was from June to November of 2022. Crypto winter had led to the failure of a variety of companies within the business. That’s the primary time it turned clear that Alameda was utilizing buyer funds. In the autumn of that 12 months, Bankman-Fried noticed a liquidity downside, not a solvency downside, Cohen stated. He all the time thought there have been adequate funds on and off the change.

While FTX’s lack of a threat administration system or chief threat officer mirrored poor system controls, dangerous enterprise choices aren’t crimes, Cohen stated.

The government carries the heavy burden of proving Bankman-Fried operated with felony intent, and “it has not,” Cohen stated. He stated that prosecutors referred to as Bankman-Fried “evil” and “conceited” and described him as a “felony mastermind.” But in stepping into particular actions, “there’s nothing wrongful about margin buying and selling,” he stated.

Cohen stated his shopper offered the court docket with good religion solutions about what he remembered, and requested why a felony mastermind would go communicate in entrance of Congress. He described the government’s assumptions as “heads I win, tales you lose.”

With the protection persevering with its closing argument, Judge Kaplan stated the jury will possible be requested to remain late on Wednesday.

— CNBC’s Dawn Giel contributed to this report.

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