Sam Bankman-Fried 'lied to the world' in building FTX, prosecutors say

Former cryptocurrency executive accused of using investor deposits as personal bank account

FTX founder Sam Bankman-Fried watches as his lawyer makes opening remarks in his fraud trial in a New York City courtroom. Reuters

Sam Bankman-Fried “lied to the world” as he built his cryptocurrency empire at FTX, telling only his friends and girlfriend the truth about what was happening, prosecutors said on the first day of a historic fraud trial.

Nathan Rehn, an assistant US attorney, painted a picture of the 31-year-old as a calculated criminal who used investor deposits at FTX as a personal bank account before the company collapsed into bankruptcy a year ago. He said that only Mr Bankman-Fried’s small inner circle knew that he was taking customer money to fund his lifestyle.

“He had wealth, he had power, he had influence, but all of that was built on lies,” Mr Rehn told jurors in federal court in Manhattan on Wednesday. “He was committing a massive fraud and taking billions of dollars from thousands of victims.”

Former Almeda Research co-chief executive Caroline Ellison, Mr Bankman-Fried’s former girlfriend, is the government’s star witness. She reached a co-operation deal last year.

Gary Wang, former FTX chief technology officer, and Nishad Singh, FTX’s former engineering director, are also expected to take the stand as co-operating witnesses.

The case, which the government has labelled one of the biggest financial crimes in the country’s history, will explore how an awkward 20-something from California came to run and allegedly ruin one of the largest crypto exchanges in the world.

The Massachusetts Institute of Technology graduate faces a maximum prison term of 20 years for each of the five most serious charges against him.

Mr Bankman-Fried was expressionless as Mr Rehn spoke, but briefly looked at the jury as the government lawyer emphasised “billions” in fraud, before turning back to stare at his laptop.

The former crypto executive’s parents, a pair of Stanford University law professors, sat in the gallery behind their son.

Mr Bankman-Fried’s lawyers said that Mr Rehn portrayed their client as a “cartoon” villain, rather than the maths nerd he truly was.

“The evidence will give you different context – that Sam works very hard, didn’t drink or party, and went to MIT,” his lawyer, Mark Cohen, said during his opening arguments. “Sam didn’t intend to defraud anyone. There was no theft.”

Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, arrives on the day of a hearing at Manhattan federal court

Former FTX chief executive Sam Bankman-Fried arrives on the day of his hearing at Manhattan federal court in New York. Reuters

Mr Cohen said that the “rise and fall” of FTX and Alameda Research, an affiliated hedge fund, mirrored the wider crypto industry, which was battered by fast-changing market conditions in 2022.

“The case in many ways is about crypto from 2017 to 2022,” Mr Cohen said. “You will learn that crypto is not for everyone.”

Mr Bankman-Fried is accused of taking customer funds from FTX and using it to engage in speculative trading through Alameda.

Mr Cohen said his client had “reasonably believed” that loans provided by Alameda were permitted and backed by collateral.

Updated: October 04, 2023, 8:33 PM