Sam Bankman-Fried built FTX on a ‘pyramid of deception,’ prosecutor says

Sam Bankman Fried, the former cryptocurrency magnate, built his FTX crypto exchange on a “pyramid of deceit” and a “foundation of lies and false promises,” a federal prosecutor said Wednesday in his closing statements at the criminal fraud trial.

For more than two hours in a Manhattan courtroom, Nicolas Roos, the prosecutor, used scathing language to portray Mr. Bankman-Fried as a liar and fraudster. FTX’s founder, Mr. Roos said, was driven by greed and was responsible for the stock market’s collapse a year ago, which left customers unable to get their deposits back. And Mr Bankman-Fried, who had testified in his own defense at the trial, had repeatedly dissembled and dodged questions, Mr Roos said.

Mr Bankman-Fried “lied about things big and small”, the prosecutor said, noting that the defendant said he “couldn’t remember” more than 140 times in response to cross-examination questions. “It was uncomfortable to hear,” Mr. Roos said.

The prosecutor’s closing statement came after 15 days of testimony in the trial of Mr Bankman-Fried, one of the most high-profile financial crimes in years. The outcome of the case will be seen as a referendum not only on the meteoric rise and fall of Mr Bankman-Fried’s business empire, which at its peak was valued at $32 billion, but also on the volatile crypto industry, which was high just two years ago before it melted last year.

The spectacular implosion of FTX last November set off a chain reaction that led to the collapse of other crypto companies. Mr. Bankman-Fried’s arrest and subsequent charges also sparked a regulatory crackdown in the crypto universe.

At the heart of Mr Bankman-Fried’s case is whether he committed fraud and treated FTX as his personal piggy bank. Prosecutors allege he stole as much as $10 billion from FTX’s clients to pay for investments in other crypto companies, buy luxury real estate in the Bahamas, where the exchange was headquartered, and to support a crypto trading firm which he also founded, Alameda. Research.

The 31-year-old has pleaded not guilty to seven charges of fraud, conspiracy and money laundering. If convicted, he could face life in prison.

The defense is expected to make its closing statement on Wednesday afternoon, after which the Public Prosecution Service will deliver a brief rebuttal.

Carl Tobias, a professor at the University of Richmond School of Law, said the prosecutor presented a strong case and made a smart decision by “framing this case as a garden-variety fraud case, rather than a more complex cryptocurrency case.” ”

The trial of Mr Bankman-Fried, which began on October 4, has produced many damaging testimonies. Prosecutors called 16 witnesses, including three of Mr. Bankman-Fried’s former top lieutenants, all of whom had pleaded guilty to fraud and conspiracy charges and agreed to testify against their former boss. For its part, the defense called only three witnesses, one of whom was Mr Bankman-Fried.

During the trial, the prosecution’s three star witnesses – Caroline Ellison, Nishad Singh and Gary Wang, all of whom worked with Mr. Bankman-Fried – testified that the FTX founder knew for months that his spending binge was unsustainable and was improperly fueled by the FTX customer. money transferred to Alameda. They also said that Mr. Bankman-Fried knew that Alameda could not repay the billions it embezzled from FTX because Alameda’s debts to FTX were hidden from customers and investors.

In response, Mr Bankman-Fried and his lawyers argued that he was unaware that billions in customer money had been misused until a few weeks before the FTX collapsed. Mr. Bankman-Fried testified that he believed Alameda’s expenses came from company money, not customer money. Any mistakes made, Mr Bankman-Fried said, were made in good faith and not intended to deceive anyone.

FTX was supposed to “move the ecosystem forward,” he testified at one point. “It turned out to be the opposite.”

During nearly seven hours of cross-examination over two days, Mr. Bankman-Fried was repeatedly asked about his many public statements about FTX and how they conflicted with what was going on behind the scenes of the exchange. Mr. Bankman-Fried often joked in response to questions about his public claims that FTX was one of the most secure crypto exchanges in the industry.

He also couldn’t explain how FTX customers’ money could be funneled into Alameda to pay for building his crypto empire without his knowledge. At times he effectively said that his former employees who testified against him were not telling the truth.

On Wednesday, Mr. Roos discussed highlights of the testimony of the prosecution’s witnesses, including their statements that Alameda had special privileges with FTX, such as a $65 billion line of credit that allowed the trading company to borrow billions from FTX customers. Mr. Bankman-Fried kept these special privileges secret, Mr. Roos said, “because he knew they were wrong.”

“The way you know he knew was because he set up a public system for everyone and a secret system for Alameda,” Mr. Roos said.

The prosecutor also discussed the inconsistencies in Mr. Bankman-Fried’s testimony with the testimony of his former employees. He showed graphs with headings such as “The Defendant’s Lies to the Public” and “The Defendant Knew the Secret Line of Credit.” And he pointed to instances in which Mr. Bankman-Fried appeared to deliberately use FTX customer deposits, including to buy back FTX shares from Binance, a competing crypto exchange.

The jury, made up of nine women and three men, is expected to begin deliberating Thursday after U.S. District Court Judge Lewis A. Kaplan briefs them on the relevant law.