Sam Bankman Fried, the one-time cryptocurrency mogul, built his FTX crypto exchange into a “pyramid of deception” built on a “foundation of lies and false promises,” a federal prosecutor said Wednesday in his fraud trial.
Mr. Bankman-Fried’s lawyer countered that his 31-year-old client was simply a “math nerd” who may have made some bad business decisions but committed no crimes and never told anyone to break the law.
These different messages formed the core of closing arguments in Mr. Bankman-Fried’s trial in a Manhattan courtroom on Wednesday. Nicolas Roos, the prosecutor, initially said that Mr Bankman-Fried was a liar who was responsible for FTX’s collapse last year, which left customers unable to get their deposits back.
Mr. Bankman-Fried, who testified in his own defense during the trial, “lied about things big and small,” Mr. Roos said, pointing out that the defendant said he “couldn’t remember” more than 140 times. . in response to cross-examination questions.
Then Mark Cohen, a lawyer for Mr. Bankman-Fried, said in his closing argument that the FTX founder had acted in good faith. “The prosecution tried again and again to turn Sam into some kind of villain, some kind of monster,” he said.
Her dueling closing argument came after 15 days of testimony in Mr. Bankman-Fried’s trial, one of the highest-profile financial crime cases in years and moving far quicker than expected. The outcome of the case will be seen as a referendum not only on the rapid rise and fall of Mr. Bankman-Fried’s business empire, which was worth $32 billion at its peak, but also on the volatile crypto industry, which has only been in existence for two years Years ago, the stock was on a high before collapsing last year.
The spectacular implosion of FTX last November set off a chain reaction that led to the collapse of other crypto firms. Mr. Bankman-Fried’s arrest and subsequent charges also triggered regulatory action across 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 up to $10 billion from FTX customers to pay for investments in other crypto firms, buying lavish real estate in the Bahamas, where the exchange was headquartered, and a crypto trading firm he also founded, Alameda Research, to support.
Mr. Bankman-Fried pleaded not guilty to seven counts of fraud, conspiracy and money laundering. If convicted, he could face life in prison.
Carl Tobias, a professor at the University of Richmond School of Law, said prosecutors presented a strong argument and made a wise decision by “characterizing this matter as a garden variety fraud case rather than a more complex cryptocurrency case.”
Mr. Bankman-Fried’s trial, which began on October 4, contained numerous damaging statements. Prosecutors called 16 witnesses, including three of Mr. Bankman-Fried’s former top lieutenants, who each pleaded guilty to fraud and conspiracy charges and agreed to testify against their former boss. The defense, for its part, called only three witnesses, including Mr. Bankman-Fried.
At trial, the prosecution’s three key witnesses – Caroline Ellison, Nishad Singh and Gary Wang, all of whom had worked with Mr Bankman-Fried – testified that the FTX founder knew for many months that his buying spree was unsustainable and from FTX’s customers inappropriately fueled was money that had been 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 debt to FTX remained hidden from customers and investors.
In response, Mr. Bankman-Fried and his lawyers argued that he was unaware that billions of dollars in customer funds had been misused until a few weeks before FTX collapsed. Mr. Bankman-Fried testified that he assumed Alameda’s expenses came from company funds, not customer funds. Any errors that were made, Bankman-Fried said, were made in good faith and were not intended to defraud anyone.
FTX should “advance the ecosystem,” he once said. “It turns out the opposite was true.”
For closing arguments on Wednesday, Damian Williams, the top federal prosecutor in New York, sat in the front row of the courtroom, accompanied by other government officials. Mr. Bankman-Fried’s parents, a fixture in the gallery throughout the trial, skipped the government’s presentation but returned to the courtroom to watch Mr. Cohen defend their son. Mr. Bankman-Fried sat between his lawyers, wearing the same gray suit and purple tie he has worn on the witness stand in recent days.
Mr. Roos stood at the lectern and reviewed highlights of testimony from prosecution witnesses, including their statements that Alameda had special privileges at FTX, such as a $65 billion line of credit that allowed the trading firm to raise billions FTX customers to borrow. Mr. Bankman-Fried kept those special privileges secret, Mr. Roos said, “because he knew they were wrong.”
The prosecutor also addressed the discrepancies between Mr. Bankman-Fried’s statements and those of his former employees. He showed charts with headings like “The Defendant’s Lies to the Public” and “The Defendant’s False Tweets in November.” He produced digital records showing that Mr. Bankman-Fried had viewed incriminating documents that he said he did not remember seeing.
Mr. Roos also pointed to instances in which Mr. Bankman-Fried appeared to intentionally use FTX’s customer deposits, including to buy back FTX shares from Binance, a rival crypto exchange.
Mr. Cohen began his closing argument by saying prosecutors had made every effort to focus on Mr. Bankman-Fried’s appearance. “We agree that there was a time when Sam was probably the worst-dressed CEO and had the worst haircut,” Cohen said, adding that these were not crimes.
The prosecution’s retelling of FTX’s collapse was exaggerated and cinematic, Mr. Cohen said. “In the real world, unlike the movie world, things can get messy,” he said, adding that FTX and Alameda’s big spending was “sensible corporate spending” and not a misuse of customer funds.
Mr. Bankman-Fried acted in good faith in his business decisions and lacked criminal intent to defraud anyone, Mr. Cohen said. It is the prosecution’s responsibility to prove guilt beyond a reasonable doubt, he added, and Mr. Bankman-Fried is under no obligation to prove anything.
Mr. Bankman-Fried testified “because he wanted to tell you what happened,” Mr. Cohen said. “You can hardly imagine a more stressful situation. He was anything but polished. He was himself, he was Sam. He told you when he couldn’t remember things.”
Mr. Cohen also tried to discredit Ms. Ellison, Mr. Wang and Mr. Singh. He showed a chart showing that each of them could face decades in prison and argued that they were acting out of self-preservation by cooperating with prosecutors.
As he concluded his presentation, Mr. Cohen urged the jury to keep an open mind. He emphasized how quickly Mr. Bankman-Fried’s life changed – one day he was a student, the next a crypto mogul and now a defendant in a federal fraud trial.
When Mr. Cohen finished, Mr. Bankman-Fried appeared close to tears. He blinked rapidly and looked back and forth from the lectern to his parents in the gallery. One of his lawyers put an arm around him before two U.S. marshals led him from the room.
The jury of nine women and three men is expected to begin deliberating a verdict Thursday after U.S. District Court Judge Lewis A. Kaplan briefed them on the relevant law.