Ann Berry, founder of Threadneedle Ventures, explains the Sam Bankman-Fried controversy over making money.
The criminal trial against FTX founder and ex-CEO Sam Bankman-Fried is scheduled to begin on Tuesday. The case will determine his fate as he faces seven federal charges of fraud and conspiracy in connection with the collapse of his crypto empire.
Here’s what you should know as the process begins:
FTX went from being the world’s second-largest crypto exchange with an estimated value of $32 billion to entering Chapter 11 bankruptcy in November last year along with sister hedge fund Alameda Research and other affiliates after being hit by a Flood of transactions affected withdrawals following reports that the exchange had merged assets with Alameda.
The criminal trial against FTX founder Sam Bankman-Fried in connection with the exchange’s collapse begins on Tuesday. (Andrey Rudakov/Bloomberg via Getty Images / Getty Images)
Customers lost billions in the collapse and Bankman-Fried resigned as CEO. He was replaced by John Ray III, best known for handling Enron’s bankruptcy and now tasked with recovering as many assets as possible for FTX’s creditors.
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Bankman-Fried was initially arrested in the Bahamas, where FTX International was based, before being extradited to the US in December. Federal prosecutors in Manhattan have accused Bankman-Fried of misleading investors and lenders and stealing billions of dollars in customer money to buy real estate, make political contributions and offset losses at Alameda.
Bankman-Fried was released on $250 million bail and remained under house arrest at the California home of his parents Joseph Bankman and Barbara Fried for several months before U.S. District Judge Lewis Kaplan revoked his bail in August based on prosecutors’ allegations , which the former CEO had attempted to tamper with at least one witness.
Former FTX CEO Sam Bankman-Fried leaves federal court in New York City after a bail hearing on July 26, 2023. (ANGELA WEISS/AFP via Getty Images / Getty Images)
Bankman-Fried has pleaded not guilty to all charges against him, but members of his inner circle – four former FTX and Alameda executives – have all pleaded guilty to crimes related to the companies’ demise and will expects them to testify against him in the trial after he agreed to cooperate with the government.
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The likely key witness against Bankman-Fried is former Alameda CEO Caroline Ellison, his ex-girlfriend and his top deputy. She pleaded guilty in December to wire fraud and conspiracy, and prosecutors allege Bankman-Fried tried to intimidate her by leaking some of her writings to a journalist.
Alameda Research CEO Caroline Ellison reportedly admitted to knowingly misleading lenders about the company’s financial ties to FTX. (Twitter @carolinecapital / Fox News)
In August, prosecutors announced they would rely on testimony from Ellison, FTX co-founder Gary Wang and former FTX chief engineer Nishad Singh to show jurors “the unlawful conduct ordered and committed by the defendant.”
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Another potential witness who could be brought in to testify is Ryan Salame, who was co-CEO of FTX International. Authorities in the Bahamas said Salame alerted them to possible wrongdoing at the exchange. Salame pleaded guilty to conspiring to make unlawful political contributions and admitted making political donations to Republicans at Bankman-Fried’s behest.
Bankman-Fried has acknowledged that FTX had inadequate risk management, but insists it did not steal any funds.
In January, the former CEO released what he called a “pre-mortem overview” of what was happening to his companies, blaming FTX International’s implosion on a combination of market crashes, mismanagement at Alameda and sabotage by Changpeng “CZ “Zhao is the head of FTX rival Binance.
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Bankman-Fried has repeatedly claimed that FTX US was solvent at the time of its Chapter 11 bankruptcy filing, writing that it is “ridiculous that FTX US users have not yet recovered and gotten their money back.”
Jury selection for the trial is scheduled to begin at 9:30 a.m. ET on Tuesday, and depending on how long the trial lasts, the court could begin opening proceedings the same day.
FOX Business’s Chris Pandolfo and Danielle Wallace contributed to this report.