Who is Sam Bankman-Fried, the former CEO of crypto exchange FTX? Is he a liar and a fraud? Or did he act in good faith, and like many a startup founder, fly too close to the sun?
That answer ultimately lies with the jury, which was selected on Wednesday morning before lawyers for the government and then Bankman-Fried swapped two very different stories of the former crypto mogul’s sudden rise and almost instantaneous fall.
Here’s what happened on the second day of the trial, which featured pointed allegations, a friend from MIT, and an audience replete with big names, including Bankman-Fried’s professorial parents and Damian Williams, U.S. attorney for the Southern District of New York.
A conscious criminal…
The prosecution’s account of the alleged crimes by Bankman-Fried, who spent most of his day in court staring into a laptop while seated between his two attorneys, featured a study in contrasts.
“One year ago, it looked like the defendant was on the top of the world,” began Thane Rehn, a prosecutor for the government, in his opening statement. The former CEO of FTX oversaw a supposedly thriving crypto exchange, jetted between international locales, and hobnobbed with celebrities like Tom Brady and Larry David. He repeatedly emphasized to customers that their money was safe and secure.
But “all of that, all of it, was built on lies,” Rehn declared to the jury. “Behind the curtains, he was not what he appeared to be.” What followed was a roughly 30-minute story that repeatedly emphasized how Bankman-Fried allegedly stole customer funds to facilitate his jet-setting lifestyle, donate millions to political candidates, and finance risky bets.
The key to his alleged scheme? Alameda Research, a crypto hedge fund he also owned, argued Rehn. Using Caroline Ellison, his on-again off-again girlfriend and the CEO of Alameda, as a front, Bankman-Fried had “secret access” to customer money—both cash and crypto—the government claimed.
Moreover, Bankman-Fried allegedly directed employees to conceal the flow of money into FTX’s coffers and forged financial documents distributed to lenders and investors. “The defendant lied to the world,” Rehn alleged.
And who was this defendant? Not a crypto “boy” genius, as so many in the media (Fortune included) have written, but a “man” who “stole billions of dollars from thousands of victims,” Rehn said. “You will see the full picture.”
…or a well-meaning founder?
But Bankman-Fried, whose cheekbones were more prominent after spending about seven weeks in a Brooklyn prison, was no liar, according to Mark Cohen, one of his lawyers. “Sam didn’t defraud anyone,” he said early on in his opening statement.
What the jury will see is a nerdy startup founder who acted in “good faith,” not the prosecution’s “cartoon of a villain.” (Cohen repeatedly harped on Bankman-Fried’s allegedly good-faith actions throughout his address to the jury.)
Alameda was not subterranean or shady. It was a successful hedge fund, he said. FTX was no Ponzi scheme. It was a “very innovative, successful company.” And the business practices between the two were reasonable, he argued, claiming that Alameda acted legally as an FTX customer, payment processor, and market maker, or financial entity that acts as a trading partner for customers looking to buy and sell cryptocurrencies.
In an analogy he employed throughout his opening statement, he said that “working at a startup is like building a plane as you’re flying it” and that businesses sometimes fail. In fact, he specifically pointed the finger at Ellison, the former CEO of Alameda, who, he said, did not adequately protect her hedge fund from the inherent risk of the crypto markets.
When the walls came closing in and the aforementioned plane approached the “eye of the storm,” Bankman-Fried did not act like someone who was guilty. Rather, he was willing to give up his personal wealth to make customers whole, Cohen argued.
“In the end, Sam started and built two billion-dollar businesses,” he concluded. “He didn’t steal any money.”
A Frenchman who lives in London testifies in New York
After lawyers from both sides depicted two very different Bankman-Frieds, the prosecution called its first two witnesses to the stand—and they weren’t blockbuster names or former lieutenants-turned-government-cooperators, like Ellison.
The first was a victim: Marc-Antoine Julliard, a Paris-born cocoa trader who lives in London. In 2021, Julliard, who had coiffed hair and spoke with a strong French accent, decided to invest in crypto and landed on FTX as his exchange of choice, where he traded cryptocurrencies like Bitcoin and Dogecoin.
On Nov. 8, in the crypto exchange’s final few days, he tried to pull out his cash and crypto. How much? Almost $100,000, he said. And was he ever able to? “Never,” he told prosecutors.
Shortly afterward, as the trial neared late afternoon, the government called Adam Yedidia to the stand. A fast-talking graduate of MIT, he and Bankman-Fried were close friends in college, he said. And after Bankman-Fried left Jane Street, the high-frequency trading firm where the former billionaire got his start in finance after MIT, he persuaded Yedidia to join him as a trader at Alameda and then as a developer at FTX.
When Yedidia first took the stand, Danielle Sassoon, one of the lead prosecutors, said that the college friend of Bankman-Fried had legal immunity during his testimony. Why did he make such a deal with the government, she asked.
“I was concerned that I had unwittingly written code that contributed to a crime,” he said.
Soon, however, the clock neared 4:30 p.m., and court adjourned for the day. Yedidia will continue his testimony on Thursday, followed by Matt Huang, a former partner at the high-powered venture capital firm Sequoia Capital, and then Gary Wang, a key Bankman-Fried lieutenant and one of the government’s star witnesses.
