Latest update – former FTX CEO Sam Bankman-Fried trial [Day 2]

Cointelegraph reporters are on the ground in New York for the trial of former FTX CEO Sam “SBF” Bankman-Fried. As the saga unfolds, watch below for the latest updates.

October 4: DOJ and Bankman-Fried present their defense arguments.

The first hours of the Sam Bankman-Fried trial have hinted at the arguments the Department of Justice (DOJ) and the defense will make to the court in the coming weeks.

After jury selection in the morning, both sides gave opening statements to the 12 people present in the courtroom.

The DOJ took a hard line against Bankman-Fried in its initial statement, describing the FTX founder as someone who deliberately lied to investors to enrich himself and expand his crypto empire.

According to the DOJ, Bankman-Fried lied to FTX's customers and investors, using Alameda as a key partner to “steal customers' money,” a phrase used several times in opening statements.

According to the trial preview, the DOJ will focus on allegations that Bankman-Fried misled customers, investors and lenders about the safety of their money in order to steal their money and influence Washington politicians.

The defense argued that Banman-Fried was a young entrepreneur who made “unsuccessful” business decisions. The defense denied that there was any secret trading between Alameda and FTX or that there was a back door used to steal customers' money. According to the previous arguments, all transactions were legitimate or done in good faith by Bankmann-Fried during the crypto market crash and the November 2022 FTX crash.

The defense also highlighted Binance's role in the bank run that led to FTX's collapse. Testimony will continue throughout the day.

According to the defense, Banman-Fried assumed that FTX was authorized to make loans to Alameda as part of its business relationship with the market maker, and that transactions between the companies were not backdoors.

Prosecutors also said Caroline Ellison, Gary Wang and Nishad Singh will present information to the jury about Bankman-Fried's role in FTX operations and alleged crimes. But the defense had to testify against Bankman Fried as part of a cooperation agreement with the government, casting doubt on their credibility.

The defense downplayed the allegations about the nature of the relationship between FTX and Alameda, arguing that FTX's margin traders were aware of the risks associated with the transactions.

“There was no theft,” the defense said. “It is not a crime to be the CEO of a company that is filing for bankruptcy.”

In the second half of the first day of the trial, the jury heard from two witnesses, namely the French businessman and former client of FTX, Marc Juilliard, and Sam Bankman-Fried's friend and former employee of Alameda Research and FTX, Adam Yedidia.

In his testimony, Juilliard said he was holding four bitcoins in FTX at the time of the exchange's collapse, worth $100,000. He acknowledged that FTX and Bankman-Fried's marketing efforts alongside prominent venture capital firms backed FTX and gave him the confidence to use the exchange for crypto trading. He assumed the VC firms had done their due diligence on FTX and its management.

During cross-examination, prosecutors emphasized that the trader was only using FTX for spot trading and that the exchange did not know that the exchange was using client funds to trade with Alameda Research.

Yedidia's questions first focused on his academic background at MIT, where he met Banman-Fried, and his two professional experiences with the FTX founder. Yedidia briefly worked in Alameda as a trader in 2017 and then returned to work for FTX in 2021 as a developer. He was one of ten people who owned $30 million in FTX real estate in the Bahamas.

In Jedidiah's testimony, prosecutors used previous FTX ads as evidence that the company has always positioned itself as a safe, secure and reliable way to invest in cryptocurrency, including marketing campaigns with NFL player Tom Brady and comedian Larry David. The trial will resume on October 5.

October 3: SBF trial begins

Sam Bankman-Fried's trial begins Oct. 3 with jury selection. Bankman-Fried has been charged with seven counts of conspiracy and fraud related to the collapse of FTX, the cryptocurrency exchange he co-founded. He has pleaded not guilty to all charges. The case is being heard by Judge Louis Kaplan, who has presided over a long list of other high-profile cases, including detainees at Guantanamo Bay, the Gambino crime family, Prince Andrew and Donald Trump.

Bankman-Fried was ordered arrested on Aug. 11 after Kaplan found that sharing the personal papers of former Alameda Research CEO Carolyn Ellison constituted witness intimidation. Alameda Research was a trading house founded by Bankman-Fried. He was previously being held on $250 million bond at his parents' home in Stanford, California.

December: SBF captured

Bankman-Fried was arrested in the United States on December 21, 2022, upon his arrival from the Bahamas. He was arrested in the Bahamas on December 12, after the US government officially notified the country of the charges against him. He expressed his desire to fight extradition from the Caribbean nation, but changed his mind after a week in a Bahamian prison and agreed to be extradited.

Meanwhile, FTX co-founder Gary Wang and Alameda Research CEO (and sometimes rumored girlfriend of SBF) Ellison have agreed to plead guilty in the developing case.

November: FTX crashes

Bankuman-Fried's troubles began on November 2 when reports emerged that Almeida Research had a large holding of FTX Token (FTX), the FTX utility token. That revelation raised questions about the relationship between the two entities. In the year On November 6, Changpeng Zhao, CEO of the rival exchange Binance, announced that the exchange will liquidate its FTT holdings valued at $2.1 billion. Zhao declined an offer from Ellison on Twitter to buy Binance's FTT.

Run started with FTX. Bankman-Fried tweeted (now X) that the exchange's “assets are fine” and accused them of spreading “competitive” rumours. On November 8, the price of FTT dropped from $22 to $15.40.

SBF's famous “FTX is good. The properties are good. ” pic.twitter.com/zKoILqquHF

— Robert Smith (@BondHack) November 14, 2022

Also on November 8, Bankman-Fried announced on Twitter that it had reached an agreement on a “strategic transaction” with Zhao. They wrote: “Our teams are currently cleaning up the withdrawal controversy. This eliminates liquidity constraints; All assets are covered 1:1.

In the year On November 9, Zhao announced that Binance FTX will not receive due diligence and reports of additional unclaimed funds. Bitcoin (BTC) price dropped to $15,600. The FTX and Alameda Research websites went dark for a few hours. When the FTX website came back up, it gave a warning about making a deposit and couldn't process a withdrawal.

In the year On November 10, Bankman-Fried posted a 22-part Twitter thread beginning with “Sorry.” It was the first in a long series of public statements about the exchange's failure. The next day, all Alameda Research employees quit, and FTX, FTX US and Alameda Research filed for bankruptcy in the United States. Bankman-Fried stepped down as CEO of FTX, replacing John J. Ray III, best known for his role in Enron's bankruptcy.

Before the collapse of SBF and FTX

In the year As of early 2022, FTX had a valuation of $32-billion and was considered to be in an enviable financial position. Bankman-Fried was seen as a respected business leader by much of the crypto community and the world at large. He was photographed with political leaders and spoke at congressional meetings.

Maxine Waters is leading the investigation into FTX pic.twitter.com/Ox6O5w4nOl

— Jordan Schachtel @ dossier.today (@JordanSchachtel) November 17, 2022

He has earned a reputation as a philanthropist following a philosophy popular among academics known as “effective altruism.” Part of the application of that philosophy is political activism in the form of financial support for candidates.

Heading into the crypto winter, Banman-Fried spoke of FTX and Alameda Research as having a “responsibility to seriously consider getting in to prevent contagion, even if it hurts ourselves.” The companies submitted a bid for Voyager Digital, which was rejected.

FTX has signed an agreement with Visa to introduce its debit card in 40 countries.

Banman-Fried, Ellison and other Jane Street Capital alumni founded Alameda Research in 2017. Bankman-Fried found FTX with Wang in 2019.

This is a developing story, and more information will be added as it becomes available.