Sam Bankman-Fried's trial to test dueling explanations for collapse of crypto exchange

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In U.S. prosecutors' telling, Sam Bankman-Fried embezzled money from depositors in his FTX cryptocurrency exchange ever since he launched it in 2019, and the resulting shortfall led directly to its collapse as crypto prices swooned last year. But in his own version and in explanations put forth by his lawyers, Bankman-Fried thought FTX, like a bank, could make investments with customers' money as long as they were able to withdraw it - and he did not know that actions taken by his closest colleagues had jeopardized the availability of funds. Over the course of six weeks starting on Oct. 3, a federal jury in Manhattan is due to weigh these dueling narratives during Bankman-Fried's criminal trial on fraud charges, before determining whether the 31-year-old former billionaire is guilty on seven counts of fraud and conspiracy.

FILE PHOTO: Former FTX Chief Executive Bankman-Fried at a courthouse in New YorkNEW YORK - In U.S. prosecutors' telling, Sam Bankman-Fried embezzled money from depositors in his FTX cryptocurrency exchange ever since he launched it in 2019, and the resulting shortfall led directly to its collapse as crypto prices swooned last year.

Bankman-Fried, who quit his job as a quantitative trader at Wall Street firm Jane Street to found crypto hedge fund Alameda Research in 2017, has pleaded not guilty. FTX survived a downturn in crypto prices that saw other major digital currency platforms fail earlier in 2022, with Bankman-Fried even bailing some of them out.

Bankman-Fried has acknowledged inadequate risk management, but denied stealing funds. He intended to tell Congress in a December hearing over FTX's collapse that he made a mistake and did not know how much FTX had lent Alameda due to a "quirk" in the company's internal controls, according to a written draft of his planned testimony published by Forbes and confirmed by Bankman-Fried as authentic. Bankman-Fried was arrested before he could testify.

Ellison, Bankman-Fried's former romantic partner, said in her plea hearing that she and Bankman-Fried agreed to hide the fact Alameda had lent billions of dollars to FTX executives for their personal use from the fund's own lenders. "She continually avoided talking about risk management - dodging my suggestions - until it was too late," he wrote.

 

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