Sam Bankman-Fried, the Jewish founder of the FTX cryptocurrency exchange company, was brought before a U.S. court on Monday to begin his federal trial on charges including counts of wire fraud, money laundering, violations of securities laws, and other financial crimes, following one of the most astounding corporate collapses in decades.
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Bankman-Fried faces seven counts related to a years-long fraud that siphoned billions of dollars from customers to fund political donations, venture capital investments, and luxury real estate purchases around the world. If convicted, he could face a lifetime in prison.
At 31, Bankman-Fried denies the charges, but the prosecution is well prepared to counter his claims. Three of his closest advisers have both pleaded guilty and agreed to testify against him. The plaintiffs will present hundreds of thousands of digital records, texts, financial records, and emails, with plans to present around 1,300 exhibits in the trial.
In preliminary hearings, Judge Louis Kaplan mostly sided with the prosecution's claims and admitted evidence that Bankman-Fried's defense lawyers opposed. Following his arrest, Bankman-Fried was on house arrest at his parents' home in Palo Alto, California, where he hosted guests and installed a basketball hoop in the yard. Seven weeks ago, Judge Kaplan revoked his release on bail and sent him to prison, finding that he had attempted to influence witnesses.
Using his charisma, Bankman-Fried garnered fame as a rare "good guy" in the skeptical world of cryptocurrency only a year ago. He founded the FTX exchange in 2019, raised $2 billion, and promised to work with regulators to legislate new guidelines for the industry.
He was a political activist and supported Democratic candidates, including a donation of $5 million donation to Joe Biden's 2020 presidential campaign. At his peak, before reaching 30, Bankman-Fried was worth more than $26 billion when FTX's valuation crossed the $40 billion threshold.
His empire crashed in four short days last November. FTX and its sister hedge fund, Alameda Research, crashed, and customers couldn't withdraw more than $8 billion in deposits. The companies filed for bankruptcy, and Bankman-Fried- was arrested in the Bahamas.
Caroline Allison, CEO of Alameda Research and Bankman-Fried's partner, pleaded guilty and agreed to cooperate with the prosecution, which intends to present comments she made during meetings with Bankman-Fried. Two other FTX co-founders, Gary Wang, and Nishad Singh, also admitted they had conspired with Bankman-Fried to defraud customers.
Bankman-Fried isn't the only one going on trial as he brings the entire cryptocurrency industry, which has become a multi-billion-dollar industry with a shaky foundation during the COVID-19 pandemic, with him. FTX's collapse completely burst this bubble and led to investigations against other companies.
Journalist and author Michael Lewis, who released a book about his rise and fall, revealed in an interview with CBS's 60 Minutes that prior to the company's crash, Bankman-Fried negotiated with Donald Trump and offered him $5 billion not to for the presidency a second time.