The fraud trial of Sam Bankman-Fried, founder of FTX exchange, has resumed, with his defense team claiming he did not steal customer money. The alleged fraud charges date back to FTX’s launch in 2019 up until its bankruptcy in November 2022, which shocked financial markets.
Defense Claims “No Theft”
During the opening statements, defense lawyer Mark Cohen acknowledged that FTX lent money to Bankman-Fried’s hedge fund, Alameda, but claimed that he “reasonably believed” the loans were permitted and backed by collateral. Cohen argued that Bankman-Fried didn’t defraud anyone as he had acted in good faith and there was no theft.
Key Aspects of FTX’s Business Overlooked
Cohen argued that the startup grew so rapidly that some key aspects of FTX’s business like risk management were overlooked. He went on to say that “No one person – no one CEO, certainly not Sam could be everywhere and do everything.”
Prosecutor Thane Rehn said Bankman-Fried claimed in FTX’s terms of service that customer’s cryptocurrency would always belong to them, not the exchange, but “all of it was built on lies”. Rehn accused Bankman-Fried of committing fraud on a massive scale, using company FTX to take more than $10 billion from unsuspecting customers.
Growing Customer Base Helped Paper Over the Theft
Rehn argued that Bankman-Fried didn’t take the money all at once. Instead, a growing customer base helped him paper over the theft. However, Rehn claimed that Bankman-Fried directed customers to deposit their money into accounts controlled by Alameda. He also alleged that Bankman-Fried used FTX’s computer code to allow Alameda to withdraw deposits.
Inner Circle Expected to Testify Against Bankman-Fried
Prosecutors are expected to call three former members of Bankman-Fried’s inner circle to testify against him, including Caroline Ellison, former Alameda chief executive, and former FTX executives Nishad Singh and Gary Wang. All three have pleaded guilty and agreed to cooperate with prosecutors.
Bankman-Fried’s trial is set to last for two weeks. If he is convicted, he could face up to 20 years in prison.