Sam Bankman-Fried: How is he going to jail after the Fall of FTX and the collapse of billions of dollars of customer funds?
The Department of Justice has filed a total of 13 criminal charges against Bankman-Fried, seven of which will be heard at the initial trial. A second will follow in March 2024. The events that lead to the collapse of billions of dollars’ worth of customer funds have been brought to light by the court cases filed against Bankman-Fried and FTX.
LaVigne says that he had him going out to the internet. If he said things that weren’t true in an interview, it’s more fodder for the government. “They can point to that and say, ‘This is what he said, this is what actually happened.’”
The government can use Bankman-Fried’s own words to establish intent. Bankman- Fried’s November, 2022, tweet was called false and misleading by the indictment.
He was having conversations with his parents and his other advisers. LaVigne says. “What conversations happened between him and his co-conspirators that are now cooperating against him?”
The second part is where all the drama is likely to come, says Christopher LaVigne, a litigation partner and co-chair of the cryptocurrency practice at the law firm Withers. Prosecutors must connect those transactions to Bankman-Fried to prove that he lied about what he was doing.
The first part of proving the government’s case is pretty simple and a little boring: prosecutors must show that certain transactions took place. The transactions in the Southern District of New York will be shown.
The trial of Sam Bankman-Fried will be more consequential than simply whether he is found guilty. It could be a problem for the entire industry if there is evidence during the trial.
Bankman-Fried’s behavior after the fall of FTX suggests he’s something of a wild card. He may have been acting on the advice of his lawyers. He may be able to show that he was engaged in standard industry behavior or that he was responsible for everything that happened. That may be risky, but we already know that Bankman-Fried loves risk.
“How much damage can this trial do to the already beaten-down reputation of the industry at this point?” asks Yesha Yadav, a law professor at Vanderbilt University. The industry is going to be very sensitive during this trial because no one knows what the evidence will be.
According to LaVigne, Bankman-Fried’s lawyers are arguing that his constitutional rights are being violated by his incarceration, because he wasn’t good enough with his internet connections to plan his defense. That could be grounds for an appeal.
For instance, just before he was arrested, Bankman-Fried brought forward messages from a crypto group chat in testimony he planned to give before Congress. He blamed the lawyers at Sullivan & Cromwell for his troubles.
Messages from group chats may be used in the trial. That can potentially be embarrassing for the whole industry, Wong says.
“You can imagine some of these founders, CEOs, people of that echelon talk to each other somewhat informally about what’s going on,” she says. If it appears his peers supported him, that would be a real problem for the industry.
The Bankman-Fried trial will be a huge embarrassment for the industry. The salacious details — his ex-girlfriend and a friend he met at a childhood math camp testifying against him, possible recreational drug use, and complicated love lives — mean the public will likely be tuned in to the trial. The real question is if Bankman- Fried’s appetite for risk will be enough to make it embarrassing.
The CEO of Alameda Research was a romantic partner of Bankman- Fried. They met at Jane Street, a quantitative trading firm where they both worked after college. She has pleaded guilty to seven criminal charges, including wire fraud, securities and commodities fraud, and money laundering.
Three months before the collapse of FTX, the Co-CEO of Alameda Research left the post. The DOJ has not brought criminal charges against him, and it is not certain if he is cooperating with prosecutors. His whereabouts are unknown.
There is a director of engineering at FTX. Singh was headhunted by Bankman-Fried after he worked at Meta. He pleaded guilty to six criminal charges, including wire fraud.
The attorney now tasked with steering FTX and its subsidiaries through bankruptcy. Ray became a Restructuring savant because of his work on the collapse of Enron, a company that engaged in corporate fraud and accounting malfeasance. The prosecution may use materials compiled by Ray, as part of their case against Bankman-Fried.
Bankman-Fried pleaded not guilty to all of the charges. He had been on house arrest but was taken into jail in August after the prosecution alleged that he was tampering with witnesses. If convicted at the end of the trial, which is expected to last around a month, the one-time crypto wunderkind could face decades in prison.