Sam Bankman Fried, the former cryptocurrency mogul, turned his FTX cryptocurrency exchange into a “pyramid of deception” based on a “foundation of lies and false promises,” a federal prosecutor said in closing arguments Wednesday in the trial for criminal fraud.
For more than two hours in a Manhattan courtroom in the morning, Nicolas Roos, the prosecutor, used scathing language to portray Bankman-Fried as a liar and fraudster. The founder of FTX, Roos said, was driven by greed and was responsible for the exchange’s collapse a year ago, leaving clients unable to recover their deposits. And Bankman-Fried, who had testified during the trial in his own defense, had repeatedly dissembling and dodging questions, Roos said.
Bankman-Fried “lied about things big and small,” the prosecutor said, noting that the defendant said he “couldn’t remember” more than 140 times in response to questions during cross-examination. “It was uncomfortable to hear,” Roos said.
The prosecutor’s final statement came after 15 days of testimony in Mr. Bankman-Fried’s trial, which is one of the highest-profile financial crimes cases in years. The outcome of the case will be seen as a referendum not only on the rapid rise and fall of the Bankman-Fried business empire, which at its peak was valued at $32 billion, but also on the volatile cryptocurrency industry, which only two years ago it was at its peak before melting last year.
The spectacular implosion of FTX last November set off a chain reaction that led to the collapse of other crypto companies. Bankman-Fried’s arrest and subsequent charges also triggered a regulatory crackdown across the crypto universe.
At the heart of Mr. Bankman-Fried’s case is whether he committed fraud and treated FTX as his personal piggy bank. Prosecutors allege he stole up to $10 billion from FTX clients to pay for investments in other cryptocurrency companies, buy luxury real estate in the Bahamas, where the exchange was based, and to prop up a cryptocurrency trading company that He also founded Alameda. Investigation.
The 31-year-old pleaded not guilty to seven charges of fraud, conspiracy and money laundering. If he is convicted, he could face what amounts to life in prison.
The defense is expected to present its closing statement Wednesday afternoon, after which the prosecution will make a brief rebuttal presentation.
Carl Tobias, a professor at the University of Richmond School of Law, said the prosecution presented a strong case and made a smart decision by “framing this matter as a run-of-the-mill fraud case, rather than a more cryptocurrency case.” complex”.
Bankman-Fried’s trial, which began Oct. 4, has featured much damaging testimony. Prosecutors called 16 witnesses, including three former Bankman-Fried lieutenants, each of whom had pleaded guilty to fraud and conspiracy charges and had agreed to testify against his former boss. The defense, for its part, called only three witnesses, one of whom was Mr. Bankman-Fried.
At trial, the prosecution’s three star witnesses (Caroline Ellison, Nishad Singh and Gary Wang, who worked with Bankman-Fried) testified that the FTX founder had known for many months that his spending spree was unsustainable and improperly fueled. by FTX client. money that had been transferred to the Alameda. They also said that Bankman-Fried knew that Alameda could not repay the billions it had embezzled from FTX, and that Alameda’s debt to FTX was hidden from customers and investors.
In response, Bankman-Fried and her lawyers argued that until a few weeks before FTX’s collapse she was unaware that billions of customer money had been misappropriated. Bankman-Fried testified that he believed Alameda’s expenses came from corporate money, not customer money. Any mistakes that were made, Bankman-Fried said, were made in good faith and were not intended to defraud anyone.
FTX was supposed to “move the ecosystem forward,” he testified at one point. “It turned out to be the complete opposite of that.”
Under cross-examination for nearly seven hours over two days, Mr. Bankman-Fried was repeatedly asked about his many public statements about FTX and how they ran counter to what unfolded behind the scenes at the exchange. Bankman-Fried often hemmed and hawed in response to questions about his public claims that FTX was one of the most secure crypto exchanges in the business.
He also failed to explain how money from FTX customers could have been funneled to Alameda to pay for building his crypto empire without him knowing. At times, he actually said that his former employees who testified against him were not telling the truth.
On Wednesday, Roos reviewed highlights of prosecution witnesses’ testimony, including their statements that Alameda had special privileges with FTX, such as a $65 billion line of credit that allowed the trading company to borrow thousands of million to FTX clients. Bankman-Fried kept those special privileges secret, Roos said, “because he knew they were wrong.”
“The way you know he knew was because he set up a public system for everyone and a secret system for Alameda,” Roos said.
The prosecutor also reviewed inconsistencies in Mr. Bankman-Fried’s testimony with the testimony of his former employees. He showed charts with titles like “Defendant’s Lies to the Public” and “Defendant Knew About Secret Line of Credit.” And he pointed to instances where Bankman-Fried appeared to deliberately use FTX customer deposits, including to buy back FTX shares from Binance, a competing crypto exchange.
The jury of nine women and three men is expected to begin deliberating Thursday after U.S. District Court Judge Lewis A. Kaplan instructs them on the relevant law.
