Original author: Daniel Kuhn,CoinDesk
Original compilation: Felix, PANews
The general consensus seems to suggest that the first few days of SBFs (Sam Bankman-Fried) trial are not going in his favor.
U.S. Department of Justice (DOJ) prosecutors are establishing that SBF was deeply involved in a long-term scheme to defraud customers and investors, complicating SBF’s legal defense. Although SBF was nominally the head of the company, he was unaware of the ongoing corruption at his exchange FTX and hedge fund Alameda Research.
The SBF always faced an uphill battle in the high-profile trial. The current CEO of FTX is John Jay Ray III, the head of Enrons bankruptcy. Under Rays guidance, FTX released documents and made accusations against SBF. SBF, which was once loved by crypto people, started an apology tour and completely changed the publics perception of SBF. its view.
The defense of SBF in court by lawyers from the law firm Cohen Gresser appears to have had little effect. District Judge Lewis Kaplan was visibly annoyed with SBFs defense attorneys. Some onlookers said 80 per cent of questions asked by defense attorney Chris Everdell during some questioning were dismissed. In fact, it has become commonplace for prosecutors to dismiss misleading questions.
But it is still early days for the trial, which could last six weeks. It is unclear whether SBF, who has a new hairstyle, will testify. Renato Mariotti, a partner at Bryan Cave Leighton Paisner LLP who is following the case, and seemingly most of the lawyers, say its a gamble at best and could be disastrous. Gary Wang, co-founder of FTX and a long-time friend of SBF, has pleaded guilty to fraud and cited the privilege FTX provided Alameda, which allowed Alameda to withdraw funds unlimitedly. While former FTX developer Adam Yedidia said he resigned in November 2022 after learning of FTX’s plans to “defraud” customers, this point was previously redacted from the record.
Here are the key highlights and details from the trial so far, as well as what happened outside the courtroom, such as The Big Short author Michael Lewis revelations about SBF in his new book Going Infinite.
FTX co-founder Gary Wang testified in court on October 6 (Beijing time) that he was the fourth witness of the US Department of Justice. He acknowledged that FTX gave SBF’s hedge fund Alameda Research “privileges.” Alameda has a large credit limit, allows for faster execution of orders on the FTX platform, and unlimited withdrawals of funds. Gary Wang said Alameda Research was allowed to maintain a negative balance. When FTX collapsed, Alameda had withdrawn $8 billion from the platform and $65 billion from its credit line. Gary Wang also testified that FTX and Alameda executives, including Caroline Ellison and Nishad Singh, knowingly committed wire fraud, securities fraud and commodities fraud.
Venture capital firm Paradigm co-founder Matt Huang said during the SBF trial that his $278 million investment in FTX has been marked to zero. Matt Huang described how Paradigm invested a total of about $278 million in FTX twice. Matt Huang said he was excited by FTX’s rapid early market share growth, but he was concerned about FTX’s lack of a formal governance structure or even a board of directors. SBF has informed it that Alameda Research does not have preferential treatment at FTX.
According to the testimony of Adam Yedidia, a former senior engineer at FTX, Adam Yedidia met with SBF in June 2022 and asked SBF about the status of FTX. SBF stated that “last year we were invulnerable, but this year we are not. It may take six months to three years.” It will take time to correct this problem.” Later, SBF also told Adam Yedidia that SBF had attempted to raise funds from the UAE to bolster the trading platform’s cash reserves, but was unsuccessful.
Two multi-million dollar luxury aircraft owned by SBF but reportedly never used by him may be subject to confiscation as U.S. prosecutors continue to pursue asset recoveries. In documents filed late on Oct. 4, a forfeiture bill issued by the U.S. Department of Justice lists two aircraft—Bombardier Global and Embraer Legacy—as SBF assets it proposes to forfeit.
According to Michael Lewiss new book Going Infinite, after the SRM token surged in 2021, hitting an all-time high of $13.72, SBF changed the lock-up period of the SRM token because SBF was worried that employees would become too rich and unable to concentrate Work. In the fine print of the Serum contract, SBF reserves itself the right to extend the Serum lockup period, locking all employees’ Serum tokens for seven years.
Twelve jurors have been confirmed for the SBF trial, with an additional six alternates. They ultimately decide whether SBF is guilty of fraud. Observing throughout the week, reporters and onlookers said the jury seemed bored at times with the trial, with at least one juror reportedly dozing off. (The list of 12 jurors is as follows: ① 39-year-old female physician assistant, 10 weeks pregnant, medical background, husband does web development; ② 33-year-old female nurse, living alone in Westchester, New York; ③ 40-year-old female Social worker, currently unemployed; ④ 53-year-old female, Duke University graduate, divorced, stay-at-home mother of two, previously managed fundraising events at a nonprofit; ⑤ 59-year-old male, married, with 3 children, one of whom works in a bank; ⑥ 50-year-old female Metro North conductor, mother of five children, three of whom live at home and two are in college; ⑦ 47-year-old female high school librarian, Single, living with her cat, sister and ailing mother; ⑧ 65-year-old female retired prison guard, mother of three; ⑨ 61-year-old male US Postal Service employee, no wife and children; ⑩ 43-year-old Ukrainian woman, at Bloomberg Works in IT, has been in the United States for 15 years, is divorced, and has two children; ⑪ 55-year-old female special education teacher, originally from Bank of Bermuda, studied at the University of Waterloo as an undergraduate, and received masters degrees from New York University and Seton Hall University degree; ⑫ 69-year-old male, retired investment banker in Hong Kong, studied at Rice University and Stanford University, has a wife and no children, diagnosed with non-Hodgkin lymphoma)
In opening statements, U.S. prosecutors called SBF’s crypto empire a “house of cards” “built on lies.” Lying has become a common occurrence during the trial, with FTX co-founder Gary Wang also saying that SBF lied about Alamedas ability to increase debt and leverage, putting FTX client funds at risk.
SBFs defense attorneys argued during the trial that SBF acted in good faith, and attorneys worked to prove that business mistakes --- even ones as huge as the misappropriation of $8 billion --- were not necessarily criminal. It was not SBFs fault that the business grew too fast and collapsed dramatically. Lawyers placed some of the blame on Caroline Ellison and said she failed to put safeguards in place. Ellison has pleaded guilty and may testify at the SBF trial next Tuesday
U.S. prosecutors reiterated on October 4 that the existing legal framework is sufficient to charge SBF with fraud-related violations and rejected SBF’s previous argument that “there is a clear lack of relevant laws or guidance directly related to the alleged use of customer deposits.” Does it constitute misappropriation, rather than permitted commercial behavior?
Alameda Research lost almost all of the $170 million it raised in its first round of funding, which was largely backed by the effective altruism community, according to Michael Lewis new book Going Infinite. In addition to the arbitrage strategy of buying cheap Bitcoin in the United States and selling it in Japan for a profit, its high-frequency trading strategy also had problems, but it lost millions of dollars in the first few months, with more than 500,000 lost per day in one month dollars, while some exchange-traded funds “simply disappeared” due to poor money management.
SBF sued his insurance company, CNA, saying it failed to pay legal fees related to defending against fraud charges. SBF’s legal complaint cites more than a dozen civil and regulatory lawsuits related to FTX, a sign that legal costs are mounting.
Former FTX spokesperson Kevin OLeary, a well-known Canadian businessman, said that the era of crypto cowboys is over as the crypto industry moves toward regulation. According to the book Going Infinite, FTX paid the prominent Canadian businessman $15.7 million for “20 hours of service, 20 social posts, a virtual lunch and 50 signatures.” But not all FTX executives agree with the value of the deal. SBF however said fans would take financial advice. Because investing is a kind of social interaction, it is meaningless, but that is the fact. SBF also tried to hire CNBC host Jim Cramer, according to the book.
