FTX Founder Sam Bankman-Fried’s Trial: How Did We Get Here?

The trial of Sam Bankman-Fried, the founder of collapsed crypto exchange FTX, starts on Oct. 3.

Bankman-Fried faces more than half a dozen criminal charges related to his company’s swift demise last year. Prosecutors are calling it one of the biggest financial-fraud cases in U.S. history.

Here is what you need to know as the trial gets under way.

What do prosecutors allege?

Prosecutors allege that Bankman-Fried stole billions of dollars from FTX customers, using the funds to enrich himself, fund venture investments and make campaign contributions to Republicans and Democrats.

Prosecutors say that FTX customer money moved to a crypto-trading firm called Alameda Research, which Bankman-Fried founded. They say he did this in two ways: by having users deposit funds in bank accounts controlled by Alameda and through code written on FTX that allowed Alameda to borrow tens of billions of dollars.

Bankman-Fried has pleaded not guilty to all charges.

How did we get here?

The first cracks appeared in Bankman-Fried’s empire last November, when crypto-news website CoinDesk published an article with leaked financials from Alameda.

The article ignited concerns about the close financial ties between Alameda and FTX, eventually prompting a rush of withdrawals from FTX. These withdrawals revealed that FTX was missing billions of dollars and had given customer funds to Alameda.

On Nov. 11, without sufficient emergency financing, Bankman-Fried resigned as chief executive and FTX filed for bankruptcy protection. In mid-December, Bankman-Fried was arrested in the Bahamas and extradited to the U.S. after the Justice Department charged him with fraud.

Here is a timeline of the crypto crisis.

Who are the major players?

Sam Bankman-Fried: The 31-year-old founder of FTX and related companies. With a mop top of unruly curls and a penchant for shorts and T-shirts, Bankman-Fried turned FTX into one of the biggest cryptocurrency exchanges in the world, and before the collapse he was reportedly worth about $16 billion. He was also a regular fixture in Washington, talking to lawmakers about regulation for the crypto industry. On Nov. 11, he resigned from FTX and the company filed for bankruptcy. He was arrested in the Bahamas in December and extradited to the U.S. to face fraud charges.

Caroline Ellison: The CEO of Alameda Research, a crypto-trading firm founded by Bankman-Fried. Former colleagues describe her as smart and a good boss while noting that she wasn’t one to push back on others’ strong opinions. She has pleaded guilty to fraud charges and is cooperating with the government. Ellison is expected to be a crucial witness for the prosecution. She was in a romantic relationship with Bankman-Fried and was a member of his inner circle.

Nishad Singh: The former director of engineering at FTX who helped write much of the code underpinning the crypto exchange. Former colleagues said Singh was a well-liked figure at FTX, seen as kind and thoughtful and the most approachable member of Bankman-Fried’s inner circle. Singh has pleaded guilty to six criminal counts, including wire fraud. He agreed to cooperate with the government’s investigation of FTX’s collapse and is expected to testify.

Gary Wang: FTX’s former chief technology officer who also helped write much of FTX’s code. Prosecutors allege that Bankman-Fried instructed Wang to write code that gave Alameda the ability to borrow billions of dollars from FTX customers. Former FTX employees describe Wang as quiet. Wang has pleaded guilty to four counts, including wire fraud. He is expected to testify against Bankman-Fried at trial.

What does the government have to prove to the jury?

The government has to prove that Bankman-Fried is guilty “beyond a reasonable doubt” on each charge. This means that the jurors must find that—based on the evidence at trial—there is no other reasonable conclusion than that Bankman-Fried is guilty. Otherwise, he must be found not guilty.

Toward the end of the trial, the judge will provide legal instructions to the jury that detail how to consider each count. Jurors will likely have to consider Bankman-Fried’s state of mind, and whether he intended to commit a crime linked to certain conduct.

Who is the judge?

U.S. District Judge Lewis A. Kaplan is an experienced jurist who has presided over prominent cases. Judge Kaplan was born in the Staten Island borough of New York City. He graduated from the University of Rochester and Harvard Law School and clerked for the late First Circuit Court of Appeals Judge Edward McEntee.

In one hearing before the trial concerning Bankman-Fried’s revocation of bail, Kaplan addressed Bankman-Fried directly, telling him to take the proceedings seriously. In ordering his bail revoked and sending Bankman-Fried to jail ahead of his trial, Kaplan said the jail was “not on anybody’s list of five-star facilities.”

What are the possible sentences?

Bankman-Fried could face decades in prison if found guilty on all seven charges. Ellison, Singh and Wang also face decades in prison, but are likely to get a reduced sentence, which might or might not include jail time, for their cooperation. Kaplan will sentence the cooperators and Bankman-Fried—if found guilty—after the trial.

How long is the trial expected to take and what is likely to happen?

The government has said that the trial is expected to take six weeks, though it could be shorter depending on the number of witnesses who testify for the defense and the government and how long cross-examination of them takes. The trial is expected to start with jury selection on Oct. 3 before opening statements are given by both sides.

A second trial for Bankman-Fried is tentatively scheduled for March 2024. The Bahamas, from which Bankman-Fried was extradited, contests some of the charges against the FTX founder as they were added after the extradition agreement. The most recent charges can’t be tried until an agreement is reached.

Write to Caitlin Ostroff at [email protected] and Corinne Ramey at [email protected]