Sam Bankman-Fried goes on trial for allegedly stealing billions from FTX users

Accused FTX founder Sam Bankman-Fried leaves the United States Courthouse in New York City on July 26, 2023. REUTERS/Amr Alfiky/File Photo Get license rights

NEW YORK, Oct 3 (Reuters) – Sam Bankman-Fried is set to go on trial on charges of stealing billions of dollars from customers of his FTX cryptocurrency exchange starting on Tuesday, nearly a year after the company’s collapse shocked markets and tarnished his reputation. .

Dozens of New York residents, many with jury summons in hand, began streaming into the federal courthouse in lower Manhattan ahead of jury selection, which is scheduled to begin at 9:30 a.m. EDT (1330 GMT).

Federal prosecutors say the 31-year-old former billionaire bilked FTX clients from its founding in 2019 through its November 2022 bankruptcy to shore up his hedge fund Alameda Research, buy luxury properties and donate more than $100 million to U.S. political candidates.

Bankman-Fried pleaded not guilty to seven counts of fraud and conspiracy. He admitted to adequate risk management but denied stealing funds. His attorneys have signaled in court documents that they plan to argue that FTX’s handling of customer funds was correct and that FTX and others in Alameda bore much of the blame for their failure.

The first step in the trial is the selection of a 12-member jury, which will ultimately weigh the competing stories in deciding whether Bankman-Fried is guilty.

U.S. District Judge Louis Kaplan will ask New York residents questions about their backgrounds and experiences in an effort to weed out biased prospective jurors.

The trial is expected to last up to six weeks. Testimony will feature from three former members of Bankman-Fried’s inner circle who have pleaded guilty to fraud charges and agreed to cooperate with the Manhattan US Attorney’s Office.

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Bankman-Fried’s attorneys plan to challenge the credibility of those witnesses — who include former Alameda president Carolyn Ellison and former FTX executives Gary Wang and Nishad Singh — by arguing they were motivated to frame their client in order to receive a lesser sentence. Strategy in White Collar Fraud Cases.

They laid the groundwork for Banker-Fried to argue that his exchange was allowed to invest customers’ deposits, and that business failures — not intentional fraud — left the exchange. Without sufficient funds to fulfill withdrawal requests.

Bankman-Fried is the most high-profile case U.S. attorneys have ever brought against a former cryptocurrency executive.

The indictment he filed last December marked a dramatic fall for Banker-Fried, who had built a reputation as a methodical operator in an industry.

Prosecutors say Bankman-Fried built that reputation with lies and enhanced it with endorsements from celebrities and star athletes.

Bankman-Fried has been held at the Metropolitan Detention Center in Brooklyn since Aug. 11 after a judge found she may have engaged in witness tampering — including sharing Ellison’s personal writings with a reporter. Ellison and Bankman-Fried were former romantic partners.

He is brought to court early on most days to allow him to prepare with his lawyers.

Reporting by Jodi Godoi and Luke Cohen in New York; Editing by Amy Stevens, Lincoln Feist and Nick Zieminski

Our Standards: Thomson Reuters Trust Principles.

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Jody Godoy reports on banking and securities law. Reach her at [email protected]

Reports on New York Federal Courts. Previously worked as a correspondent in Venezuela and Argentina.

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