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Latest update — Former FTX CEO Sam Bankman-Fried trial [Day 2]

Cointelegraph reporters are on the bottom in New York for the trial of former FTX CEO Sam “SBF” Bankman-Fried. As the saga unfolds, check below for the most recent updates.

Oct. 4: DOJ and Bankman-Fried’s defense state their arguments

The first hours of Sam Bankman-Fried trial have offered a glimpse of the arguments the Department of Justice (DOJ) and his defense will bring to court in the approaching weeks.

After a jury selection within the morning, each parties gave opening statements to the 12-person jury present within the court.

The DOJ took a troublesome stance against Bankman-Fried in its first statement, portraying the FTX founder as someone who deliberately lied to investors to complement himself and expand his crypto empire.

According to the DOJ, Bankman-Fried lied to FTX customers and investors, using Alameda as a key partner to “steal customers’ funds,” a phrase that was incessantly used throughout the opening statements.

An indication outside Sam Bankman-Fried’s trial location in New York. Source: Ana Paula Pereira/Cointelegraph

As per the trial preview, the DOJ will focus its arguments on allegations that Bankman-Fried misled customers, investors, and lenders regarding the protection of their funds while using Alameda to steal their money and influence politicians in Washington.

The defense, meanwhile, brought arguments about Bankman-Fried being a young entrepreneur who made business decisions that “didn’t work out.” The defense denied the existence of secret transactions between Alameda and FTX, or a backdoor used to steal customer funds. According to the previous arguments presented, all transactions were legitimate or made in good faith by Bankman-Fried throughout the crypto market downturn and the following collapse of FTX in November 2022.

The defense also highlighted the role of Binance within the bank run that led to FTX’s collapse. Testimonies will proceed throughout the day.

According to the defense, Bankman-Fried assumed FTX was allowed to loan funds to Alameda as a part of a business relationship with the market maker, and there was no secret door for transactions between the businesses.

Prosecutors also noted that Caroline Ellison, Gary Wang, and Nishad Singh will offer the jury insider details about Bankman-Fried’s role in FTX’s operations and alleged crimes. However, the defense identified that as a part of the cooperation agreement with the federal government, they were alleged to give testimony against Bankman-Fried, raising doubts about their credibility.

The defense also downplayed the accusations against the character of the connection between FTX and Alameda, arguing that FTX margin traders were aware of the risks related to transactions.

“There was no theft,” the defense claimed. “It’s not a criminal offense to be the CEO of an organization that files for bankruptcy.”

In the second half of the primary day of the trial, the jury heard from two witnesses: Mark Julliard, a French trader and former client of FTX, and Adam Yedidia, a friend of Sam Bankman-Fried and former worker at Alameda Research and FTX.

In his testimony, Julliard said he had 4 Bitcoin held at FTX on the time of the exchange’s collapse, value nearly $100,000. He admitted that FTX and Bankman-Fried’s marketing efforts, together with notable enterprise capital corporations backing FTX, gave him the boldness to make use of the exchange for crypto trading. He assumed that VC firms had run due diligence on FTX and its leadership.

During the questioning, prosecutors emphasized that the trader used FTX exclusively for spot trading and that he was not aware that the exchange was using client funds for crypto trading with Alameda Research.

Questions for Yedidia were focused on his educational background at MIT, where he first met Bankman-Fried, and his two skilled experiences with the FTX founder. Yedidia worked at Alameda for a transient period in 2017 as a trader after which got here back to work for FTX in 2021 as a developer. He was one among ten people living within the Bahamas on FTX’s $30 million real estate.

In Yedidia’s testimony, prosecutors used former FTX ads as evidence that the corporate was at all times positioning itself as a protected, trusted, and straightforward strategy to put money into cryptocurrency, including marketing campaigns with NFL player Tom Brady and comedian Larry David. The trial will resume Oct. 5.

Oct. 3: SBF trial begins

Bankman-Fried’s trial will happen in a Manhattan federal court. Source: Ana Paula Pereira/Cointelegraph

The trial of Sam Bankman-Fried began on Oct. 3 with jury selection. Bankman-Fried is charged with seven counts of conspiracy and fraud in reference to the collapse of FTX, the cryptocurrency exchange he co-founded. He has pleaded not guilty to all charges. The case is being heard by Judge Lewis Kaplan, who has presided over a protracted list of other high-profile cases, including ones involving detainees at Guantanamo Bay, the Gambino crime family, Prince Andrew and Donald Trump.

Bankman-Fried was ordered to be jailed on Aug. 11 after Kaplan found that his sharing of former Alameda Research CEO Caroline Ellison’s personal papers amounted to witness intimidation. Alameda Research was a trading house also founded by Bankman-Fried. Previously, he had been under house arrest in his parents’ home in Stanford, California on a $250-million bond.

December: SBF arrested

Bankman-Fried was arrested within the United States on his arrival from the Bahamas on Dec. 21, 2022. He had been arrested within the Bahamas on Dec. 12 after the U.S. government formally notified the country of charges the U.S. was filing against him. He declared his intention to fight extradition from the Caribbean nation but modified his mind after every week in Bahaman jail and consented to extradition.

Meanwhile, FTX co-founder Gary Wang and Alameda Research CEO (and reportedly sometime SBF girlfriend) Ellison agreed to plead guilty within the burgeoning case.

November: FTX collapses

Bankman-Fried’s troubles began when reports emerged on Nov. 2 that Alameda Research had a big holding of FTX Token (FTT), FTX’s utility token. That revelation led to questions on the connection between the 2 entities. On Nov. 6, Changpeng Zhao, CEO of rival exchange Binance, announced that his exchange would liquidate its FTT holdings, which were estimated to be value $2.1 billion. Zhao turned down a proposal tweeted by Ellison to purchase Binance’s FTT.

A run began on FTX. Bankman-Fried gave reassurances on Twitter (now X) that the exchange’s “assets are high-quality” and accused “a competitor” of spreading rumors. By Nov. 8, the value of FTT had fallen from $22 to $15.40.

Also on Nov. 8, Bankman-Fried announced on Twitter that he had come to an agreement with Zhao “on a strategic transaction.” He wrote, “Our teams are working on clearing out the withdrawal backlog as is. This will filter out liquidity crunches; all assets will probably be covered 1:1.”

On Nov. 9, Zhao announced that Binance wouldn’t pursue the acquisition of FTX after due diligence and more reports of mishandled funds. The price of Bitcoin (BTC) plummeted to $15,600. The FTX and Alameda Research web sites went dark for a number of hours. When the FTX website got here back, it bore a warning against making deposits and was unable to process withdrawals.

On Nov. 10, Bankman-Fried posted a 22-part Twitter thread that began with “I’m sorry.” It was the primary of a protracted string of public statements he made concerning the exchange’s fall. The following day, the whole staff of Alameda Research quit, and FTX, FTX US and Alameda Research filed for bankruptcy within the United States. Bankman-Fried resigned as FTX CEO and was replaced by John J. Ray III, who was best known for his role within the Enron bankruptcy.

SBF and FTX before the autumn

At the start of 2022, FTX had a $32-billion valuation and was considered in enviable financial condition. Bankman-Fried was seen as a respected business leader by much of the crypto community and the world at large. He was photographed with political leaders and spoke at congressional hearings

He had gained a fame as a philanthropist, pursuing a philosophy popular amongst academics referred to as “effective altruism.” Part of his implementation of that philosophy was political activism in the shape of monetary support for candidates.

As the crypto winter set in, Bankman-Fried spoke of FTX and Alameda Research’s “responsibility to significantly consider stepping in, even whether it is at a loss to ourselves, to stem contagion.” The corporations made a bid for Voyager Digital that was rebuffed.

FTX made a take care of Visa to introduce its own debit card in 40 countries.

Bankman-Fried, Ellison and other alumni of Jane Street Capital founded Alameda Research in 2017. Bankman-Fried went on to found FTX with Wang in 2019. Zhao was an early investor within the exchange.

This is a developing story, and further information will probably be added because it becomes available.

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