Jurors Hear Competing Explanations For FTX Collapse

During the opening statements on Wednesday, October 4, federal prosecutors and Sam Bankman-Fried’s attorneys sparred over whether the former billionaire’s cryptocurrency exchange, FTX, fell due to “massive” fraud committed by its creator or poor business decisions.

Bankman-Fried, 31, has entered a not-guilty plea to allegations that he supported his hedge fund, Alameda Research, purchased opulent real estate, and contributed to US political parties and candidates using funds from FTX customers from the exchange’s 2019 founding until its bankruptcy in November 2022.

Nearly a year after the collapse of FTX shook financial markets and damaged the aspiring entrepreneur and philanthropist’s reputation as an honest actor in a crypto sector prone to scams and alleged get-rich-quick schemes, the trial began on Tuesday with jury selection.

Defense attorney Mark Cohen painted the Massachusetts Institute of Technology physics graduate as a “math nerd” who disregarded risk management when constructing FTX but did not embezzle client funds during his opening remarks on Wednesday.

Although Cohen admitted that FTX had given Alameda a loan, he stated Bankman-Fried “reasonably believed” that the loans were authorized and supported by collateral. He claimed that while the startup expanded quickly, several important facets of FTX’s operations, such as risk management, were “overlooked.”

Cohen stated, “Sam and his coworkers were building the plane as they were flying it.” “No CEO, and not Sam, could always be everywhere and do everything.”

However, prosecutor Thane Rehn claimed that Bankman-Fried had stolen over $10 billion from unsuspecting FTX clients and that he had “doubled down” after Alameda’s high-risk cryptocurrency holdings started to lose money in May and June of last year.