Sam Bankman-Fried‘s blockbuster fraud trial starts in Manhattan on Tuesday, eleven months after the catastrophic failure of his crypto firm FTX.
From Bankman-Fried’s turbulent romance with his Harry Potter-loving right-hand woman to multimillion dollar promos with America’s biggest celebs, prosecutors are expected to leave no stone unturned as they seek to jail the 31-year-old for an alleged fraud worth billions of dollars.
FTX collapsed in November 2022, leaving one million customers out of pocket by up to $9 billion. The failure came amid a run on the bank that was said to be triggered by a rival crypto trading firm headed by another enigmatic billionaire.
Investigators discovered that Bankman-Fried had overseen a corporate failure of unprecedented proportions while living a life of luxury in a Bahamas penthouse worth $40 million.
Bankman-Fried and his acolytes allegedly engaged in ‘polyamorous’ relationships as he rubbed shoulders with celebs and leaders from Tom Brady to Bill Clinton, who were convinced they were dealing with a tech genius.
Sam Bankman-Fried will face a fraud trial after the catastrophic collapse of his crypto trading platform FTX, which was promoted by celebs including supermodel Gisel Bundchen. The pair are pictured together at the Crypto Bahamas conference organized by FTX in 2022
Bankman-Fried, pictured after a previous court appearance in August, is accused of a massive fraud that involved the misuse of FTX customer funds
A star witness for the prosecution is Bankman-Fried’s former girlfriend and right-hand woman Caroline Ellison. They are pictured together (center) at a 29th birthday party for the disgraced crypto tycoon
In reality, the business was allegedly a massive fraud which took client money and used it for risky investments which failed to pay off. Now, Bankman-Fried – who has fallen from a crypto ‘wunderkind’ to a penniless, friendless pariah – is finally set to face the music.
The courtroom drama will be raised by the fact that the prosecution’s star witness is his ex-lover, Caroline Ellison, a fellow tech nerd who was once his closest ally.
This is the story of the demise of Bankman-Fried and FTX.
Geeky son of Stanford law professors and self-proclaimed ‘effective altruist’
Bankman-Fried was born on the campus of Stanford University in California to two esteemed law professors.
His mother, Barbara Fried, is the William W. and Gertrude H. Saunders Professor of Law. His father, Joseph Bankman, is Ralph M. Parsons Professor of Law and Business at Stanford Law School.
Bankman-Fried’s parents have been two of his closest supporters since their son’s downfall – and have also been sued for allegedly enriching themselves from FTX.
Bankman-Fried’s parents have been two of his closest supporters since their son’s downfall – and have also been sued for allegedly enriching themselves from FTX
Bankman-Fried is the son of Stanford law professors and was born on the university campus. He studied math and physics at MIT before joining Jane Street Capital in 2013, a Wall Street behemoth that made $17 trillion in trades in 2020
Bankman-Fried was notoriously obsessed by his work, but still found time to play video games. His favorite was League of Legends, an online fantasy game which he would reportedly play while taking important business calls
He studied math and physics at MIT before joining Jane Street Capital in 2013, a Wall Street behemoth that made $17 trillion in trades in 2020.
He quit four years later, moved to the liberal enclave of Berkeley, California, and started Alameda Research.
FTX itself was founded in April 2019 and three years later was valued at an eye-watering $32 billion. The company’s valuation was drawn from its growing customer base and the huge amount of crypto which was traded on the platform each day.
The company was initially headquartered in Hong Kong but moved its headquarters to the Bahamas in September 2021, in part because of a crackdown on crypto by China.
Bankman-Fried was notoriously obsessed by his work, but still found time to play video games. His favorite was League of Legends, an online fantasy game which he would reportedly play while taking important business calls.
He also touted himself as an ‘effective altruist’ – a school of thought that involves using all of the resources at one’s disposal to bring out as much good as possible.
The irony is not lost on the victims of his alleged fraud. This altruism involved donating millions to causes including Joe Biden’s 2020 election campaign. He also gave hefty sums to Republicans.
Billion-dollar firm ‘run by a gang of kids in the Bahamas’
After FTX switched base from China to the Bahamas – a business haven with no corporate tax, income tax, or capital gains tax – Bankman-Fried and his acolytes moved into a penthouse on the Caribbean island’s exclusive Albany resort.
A hotel stay at the resort costs around $3,000-a-night, but FTX’s base of operations was a step-up from Albany’s typical accommodation. The $40 million penthouse boasted six bedrooms across a 12,000-square-foot property.
Bankman-Fried moved into a luxury $40M penthouse at the Albany resort with nine of his acolytes after FTX moved its headquarters to the Caribbean country in 2021
FTX co-founder and Chief Technology Officer Gary Wang (right) was a member of the Bahamas set, along with FTX Director of Engineering Nishad Singh
The penthouse residence was ‘meticulously designed with Venetian plaster walls matching Italian marble accents throughout,’ a realtor’s listing said. The 12,000-square-foot, six-bedroom penthouse was reportedly shared by Bankman-Fried and nine of his colleagues
Pictures from inside the bolthole show features included a private pool, balconies, sprawling living areas and even a grand piano.
The penthouse roommates included Bankman-Fried’s rumored off-and-on lover Caroline Ellison, who headed up his trading firm Alameda Research, which was at the center of FTX’s financial collapse. FTX allegedly gave client money to Alameda, which then blew the cash on failed investments.
In total, he reportedly shacked up with nine of his FTX and Alameda staff, including the company’s co-founder and Chief Technology Officer, Gary Wang, and Director of Engineering Nishad Singh. Wang and Singh are also expected to appear as witnesses for the prosecution.
The clique of ten are said to have been split into five couples that are either in relationships or were previously romantically linked.
Bankman-Fried’s ex-girlfriend, Ellison, is a Stanford math graduate and daughter of two economists. Ellison also worked at Jane Street. And like Bankman-Fried, she comes from a family steeped in academia. Her father is Glenn Ellison, the Gregory K. Palm Professor of Economics at MIT.
In a podcast posted to the FTX Official YouTube page in July 2020, Ellison described parts of her work at Alameda as ‘uncertain’ and ‘terrifying’.
Sources later said FTX was simply ‘run by a gang of kids in the Bahamas’.
Celebrity backers and parties with presidents
Bankman-Fried turned FTX into a billion dollar leader in the crypto industry through lucrative partnerships with celebrity royalty.
From Tom Brady and Gisele Bundchen to Larry David and Bill Clinton, the biggest names across sport, showbiz and politics were eager to appear alongside this so-called crypto wunderkind.
Many celebrity backers were lured by sponsorship deals worth upwards of $50 million. In exchange for becoming ‘ambassadors’ for FTX, they were handed crypto tokens or stakes in the company. Unfortunately for most, their remuneration is now worthless.
Tom Brady and now ex-wife Gisele Bundchen appeared in an FTX commercial in 2021
NBA star Steph Curry appeared in a commercial telling viewers: ‘I’m not an expert and I don’t need to be, with FTX I have everything I need to buy, sell, and trade crypto safely’
Brady, the megastar NFL quarterback, reportedly took home $55 million in a three-year deal that involved the equivalent of just a week’s work. David, the comedian who created Seinfeld, pocketed a reported $10 million to appear in a super bowl commercial for FTX.
While Bankman-Fried and FTX promoted themselves on TV with celebrity partnerships, they also aimed to show their serious side with a glitzy Bahamas conference attended by high-profile world leaders.
At the Crypto Bahamas conference organized by FTX, which was held in April 2022, Bankman-Fried was joined by Clinton, former UK Prime Minister Tony Blair and other celebs including Katy Perry and Orlando Bloom.
Pictures show Bankman-Fried in his typical dressed down attire – shorts, t-shirt and sneakers – as he shared a stage with suited-up world leaders and glamorous supermodels.
FTX’s backers are now ruing their decision to partner with a young tech entrepreneur who convinced them he was crypto’s golden boy. Several have been sued in class action lawsuits which have valued the losses to FTX’s customers at more than $10 billion.
At the Crypto Bahamas conference organized by FTX, which was held in April 2022, Bankman-Fried was joined by Clinton, former UK Prime Minister Tony Blair and other celebs including Katy Perry and Orlando Bloom
Bundchen (right) on stage with Bankman-Fried in her role as FTX’s environmental advisor
Orlando Bloom attended an FTX conference in the Bahamas with his popstar partner Katy Perry
Brady, Bundchen, Shaquille O’Neal, Steph Curry and David are among those named in one suit filed in Florida. It claims Bankman-Fried and the celebrities he recruited to endorse the firm are responsible for around $11 billion of losses to American consumers.
None of the celebrities have been accused of wrongdoing by prosecutors who are pursuing Bankman-Fried.
The collapse of the FTX empire
The rapid demise of FTX unfolded across a ten-day period in November 2022.
The catalyst was a report on the cryptocurrency news website Coindesk, which called into question the financial stability of both FTX and its sister trading firm, Alameda, which was run by Ellison.
Investors were spooked – but the real earthquake came four days later when the CEO of a rival crypto firm said his company would liquidate its holdings of FTT, a cryptocurrency created by FTX.
Changpeng Zhao, the head of Binance – which became the world’s largest crypto exchange after FTX’s collapse – cited the ‘revelations’ about Alameda and FTX’s finances.
That triggered a run on the bank from FTX’s own customers, who were desperate to withdraw their investments. Despite Bankman-Fried insisting ‘FTX is fine’, customers tried to withdraw $6 billion in just 72 hours – but the company couldn’t pay out.
Bankman-Fried resigned on November 11 and FTX filed for Chapter 11 bankruptcy, triggering a months-long process to try and claw back customers’ money.
FTX’s downfall came after Changpeng Zhao, head of rival exchange Binance, said it was selling its holdings of a cryptocurrency created by Bankman-Fried’s firm. The former friends are pictured together before FTX collapsed
‘Complete failure of corporate controls’
The bankruptcy triggered the series of legal investigations that have led to Bankman-Fried’s criminal trial on fraud charges. It also revealed the sheer chaos within FTX before it collapsed.
The bankruptcy has been overseen by John J. Ray III, a corporate veteran who oversaw the fallout from the Enron scandal, once the largest corporate bankruptcy in US history.
‘Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,’ wrote Ray in the initial bankruptcy filings.
His revelations included details of a $1 billion loan made to Bankman-Fried by Alameda Research. FTX co-founder Nishad Singh was also loaned $543 million.
Ray said the company was controlled by ‘a very small group of inexperienced, unsophisticated and potentially compromised individuals’.
He found that big-money transactions were signed by supervisors using ‘personalized emojis’ in an ‘online ‘chat’ platform’ and software was used to ‘conceal the misuse of customer funds’.
Bankman-Fried also ‘communicated by using applications that were set to auto-delete after a short period of time, and encouraged employees to do the same’.
John J. Ray III has been appointed to oversee the FTX bankruptcy. In testimony ahead of an appearance before Congress, he said the company spent billions on investments that may now be worth ‘a fraction’ of what was paid. He details a calamitous lack of corporate controls at FTX
Sam Bankman-Fried is seen exiting New York City Courthouse on December 22. Ellison’s testimony is a hammer blow to her ex-lover’s legal battle. He faces 115 years behind bars
How the trial will unfold
Bankman-Fried was extradited from The Bahamas to New York in December.
Before his bail was revoked, Bankman-Fried had been permitted to live with his parents in their Palo Alto, California, home with strict rules limiting his access to electronic devices.
Bankman-Fried was ordered to be jailed after Judge Lewis A. Kaplan said there was probable cause to believe he was trying to tamper with potential witnesses, including Ellison, in the case.
Prosecutors from the Southern District of New York are expected to lay out a case against Bankman-Fried that shows he stole billions of dollars in FTX customer deposits and used the money to fund his hedge fund, buy real estate, and make millions of dollars of illegal campaign donations to Democrats and Republicans in an attempt to buy influence over cryptocurrency regulation in Washington.
The trial of Bankman-Fried, the founder of the failed cryptocurrency brokerage FTX, will begin Tuesday with jury selection.
Bankman-Fried is expected to come face-to-face with his former lieutenants at FTX for the first time since its collapse. Several of them have agreed to plead guilty to lesser crimes in exchange for testifying against him. This includes Ellison and Wang.
Ryan Salame, another top executive at FTX, pleaded guilty on Sept. 7 to making illegal campaign contributions to Republicans on behalf of Bankman-Fried, who was publicly making contributions to Democrats. It is not known whether Salame will testify against Bankman-Fried.
Source: | This article originally belongs to Dailymail.co.uk
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