Former crypto tycoon Bankman-Fried's defence case unveiled

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Former crypto tycoon Bankman-Fried's defence case unveiled

Sam Bankman-Fried's lawyer laid out his defence case at his fraud trial on Wednesday, portraying the 31-former billionaire as a'math nerd' who missed risk management in building his FTX exchange but did not steal customer money.

Bankman-Fried has pleaded not guilty to charges he used FTX customer money from the company's 2019 launch until its bankruptcy in November 2022 to prop up his hedge fund, Alameda Research, buy luxury real estate, and donate to U.S. political campaigns and candidates.

Defence lawyer Mark Cohen acknowledged FTX lent money to Alameda, but said Bankman-Fried, who graduated from the Massachusetts Institute of Technology in 2014,'reasonably believed' that those loans were permitted and backed up by collateral.

In addition, Cohen said that some key aspects of FTX's business, such as risk management, were overlooked as the startup grew rapidly.

Bankman-Fried's trial began on Tuesday, nearly a year after the collapse of FTX. FTX has caused financial markets to tarnish the budding entrepreneur and philanthropist's reputation as a honest actor in a crypto industry prone to scams and purported get-rich-quick schemes.

Earlier on Wednesday, Prosecutors said Bankman-Fried took more than $10 billion from unsuspecting FTX customers. The former crypto tycoon said in television ads and in FTX's terms of service that customers' cryptocurrency would always belong to them, not the exchange.

Bankman-Fried did not take any of the money at once, and a growing customer base helped him paper over the theft, Rehn said. Rehn said he had been directing customers to deposit their money into accounts controlled by Alameda and using FTX's algorithm to let Alameda withdraw deposits.

When Alameda's risky investments in cryptocurrency began to lose money in May and June last year, Bankman-Fried 'doubled down' and taken more money from FTX than ever before, Rehn said. He said the scheme fell apart in November 2022, when a leaked Alameda financial statement set off panic by FTX customers.

The Prosecutors are expected to call three former members of Bankman-Fried's inner circle - former Alameda chief executive Caroline Ellison and former FTX employees Nishad Singh and Gary Wang - to testify against him. The four men have pleaded guilty and signed an agreement to co-operate with prosecutors.

Rehn said in his opening statement that ''s view of how the crimes occurred'' without naming the witnesses.

Earlier on Tuesday, a jury selected 12 primary members and six alternates.

Bankman-Fried's parents, Stanford Law School professors Joseph Bankman and Barbara Fried, were seen arriving at the federal courthouse in lower Manhattan on Wednesday. They didn't attend the trial's first day.

Their names were read on a list of potential witnesses or individuals who may be otherwise mentioned in testimony, along with Bankman-Fried's brother Gabriel Bankman-Fried and former Trump staffer Anthony Scaramucci. It doesn't always mean that they will be called to testify.

Bankman-Fried, who was known for his casual attire and mop of unkempt curls, wore a trim haircut and wore a suit and tie in court on both Tuesday and Wednesday.

He has been in the Metropolitan Detention Center in Brooklyn since Aug. 11, when Kaplan jailed him for likely tampering with witnesses, including by sharing Ellison's private writings with a reporter. At times, Bankman-Fried and Ellison were romantic partners.