Sam Bankman-Fried's case is a tale of high-level fraud

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Sam Bankman-Fried's case is a tale of high-level fraud

The course is completely free and we guarantee you'll learn something new every day.

That's the maximum amount of time Sam Bankman-Fried faces if he's found guilty on all seven criminal counts against him in what is shaping up to be one of the biggest show trials on Wall Street since the 150-year sentencing of Ponzi schemer extraordinaire Bernie Madoff more than a decade ago.

This week's trial is the first of two criminal actions set to weigh the fate of the 31-year-old former CEO of FTX.

Bankman-Fried, a $32 billion investment, led a $32 billion empire from his Princely Digs, a 40 million-square-foot penthouse in the Bahamas that doubled as his company's offshore headquarters. This week, he arrived in the federal courthouse in Manhattan to stand trial for allegedly conspiring to create one of the biggest financial frauds in the history of the United States.

Now, there's a lot to unpack here, so let's get started. The first trial of Bankman-Fried, also known by his initials, SBF, began Tuesday with prosecutors for the Southern District of New York pointing the finger at him for losing more than $8 billion of customer money while running FTX into the ground and allegedly spending massive sums on himself and members of his family. Federal prosecutors also accused the MIT math whiz of pilfering customer funds to bankroll more than $100 million of campaign donations in the U.S. midterm elections, which took place just days before FTX went under in November 2022. The second SBF trial in 2024, scheduled for March 2024, will focus on alleged campaign finance violations.

SBF haspleaded not guilty to all seven counts against him in this initial trial, expected to take several weeks. But given the amount of ink spilled over the FTX controversy, including a Michael Lewis book that dropped Tuesday - and the legal actions to come next spring - its ripple effects will no doubt be felt for much longer.

The charges against SBF include: wire fraud on FTX customers; wire fraud on Alameda Research; wire fraud on Alameda Research, conspiracy to commit securities fraud on investors of FTX; conspiracy to commit fraud on customers of FTX in connection with the purchase and sale of derivatives, and conspiracy to commit money laundering.

The money laundering bit, perhaps, is not überraschend, since FTX was based on the Bahamas' offshore tax shelter, and had tentacles in several other secrecy jurisdictions - not unlike many crypto companies that have foundered over the past year.

What has been surprising, however, is the extent to which SBF's parents appear to have been involved in the alleged skullduggery that resulted in billions of dollars vanishing from FTX and its subsidiaries. A civil lawsuit filed against both of them has been filed against them, and SBF's professors, highly respected Stanford Law School professors, until recently, helped or otherwise influenced SBF's running of FTX, paying themselves generously.

It remains to be seen how SBF will navigate his trial, but if the Bernie Madoff case is any measure, the family enriched by fraud does not usually hold together well. SBF's parents have now retained separate lawyers, in addition to his former colleagues and friends testifying against him.

The parents denied the claims made against them by FTX lawyers, calling them 'completely false', but the fact that Bankman, the father, Fried, the mother-and Bankman-Fried, the son, have all lawyered up for survival does not bode well for their continued solidarity.