Parents of crypto founder Sam Bankman-Fried to appear in court

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Parents of crypto founder Sam Bankman-Fried to appear in court

Barbara Fried and Joseph Bankman, the parents of Sam Bankman-Fried, are preparing to appear in federal court in Manhattan on Wednesday for their son's criminal fraud trial.

Prosecutors said the former FTX founder had lied to customers. Defense lawyers said he had just been trying to prevent his cryptocurrency exchange from melting down.

Federal prosecutors opened the criminal trial on Tuesday of Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, with a simple message: He deliberately lied to the world, leading to one of the biggest financial frauds of a generation. Bankman-Fried's lawyer advanced a far different narrative. The lawyer, Robert Ewing, said that the former crypto mogul was just a well-intentioned entrepreneur who acted in good faith to make his firm successful, without intent to defraud anyone. The dueling arguments are at the crux of Bankman-Fried's trial, which has become the most prominent reckoning for a business executive since Theranos founder Elizabeth Holmes, who was convicted last year of fraud. Bankman-Fried, 31, was a onetime cryptocurrency wunderkind who became a multi-colored billionaire virtually overnight, only to see his company collapse last year and his fortune disappear. He has been charged with orchestrating a conspiracy to use $10 billion that FTX's clients had entrusted to him for all manner of personal projects, including venture capital investments, political donations and luxury real estate purchases.

The head prosecutor, Thane Rehn, told a packed room at the federal courthouse in Manhattan on Wednesday. Bankman-Fried's lawyer, Mark Cohen, quickly came out, and they soon met back. It's not a crime to run a business in good faith that ends up going through a storm, he said. He said the prosecutor's depiction of his client was a 'cartoon of a villain' that distorted the facts.

Bankman-Fried appeared in court with close-cropped hair that had been cut recently by a fellow detainee. He wore a suit and tie and watched the proceedings flanked by his other lawyers, while his parents, Stanford law professors Joseph Bankman and Barbara Fried, sat a few rows behind him. His case has become a closely watched referendum not only on FTX's collapse but also on the depreciating behavior of the cryptocurrency industry. A frenzy over digital currencies such as Bitcoin and Ether swept up millions of daily investors before the market collapsed in late 2016, causing a procession of start-ups to collapse.

When FTX collapsed in November, Mr. Bankman-Fried became a symbol of the industry's excesses. His company was valued at $32 billion and Bankman-Fried was widely hailed as a leader able to bring obscure crypto technology into the mainstream of global finance. He travelled back and forth from FTX's base in the Bahamas to meetings in Los Angeles and Washington, where he rubbed shoulders with celebrities and politicians and had his photo plastered on billboards and magazine covers. Now FTX is bankrupt and the crypto markets have cratered, causing several lawsuits and tens of billions of dollars in losses that have damaged the finances of individual investors worldwide. Bankman-Fried, who has accused himself of being one of the most hated people in the world, has pleaded not guilty to seven counts of fraud and money laundering. He faces up to a life sentence in prison if convicted. FTX founder faces uphill battle in the trial. Three of Bankman-Fried's top executives have pleaded guilty to fraud and agreed to cooperate with him - including his on-and-off girlfriend, Caroline Ellison, who ran Alameda Research, a hedge fund that Mr. Bankman-Fried started. Prosecutors and defense lawyers said they had never held any negotiations over a plea agreement and that no deal had ever been offered to Bankman-Fried.

Prosecutors have uncovered millions of pages of digital evidence, including text and email logs, as well as snippets of computer code that showed how FTX moved customer money to Alameda. They have a audio recording from the week of FTX's collapse, in which Ms. Ellison appears to admit that she and Mr. Bankman-Fried worked together to steal customer deposits. And they've won a series of pretrial disputes, allowing them to present evidence that Mr. Bankman-Fried has contested and prevent his legal team from making certain defenses.

Cohen, the defense lawyer, pushed back against the public narrative that Bankman-Fried was a fraud intent on stealing customer money. '' To defraud anybody,'' he said. By castring his client as a math nerd who didn't drink or party, Mr. Cohen walked the jurors through FTX's history, claiming that Mr. Bankman-Fried had acted in his customers' interests, even if he didn't always make the right decisions. Ellison put hedges on Alameda's trading activities, but she had ignored him, which led to some of the problems that caused the business empire to collapse. In the opening statements, the first witness was Marc-Antoine Julliard, an investor in London who lost more than $100,000 in cash and Bitcoin in FTX's collapse. Mr. Julliard said FTX would keep his money safe.