US trial of ex-billionaire Bankman-Fried begins

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US trial of ex-billionaire Bankman-Fried begins

Sam Bankman-Fried's lawyers and federal prosecutors clashed on Wednesday in opening statements discussing whether the former billionaire's cryptocurrency exchange collapsed due to'massive' fraud by its founder or mistakes in business judgment.

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

The trial began with jury selection on Tuesday, just a year after the collapse of FTX impacted financial markets andtarnished the budding entrepreneur and philanthropist's reputation as a honest actor in a crypto sector prone to scams and purported get-rich-quick schemes.

In his opening statement, defense lawyer Mark Cohen portrayed the graduate as a'math nerd' who overlooked risk management in building FTX, but did not steal customer money.

Cohen acknowledges that FTX lent money to Alameda, but said Bankman-Fried'reasonably believed' that those loans were allowed and backed up by collateral. He said some important aspects of FTX's business, such as risk management, were 'overlooked' as the startup grew rapidly.

Bankman-Fried took more than $10 billion from unsuspecting FTX customers, and that he 'doubled down' when Alameda's risky investments in cryptocurrency began to lose money in May and June last year.

Prosecutors say they plan to hire three former employees of Bankman-Fried's inner circle - former Alameda chief executive Caroline Ellison and former FTX executive Nishad Singh and Gary Wang - to testify against him. The three men have pleaded guilty and agreed to cooperate with prosecutors.

In an opening statement, Rehn said he was laying out his view of how the crimes happened, without naming the witnesses.

Cohen suggested that they may'spin' Bankman-Fried's good-faith decisions that they agreed on at the time as deceitful in hindsight. Bankman-Fried urged Ellison to hedge Alameda's crypto bets, but she did not.

Cohen said the case was a cross-examination of a man convicted of wrongdoing.

Jurors are expected to hear Wang by the end of the week, another prosecutor, Danielle Sassoon, said in court.

Earlier this year, a jury of 12 primary members and six alternates were selected from a pool of residents of Manhattan, the Bronx, and New York City's northern suburbs. The group includes a former investment banker, a school librarian, and a train conductor.

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. The trial's first day was disrupted by a crowd of people who had not been allowed to attend.

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

He has been held in the Metropolitan Detention Center in Brooklyn since August 11, when US District Judge Lewis Kaplan jailed him for likely tampering with witnesses, including by sharing Ellison's private writings with a reporter. Bankman-Fried and Ellison have been romantic partners for a number of years.