With jury selection finished, FTX co-founder Sam Bankman-Fried’s (SBF)’s trial is officially underway, with prosecutors and defense lawyers delivering their opening statements on Wednesday.
During his remarks, SBF’s lawyer Mark Cohen asserted that the former exchange tycoon “didn’t defraud anyone,” instead pointing the finger at Binance CEO Changpeng Zhao (CZ) for causing a “run on the bank at FTX.”
SBF Was “Just A Math Nerd”
As summarized by Inner City Press on Wednesday, Cohen maintained that SBF acted in “good faith” and “did not steal from anyone,” believing any loans made from FTX to its sister hedge fund Alameda Research were “permitted.”
As alleged by prosecutors, Bankman-Fried had secretly arranged for customers’ fiat and crypto deposits to his exchange could be secretly taken and used at Alameda.
The fiat was allegedly stolen by letting customers deposit money into a bank account at Silvergate that actually belonged to Alameda – not FTX. Meanwhile, crypto was taken from FTX customers’ accounts using a hidden backdoor within FTX’s computer systems – a function reported by Reuters days following the exchanges’ collapse.
“They’d have you think he’s a cartoon villain,” contested SBF’s Cohen. “He was a math nerd who didn’t drink or party.”
Cohen claimed the Alameda account at Silvergate was created for FTX’s use because the latter didn’t have an account for accepting dollars in its early days. While this money was meant for FTX’s customers, poor risk management led to Bankman-Fried thinking this money could be lent out like Alameda’s other assets.
Caroline Ellison’s Role
In 2021, Bankman-Fried forfeited his role as CEO of Alameda to his on-again off-again girlfriend, Caroline Ellison. While prosecutors say he was “still calling the shots” at Alameda in the aftermath, Cohen said Ellison’s failure to heed Bankman-Fried’s advice during the bear market is what made the lender go bankrupt.
In fact, the losses at Alameda are what made Bankman-Fried believe the fund’s bank accounts no longer held FTX client funds, according to Cohen.
“Remember the fiat account? It now had $8 to $10 billion in it,” he said. “Sam reasonably believed that Alameda had stopped taking deposits meant for FTX.”
The lawyer said Bankman-Fried still believed Alameda and FTX were solvent during the market downturn, but that things changed when CZ put out a tweet sparking concerns about both firms in early November. “This triggered a run on the bank at FTX,” said the defense.
Ellison and two other executives close to SBF – co-founder Gary Wang and engineering head Nishad Singh – have already entered plea deals admitting to fraud in conspiracy with SBF.
“Now, here in the real world, they have to testify in favor of the government,” Cohen concluded. “At the end, we’ll ask you to find Sam not guilty.”
Featured Image Courtesy of New York Post.
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