NEW YORK (Reuters) -Sam Bankman-Fried’s wealth and power was “built on lies,” a U.S. prosecutor said on Wednesday in opening statements for his trial on charges of stealing billions of dollars from customers of his now-bankrupt FTX cryptocurrency exchange.
Prosecutors with the U.S. Attorney’s office in Manhattan say Bankman-Fried used FTX customer money from the exchange’s 2019 launch until its November 2022 bankruptcy in order to prop up his hedge fund, Alameda Research, buy luxury real estate, and donate to U.S. political campaigns and candidates.
Thane Rehn, a prosecutor, said it looked like Bankman-Fried was on top of the world a year ago after amassing power and influence, but he “was not who he appeared to be.”
“All of it was built on lies,” Rehn said. “He was using his company, FTX, to commit fraud on a massive scale, and the money he was spending to build his empire – it was money he was stealing from FTX customers.”
Bankman-Fried’s lawyers are expected to give their opening statement later on Wednesday. The 31-year-old-former billionaire has pleaded not guilty and is likely to argue that while he failed to manage risk adequately, he did not steal money.
His lawyers are likely to try to shift the blame for FTX’s dramatic failure to the cooperating witnesses, and argue they are implicating Bankman-Fried in order to seek lenient sentences.
Prosecutors are expected to call three former members of Bankman-Fried’s inner circle – former Alameda chief executive Caroline Ellison and former FTX executives Nishad Singh and Gary Wang – to testify against him. All three have pleaded guilty and agreed to cooperate with prosecutors.
Bankman-Fried’s trial kicked off on Tuesday, nearly a year after the collapse of FTX shocked financial markets and tarnished the budding entrepreneur and philanthropist’s reputation as an honest actor in a crypto sector prone to scams and purported get-rich-quick schemes.
Earlier on Tuesday, a jury of 12 primary members and six alternates was selected.
PARENTS IN COURT
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 morning. They had not attended the trial’s first day.
Their names were both on a list read by a prosecutor on Tuesday of possible witnesses or individuals who may be otherwise mentioned in testimony, along with Bankman-Fried’s brother Gabriel Bankman-Fried and former Donald Trump staffer Anthony Scaramucci. That does not necessarily mean they will be called to testify.
Once known for his casual attire and mop of unkempt curls, Bankman-Fried sported a trim haircut and wore a suit and tie in court on both Tuesday and Wednesday.
He has been detained at 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. Bankman-Fried and Ellison were at times romantic partners.
(Reporting by Luc Cohen and Jody Godoy in New YorkEditing by Amy Stevens, Nick Zieminski and Matthew Lewis)
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