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With jury selection completed, the trial of FTX co-founder Sam Bankman-Fried (SBF) has officially commenced, as prosecutors and defense attorneys presented their opening statements on Wednesday.
During his address, SBF’s attorney Mark Cohen contended that the former exchange executive “didn’t defraud anyone,” instead attributing responsibility to Binance CEO Changpeng Zhao (CZ) for instigating a “run on the bank at FTX.”
SBF Was “Just A Math Nerd”
As reported by Inner City Press on Wednesday, Cohen argued that SBF acted in “good faith” and “did not steal from anyone,” asserting that any loans made from FTX to its affiliated hedge fund Alameda Research were “allowed.”
Prosecutors allege that Bankman-Fried had covertly arranged for customers’ fiat and crypto deposits at his exchange to be secretly withdrawn and utilized by Alameda.
The fiat was reportedly misappropriated by allowing customers to deposit funds into a bank account at Silvergate that actually belonged to Alameda – not FTX. Simultaneously, crypto was allegedly extracted from FTX customers’ accounts through a concealed backdoor within FTX’s computer systems – a feature highlighted by Reuters shortly after the exchanges’ collapse.
“They’d have you think he’s a cartoon villain,” argued SBF’s Cohen. “He was a math nerd who didn’t drink or party.”
Cohen asserted that the Alameda account at Silvergate was established for FTX’s use because the latter lacked an account for receiving dollars in its initial stages. While this money was intended for FTX’s customers, inadequate risk management led Bankman-Fried to believe this capital could be lent out like Alameda’s other assets.
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Caroline Ellison’s Role
In 2021, Bankman-Fried relinquished his position as CEO of Alameda to his on-again off-again girlfriend, Caroline Ellison. While prosecutors claim he was “still calling the shots” at Alameda afterward, Cohen stated that Ellison’s disregard for Bankman-Fried’s guidance during the bear market is what caused the lender to go bankrupt.
In fact, the losses at Alameda are what led Bankman-Fried to believe the fund’s bank accounts no longer contained FTX client funds, according to Cohen.
“Remember the fiat account? It now had $8 to $10 billion in it,” he remarked. “Sam reasonably believed that Alameda had ceased taking deposits intended for FTX.”
The attorney indicated that Bankman-Fried still believed Alameda and FTX were financially stable during the market downturn, but that circumstances shifted when CZ posted a tweet raising concerns about both companies in early November. “This triggered a run on the bank at FTX,” stated the defense.
Ellison and two other executives closely associated with SBF – co-founder Gary Wang and engineering lead Nishad Singh – have already entered plea agreements 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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