Who’s Sam Bankman-Fried, whose fraud trial begins this week?

By Luc Cohen

NEW YORK (Reuters) -A number of years after graduating school, Sam Bankman-Fried grew anxious he was not taking sufficient dangers.

So the son of two Stanford Legislation College professors stop his Wall Avenue job and in 2017 began a cryptocurrency hedge fund, setting off a sequence of occasions that culminate on Tuesday in his trial for what federal prosecutors have known as one of many largest monetary frauds in U.S. historical past.

Two years after launching a hedge fund, Alameda Analysis, Bankman-Fried based FTX, an change that permit customers purchase and promote digital property reminiscent of bitcoin. Cryptocurrency valuations surged over the next two years, propelling Bankman-Fried to a web price of $26 billion, in response to Forbes journal, earlier than he turned 30.

He parlayed his wealth into political clout, changing into one of many largest donors to Democratic candidates and causes forward of the 2022 U.S. midterm elections. Based mostly within the Bahamas, Bankman-Fried turned identified for his mop of unkempt curly hair and for carrying rumpled shorts, even when entertaining dignitaries like Invoice Clinton.

In a cryptocurrency sector affected by hacks and cash laundering, Bankman-Fried employed celebrities together with NFL quarterback Tom Brady and comic Larry David to characteristic in commercials portraying FTX as protected. He publicly backed efforts to manage crypto.

However prosecutors say his laid-back demeanor mixed along with his cultivation of a accountable picture hid his years-long embezzlement of buyer funds. They contend the theft got here to a head in 2022, when crypto costs swooned and he used FTX funds to plug losses at Alameda.

Requested by a reporter after Bankman-Fried was arrested whether or not his informal look and him being “extremely shiny” had helped him idiot individuals, Manhattan U.S. Legal professional Damian Williams responded, “You’ll be able to commit fraud in shorts and T-shirts within the solar.”

Bankman-Fried, a Massachusetts Institute of Know-how graduate, has pleaded not responsible to seven counts of fraud and conspiracy. He has acknowledged insufficient danger administration, however denied stealing funds.

Bankman-Fried, now 31, labored 18-hour days whereas constructing FTX, however by 2022 was spending extra time speaking with policymakers, engaged on branding and partnerships, and managing the change’s rising workforce, in response to testimony he supposed to offer to Congress for a listening to over now-bankrupt FTX’s November 2022 collapse.

“I believed that I may maintain FTX collectively regardless of the enlargement,” he wrote within the deliberate testimony printed by Forbes and confirmed by Bankman-Fried as genuine. “I used to be incorrect. I bit off greater than I may chew.”

He was arrested at his luxurious condo within the Bahamas the day earlier than his scheduled testimony, locked up on the nation’s Fox Hill Jail for 10 days, then extradited to the U.S.

BANKMAN-FRIED MAY BLAME COLLEAGUES

Bankman-Fried had little crypto expertise earlier than founding Alameda, which initially made cash by exploiting variations in costs in digital tokens between the US and Asia. A physics main at MIT, he informed an FTX podcast that he didn’t apply himself in courses and didn’t know what to do along with his life for many of school.

However he grew throughout these years in a motion generally known as efficient altruism, which inspires proficient younger individuals seeking to make a mark on the world to give attention to incomes cash and giving it away to worthy causes. That led him to take a job as a quantitative dealer at Jane Avenue, however he started to doubt whether or not he was incomes all he may.

“If I actually assume that I ought to be attempting to maximise anticipated values, that in all probability implies considerably riskier methods than what appears intuitively proper,” he stated within the June 4, 2020, podcast. “I ought to be cautious to not fall prey to attempting to decide on a cushty path.”

He introduced on Gary Wang, an previous good friend from math camp, and later Caroline Ellison, a fellow efficient altruist from Jane Avenue. Each would be part of him within the Bahamas, the place they shared a $30 million penthouse with different Alameda and FTX executives, together with Nishad Singh.

Ellison, Wang, and Singh have all pleaded responsible and are set to testify towards their former boss at trial. Bankman-Fried’s attorneys have signaled that they plan to problem their credibility, and can search to distance the defendant from the day-to-day operations that landed his firms in dire straits.

“His attorneys will definitely ask the cooperating witnesses questions on his character and his consideration to element that may attempt to assist the concept that he was counting on different individuals,” stated Rebecca Mermelstein, a former federal prosecutor and now a accomplice at O’Melveny.

But when proof have been to emerge that Bankman-Fried had discussions with the cooperating witnesses about hiding what they have been doing, it will undermine that argument, Mermelstein stated.

Prosecutors have stated Bankman-Fried instructed colleagues to make sure messages between them auto-deleted as a result of authorized circumstances typically relaxation on documentary proof. He has denied that.

Since mid-August, Bankman-Fried has been making ready for trial from behind bars, after U.S. District Decide Lewis Kaplan revoked his bail for probably attempting to tamper with witnesses a minimum of twice – together with by sharing Ellison’s personal writings with a New York Instances reporter. Bankman-Fried and Ellison have been on-and-off romantic companions.

His legislation professor mother and father, who’ve now watched their son be remanded to jail at courtrooms within the Bahamas and Manhattan, have been themselves sued on Sept. 19 by FTX’s post-bankruptcy administration for enriching themselves at clients’ expense – which they denied.

“There’ll in all probability by no means be something I can do to make my lifetime impression web constructive,” Bankman-Fried stated in his personal personal writings following his arrest, which he shared with a social media influencer who gave them to the Instances. “And the reality is that I did what I believed was proper.”