On October 3, Sam Bankman-Fried, founder of bankrupt crypto exchange FTX, is due to go on trial for fraud and conspiracy in a court in the Southern District of New York.
Last fall, a report published by news outlet CoinDesk cast doubt over the health of FTX’s sibling company, Alameda Research, with which it had unusually close ties. When customers rushed to pull money out of the exchange, FTX couldn’t meet withdrawals. After a rescue deal from rival exchange Binance fell through, FTX filed for bankruptcy on November 11. A month later, Bankman-Fried was arrested in the Bahamas, where FTX was headquartered, and extradited to the US.
The Department of Justice has filed a total of 13 criminal charges against Bankman-Fried, seven of which will be heard at the initial trial. (A second will follow in March 2024.) Meanwhile, court filings in the criminal case against Bankman-Fried, civil cases filed by US financial regulators, and the FTX bankruptcy proceeding have shone a light on the events and conditions that led to the evaporation of billions of dollars’ worth of customer funds.
FTX couldn’t meet withdrawals, the DOJ alleges, because Bankman-Fried had mismanaged and misappropriated funds that were used to bankroll risky trading activity; make loans to himself and others; engage in investments, acquisitions, real estate purchases, marketing campaigns, and political donations; and service debt.
In January, Bankman-Fried pleaded not guilty to each of the seven charges. He has spent most of the intervening period under house arrest but was taken into custody in August after the prosecution alleged he was tampering with witnesses. If convicted at the end of the trial, which is expected to last around a month, the one-time crypto wunderkind could face decades in prison.
Dramatis Personae
Bankman-Fried is accused of orchestrating the alleged fraud at FTX. But the exchange and Alameda Research were run by a small inner circle of lieutenants, some of whom have pleaded guilty to related offenses and are expected to testify at his trial. The exchange’s rise and fall also drew in other major players in the crypto world.
Sam Bankman-Fried
The founder and CEO of FTX and the founder of Alameda Research, a trading firm whose close relationship with the exchange is central to the alleged fraud. He faces 13 criminal charges, seven of which will be heard at the initial trial.
Caroline Ellison
The CEO of Alameda Research and on-and-off romantic partner of Bankman-Fried. The pair met at Jane Street, a quantitative trading firm where they both worked after college. She has pleaded guilty to seven criminal charges, including wire fraud, securities and commodities fraud, and money laundering.
Sam Trabucco
The co-CEO of Alameda Research alongside Ellison, Trabucco left the post three months before the collapse of FTX. The DOJ has not accused Trabucco of any wrongdoing, and it is unclear whether he’s cooperating with prosecutors. His whereabouts are unknown.
Gary Wang
The cofounder of FTX and Alameda Research and CTO for both firms. Wang met Bankman-Fried in high school, and the pair were later roommates at MIT. He has pleaded guilty to four criminal charges, including wire fraud and conspiracy.
Nishad Singh
The director of engineering at FTX. Singh worked as an engineer at Meta before being headhunted by Bankman-Fried. He has pleaded guilty to six criminal charges, including wire fraud, securities and commodities fraud, and money laundering.
Changpeng Zhao (or CZ)
The CEO of Binance, the world’s largest crypto exchange, whose relationship with Bankman-Fried had become increasingly fraught in the lead-up to the fall of FTX. Bankman-Fried blamed tweets Zhao made for having precipitated the run on deposits that caused FTX to crumble. The prosecution may refer to these tweets as it frames events for the jury. Zhao is dealing with his own legal issues: US regulators charged Binance earlier this year with a litany of violations, and the DOJ is reportedly investigating too.
John J. Ray III
The attorney now tasked with steering FTX and its subsidiaries through bankruptcy. Ray established a reputation as a restructuring savant after overseeing the liquidation of Enron, a company that engaged in extensive accounting and corporate fraud. The prosecution may cite materials Ray compiled as part of the FTX bankruptcy investigation to support its case against Bankman-Fried.
Barbara Fried and Joseph Bankman
