The trial of former crypto CEO Bankman-Fried has begun

A federal court in Manhattan, New York, will begin hearing the case against former bitcoin guru Sam Bankman-Fried on Tuesday, with jury selection.

Bankman-Fried, the founder of cryptocurrency exchange FTX and its linked hedge fund Alameda Research, is on trial for finance offences related to FTX’s unexpected collapse.

According to the Guardian UK, Bankman-Fried is charged with seven charges of conspiracy and fraud for allegedly diverting investors’ funds into dangerous trades and other illegal activities.

The Manhattan US attorney’s office, which is pursuing the case, has also accused Bankman-Fried of using FTX customer funds to foot the bill for swelling loan expenses at Alameda.

Authorities have also contended that he snapped up fancy real estate and made extensive political donations with their money.

Bankman-Fried’s high-flying world started to unfold in November 2022 following a report in CoinDesk that Alameda held billions in FTX’s own cryptocurrency, FTT.

Amid the revelations, the chief executive of top FTX competitor Binance, Changpeng Zhao, tweeted that his firm would sell its $50m in FTT. FTT spiraled and FTX clients pulled their money in the equivalent of a high-tech bank run.

As FTX reeled from a “giant withdrawal surge”, with users scrambling to remove some $6bn in crypto tokens over a mere three days, observers feared the fiasco could prompt an industry-wide collapse reminiscent of the 2008 real estate crisis. FTX filed for bankruptcy protection and Bankman-Fried resigned.

The collapse of FTX caused “billions of dollars in losses to its customers, lenders, and investors”, Damian Williams, the Manhattan US attorney, said in December. “This was not a case of mismanagement or poor oversight, but of intentional fraud, plain and simple.”

Federal prosecutors allege that Bankman-Fried and several co-conspirators – among them his sometimes girlfriend, Alameda CEO Caroline Ellison – diverted billions for his personal use.

Ellison, who in December pleaded guilty to her role in the alleged conspiracy, is expected to be the prosecution’s star witness at Bankman-Fried’s made-for-tabloid trial.

The proceedings are also poised to provide bombshell details not only on FTX’s crash but also the murky inner-workings of crypto trading.

If Ellison’s past statements are any indication, her testimony could well be damning for Bankman-Fried.

Prosecutors have indicated they will bring forward recordings of a 9 November Alameda staff meeting, in which Ellison tried to allay staff concerns.