On the second day of Sam Bankman-Fried's trial, the US Department of Justice (DOJ) claimed that his crypto business had problems from the beginning. The Assistant US Attorney Nathan Rehn described him as someone who deceived customers and used their money for his own gain, including wealth and political influence, as reported by Coindesk.
According to Rehn, Bankman-Fried diverted customers' funds to a "smaller and secretive" company called Alameda Research, using the funds for personal luxuries and political donations. The prosecution alleges that Bankman-Fried took over $10 billion from FTX to settle Alameda Research's debts and attempted to cover up his actions by creating false financial statements.
Allegations against Sam Bankman-Fried
Rehn argues that Bankman-Fried directed customers to deposit their funds into accounts controlled by Alameda and allowed the firm to withdraw deposits. When Alameda's cryptocurrency investments suffered losses in May and June of the previous year, Bankman-Fried allegedly took even more money from FTX. The prosecution argued that this plan fell apart in November 2022 when a confidential financial document from Alameda was made public.
On the flip side, Bankman-Fried's defense team argued that their client acted in good faith, overwhelmed by the rapid growth of his businesses. According to a report by Reuters, Mark Cohen, the lead defense lawyer, stressed that Bankman-Fried never intended to defraud anyone and portrayed him as a hardworking entrepreneur.
In addition, Cohen defended Bankman-Fried's involvement in both FTX and Alameda Research, stating that it was "totally normal" for a CEO to remain connected to the activities of related companies. He emphasized that Bankman-Fried needed liquidity for FTX, and Alameda Research played a vital role as a market maker.
Sam Bankman-Fried's Defense
However, Cohen admitted that FTX did lend money to Alameda Research. He argued that Bankman-Fried thought these loans were legal and were backed by collateral. According to Cohen, there was no theft involved, and Bankman-Fried didn't plan to defraud anyone. Instead, Cohen suggested that during FTX's fast growth, certain aspects of risk management might have been overlooked.
The trial promises to be a battle of testimony, with the prosecution planning to present documents, investor files, financial statements, and even deleted tweets by Bankman-Fried. Meanwhile, the defense criticized the government's key witnesses, alleging they were testifying due to cooperation agreements and may be biased.
The trial is expected to feature testimony from former members of Bankman-Fried's inner circle, including Caroline Ellison and former FTX executives, Nishad Singh and Gary Wang, who have pleaded guilty and agreed to cooperate with the prosecution.
This article was written by Jared Kirui at www.financemagnates.com.
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