Almost a year after the spectacular collapse of the cryptocurrency exchange FTX, the trial against its co-founder Sam Bankman-Fried has begun. US investigators accuse the 31-year-old of fraud. According to the indictment, he diverted funds from customers without their knowledge and enriched himself personally. Bankman-Fried denies the allegations.

The trial in New York began with jury selection, a court spokesman confirmed. The trial is scheduled to last around six weeks. In an unusual move, Bankman-Fried himself is expected to testify.

If convicted, Bankman-Fried could face more than 100 years in prison. There are seven charges in total, ranging from fraud to conspiracy to launder money.

The reproach

FTX was one of the largest trading venues for cryptocurrencies like Bitcoin. At the same time, FTX issued its own cryptocurrency called FTT. After doubts arose about the financial situation of the crypto exchange last fall, customers began withdrawing their balances. But there wasn’t enough money: a billion-dollar hole was revealed at FTX.

According to allegations from the public prosecutor’s office, customer funds were secretly diverted to the hedge fund Alameda Research – and also used to finance Bankman-Fried’s expensive lifestyle. The FTX top shared a luxury penthouse in the Bahamas. Advertising campaigns with celebrities such as football star Tom Brady also cost a lot. Bankman-Fried was also a generous donor to President Joe Biden’s US Democrats.

Deals with investigators

Several former companions agreed to cooperate with the investigators and are likely to incriminate Bankman-Fried. After his arrest in the Bahamas and his extradition to the USA, he was initially placed under house arrest in his parents’ house at Stanford University in California. But in August the judge sent him to prison. Bankman-Fried had shared with the New York Times private notes from the former Alameda boss Caroline Ellison, who was also his girlfriend for a time.

Bankman-Fried was arrested in the Bahamas in December. FTX had its headquarters there. After the arrest, Bankman-Fried initially spoke of an accounting error. According to the investigators, the mechanisms in the software that would normally have prevented an outflow of funds were disabled. Alameda was able to get as much as she wanted from FTX without anything in return. An open question is whether prosecutors can directly link Bankman-Fried to this.

Bankman-Fried founded Alameda Research before FTX in order to profit from price differences in crypto trading between Asia and the USA. In the end, business didn’t go well and, according to the indictment, the financial holes had to be filled with FTX funds.

The rise of the crypto exchange FTX was once phenomenal. In less than three years, the company reached a valuation of $32 billion and held billions in assets on behalf of its customers. Bankman-Fried also had a billion-dollar fortune – at least on paper.