Sam Bankman Fried, the onetime cryptocurrency mogul, built his FTX crypto exchange into a “pyramid of deceit” resting on a “foundation of lies and false promises,” a federal prosecutor said in closing arguments on Wednesday at the criminal fraud trial.
Over more than two hours in a Manhattan courtroom in the morning, Nicolas Roos, the prosecutor, used scathing language to paint Mr. Bankman-Fried as a liar and fraudster. The FTX founder, Mr. Roos said, was driven by greed and was responsible for the collapse of the exchange a year ago, which left customers unable to recover their deposits. And Mr. Bankman-Fried, who had testified during the trial in his own defense, had repeatedly dissembled and dodged questions, Mr. Roos said.
Mr. Bankman-Fried “lied about big things and small things,” the prosecutor said, pointing out that the defendant said he “couldn’t recall” more than 140 times in response to questions on cross-examination. “It was uncomfortable to hear,” Mr. Roos said.
The prosecutor’s closing statement came after 15 days of testimony in Mr. Bankman-Fried’s trial, which is one of the most high-profile financial crime cases in years. The outcome of the case will be seen as a referendum not only on the rapid rise and fall of Mr. Bankman-Fried’s business empire, which at its peak was valued at $32 billion, but also on the volatile crypto industry, which only two years ago was riding high before melting down last year.
The spectacular implosion of FTX last November set off a chain reaction that led to the collapse of other crypto firms. Mr. Bankman-Fried’s arrest and subsequent charges also set off regulatory crackdowns across the crypto universe.
At the heart of Mr. Bankman-Fried’s case is whether he committed fraud and treated FTX as his personal piggy bank. Prosecutors contend that he stole as much as $10 billion from FTX’s customers to pay for investments in other crypto firms, buy lavish real-estate in the Bahamas, where the exchange was headquartered, and to prop up a crypto trading firm he also founded, Alameda Research.
The 31-year-old has pleaded not guilty to seven counts of fraud, conspiracy and money laundering. If convicted, he could face what amounts to a life sentence.
The defense is expected to deliver its closing statement on Wednesday afternoon, after which the prosecution will have a brief rebuttal presentation.
Carl Tobias, a professor at the University of Richmond School of Law, said the prosecution presented a strong case and made a smart decision in “framing this matter as a garden-variety fraud case, rather than a more complex cryptocurrency case.”
Mr. Bankman-Fried’s trial, which began on Oct. 4, has featured plenty of damaging testimony. Prosecutors called 16 witnesses, including three former top lieutenants to Mr. Bankman-Fried, each of whom had pleaded guilty to fraud and conspiracy charges and agreed to testify against their former boss. The defense, for its part, called just three witnesses, one of whom was Mr. Bankman-Fried.
At the trial, the prosecution’s three star witnesses — Caroline Ellison, Nishad Singh and Gary Wang, who all worked with Mr. Bankman-Fried — testified that the FTX founder knew for many months that his spending spree was unsustainable and improperly fueled by FTX customer money that had been transferred to Alameda. They also said Mr. Bankman-Fried knew Alameda could not pay back the billions that it had misappropriated from FTX, with Alameda’s debt to FTX concealed from customers and investors.
In response, Mr. Bankman-Fried and his lawyers argued that he was unaware until just a few weeks before FTX collapsed that billions in customer money had been misused. Mr. Bankman-Fried testified that he believed Alameda’s spending came from corporate money, not customer money. Any mistakes that were made, Mr. Bankman-Fried said, were made in good faith and not intended to defraud anyone.
FTX was supposed to “move the ecosystem forward,” he testified at one point. “It turned out the opposite of that.”
Under cross-examination for nearly seven hours over two days, Mr. Bankman-Fried was asked repeatedly about his many public statements about FTX and how those ran counter to what unfolded behind the scenes at the exchange. Mr. Bankman-Fried often hemmed and hawed in response to questions about his public claims that FTX was one of the safest crypto exchanges in the business.
He was also unable to explain how FTX customer money could have been funneled to Alameda to pay for building out his crypto empire without him knowing about it. At times, he effectively said that his former employees who testified against him were not telling the truth.
On Wednesday, Mr. Roos went over the highlights of the testimony from the prosecution witnesses, including their statements that Alameda had special privileges with FTX, such as a $65 billion line of credit that permitted the trading firm to borrow billions from FTX customers. Mr. Bankman-Fried kept those special privileges secret, Mr. Roos said, “because he knew they were wrong.”
“The way you know he knew it was because he set up a public system for everyone and a secret system for Alameda,” Mr. Roos said.
The prosecutor also went over the inconsistencies in Mr. Bankman-Fried’s testimony with the testimony of his former employees. He displayed charts with headings like “The defendant’s lies to the public” and “The defendant knew the secret line of credit.” And he pointed out instances where Mr. Bankman-Fried appeared to deliberately use FTX customer deposits, including to buy back FTX equity from Binance, a competing crypto exchange.
The jury of nine women and three men is expected to begin deliberating as soon as Thursday after Judge Lewis A. Kaplan of U.S. District Court instructs them on the relevant law.