The former CEO of FTX Trading goes on trial today for making $8 billion disappear in just under three years. Molly White has a precis:
About eleven months ago, the then second-largest cryptocurrency exchange in the world imploded over the course of only a few days as trust in the company crumbled and it failed to meet a surge of customer withdrawals. It rapidly became apparent that customer money was missing. A lot of it.
Since then, it’s come out that FTX allowed its sister trading firm, Alameda Research, to dip into FTX’s customer funds with effectively no limit to backstop their own trading losses. Much of FTX’s balance sheet was also revealed to be denominated in flimsy crypto tokens worth far less in reality than on paper, and a substantial portion of them had been created out of thin air by FTX itself. And the FTX group of companies had spent money they didn’t have, splashing out for extravagant celebrity endorsements and advertisements, buying real estate, and donating massive sums to curry favor among seated politicians and bankroll the industry boosters running for office.
Altogether, somewhere around $8 billion was gone.
Besides Sam Bankman-Fried, four other high-level executives at the FTX group of companies have been charged, and all four have reached plea deals. Three of them agreed to cooperate with the investigation as a part of their plea, and will almost certainly appear as witnesses at the trial. They were not just Bankman-Fried’s employees and co-workers, but also his friends, roommates, confidants, and, in one case, a former romantic partner.
There’s no question that billions of dollars of customer funds went missing from FTX. Instead, prosecutors are tasked with convincing a jury that they’re missing thanks to intentional fraud by Sam Bankman-Fried. The “intentional” part is the sticky bit, with prosecutors needing to convince all twelve jurors beyond a reasonable doubt that Bankman-Fried intended to defraud people. If even one juror holds out, Bankman-Fried could dodge a guilty verdict thanks to a hung jury — and trying to appeal to just one sympathetic juror may be his only hope in what looks like a pretty overwhelming case against him.
Since his resignation from FTX, Bankman-Fried has tried to portray himself as a colossally stupid man, who was simply too dumb to commit fraud. Unfortunately, stupidity doesn't actually exonerate criminal behavior. He only needs to have intended the actions, not the harm. And from the outside, it looks like he wasn't so much stupid as greedy, immature, narcissistic, and venal.
Get out the popcorn.