Bankman-Fried Trial: Defense Paints ‘Normal Guy’ Image

Observers might be wondering what the famously probabilistic Sam Bankman-Fried thinks about his chances now.

In day two of the quant-minded and alleged crypto criminal’s trial, the U.S. prosecutor Nathan Rehn accused him of “committing a massive fraud” and “taking billions of dollars from thousands of victims” during Wednesday’s (Oct. 4) opening statements.

For his part, Bankman-Fried’s defense attorney, Mark Cohen, called his client “a normal guy … a math nerd who didn’t drink or party.”

“Sam didn’t defraud anyone. Sam didn’t intend to defraud anyone. Sam acted in good faith and took reasonable business measures,” Cohen added in the defense’s opening statement. “There was no theft.”

Theft and criminal misuse of billions of dollars is, of course, what Bankman-Fried’s criminal trial is about. The one-time CEO and co-founder of the now-insolvent FTX cryptocurrency exchange stands accused of orchestrating one of the biggest financial frauds in U.S. history.

“The defendant took billions of dollars in FTX customer deposits from Alameda bank accounts and he spent it – and the customers had no way to know that their money was being used in this way,” the prosecution told the jury. “When customers thought their money was going into the exchange, they were actually sending their money right into the defendant’s pocket.”

“One year ago, it looked like Sam Bankman-Fried was on top of the world. … He had wealth, he had power, he had influence, but all of that was built on lies,” Rehn added.

Read also: Sam Bankman-Fried, FTX and the Demise of the Cool Kids

While the prosecution argued that, at Bankman-Fried’s direction, Alameda Research took more than $10 billion of customer money out of FTX and wagered it on bad crypto investments, the defense team argued in their opening statement that there was nothing corrupt in the relationship between FTX and Alameda.

The prosecutors indicated that Caroline Ellison, the former CEO of Alameda Research, will testify that she took customer money “again and again to spend and invest it through Alameda” along with Bankman-Fried.

In August 2022, Ellison claimed that FTX and Alameda were separate companies, that Alameda received no special treatment on the FTX platform, and that there was an “ethical wall” between them preventing sharing of customer information between FTX and Alameda.

Late last year (Dec. 19) Ellison admitted these previous statements were “knowingly misleading” and pleaded guilty to criminal charges filed against her, agreeing to cooperate with authorities.

The defense’s opening statement posited that the permissionless backdoor software code allowing Alameda Research to borrow from exchange customers was not a secret, and that any “senior developer at FTX” could see it.

Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy.

Read also: From Crypto Fame to Courtroom Shame: Bankman-Fried’s Rise, Fall, and Reckoning

First Two Witnesses Called

While the prosecution argued that Bankman-Fried was using Ellison “as a front” and “in reality, [Bankman-Fried] was calling the shots at Alameda,” as well as teased her later testimony, she was not called to the stand on the trial’s second day and first of witness testimony.

The case’s first two witnesses were a customer of FTX, Marc-Antoine Julliard, and one of Bankman-Fried’s friends from MIT, Adam Yedidia, who later worked at both FTX and Alameda.

Julliard, a commodities broker who traded in cocoa, lost $100,000 on FTX. He told the jurors that he had confidence in FTX because of the “big venture capital firms backing it.”

When asked why he didn’t withdraw his money when news broke about FTX’s balance sheet, the witness told the court that it was because Bankman-Fried “projected positivity” with his tweets.

The prosecution asked Julliard if he was ever able to withdraw his funds.

“Never,” the witness answered.

The next and final witness for the day, Yedidia, testified under an immunity order because he was concerned he might have written computer code that could have been used to commit a crime while a developer at FTX.

Was Bankman-Fried the face of FTX, prosecutors asked their witness, with Yedidia responding “yes.” He pointed to his former college friend and roommate at the request of the court.

When shown a picture of the infamous $35 million penthouse and asked who purchased it, Yedidia replied, “Sam did,” to which Bankman-Fried’s defense filed an objection.

The court adjourned before Yedidia finished his testimony, and he will be the first witness to speak at tomorrow’s trial.

Building Their Narrative

As PYMNTS previously wrote, the way U.S. prosecutors see it, Bankman-Fried continually embezzled money from customer accounts on the FTX crypto exchange since launching it in 2019. The resulting shortfall due to allegedly criminal misappropriation was directly responsible for the exchange’s collapse as the crypto industry entered a bear market last year.

This was confirmed by the U.S. prosecution team’s opening statement.

In Bankman-Fried’s version of the events that led to his and FTX’s downfall, his closest colleagues jeopardized the exchange’s solvency and his only failing was that he did not keep a close enough eye on what was going on beneath his nose.

“Running a startup was like building a plane while you’re flying it,” Bankman-Fried’s defense said Wednesday (Oct. 4). “Some things were overlooked.”

While prosecutors revealed they may call Gary Wang, FTX’s co-founder, later in the week, the greatest remaining unknown is how Bankman-Fried will seek to defend himself.