Greedy liar or math nerd? Duelling portraits of SBF cap trial as jurors weigh verdicts

On Wednesday afternoon, defence attorney Mark Cohen stood to deliver his closing argument. It was his last shot at swaying the jury and saving his 31-year-old client, Sam Bankman-Fried, from a potentially decades-long prison sentence.

Before he dove in, he wanted to make an admission on behalf of his client

“We’ll agree that there was a time when Sam was probably the worst-dressed CEO in the world,” he said, “and had the worst haircut.”

Someone you dislike

Bankman-Fried’s slob-chic vibe, sex life, and flashy lifestyle all came up in a five-week trial in New York that was otherwise dominated by spreadsheets, software, and the jargon of crypto trading.

“Every movie needs a villain,” Cohen told the jurors, and this was the government’s attempt to turn a well-meaning, “high school maths nerd” into “someone you’ll dislike.”

Hours earlier, Assistant US Attorney Nicolas Roos portrayed a very different Bankman-Fried: a high-flying, “celebrity chasing” entrepreneur who repeatedly stole from customers to satisfy his own greed.

We’ll soon learn which version of Bankman-Fried jurors find more believable.

Less than a year after the failure of FTX, once the second biggest crypto exchange worth $32 billion, Bankman-Fried’s criminal trial is approaching its conclusion.

Prosecutors allege that the entrepreneur who once rubbed shoulders with NFL superstar Tom Brady and supermodel Gisele Bundchen and dwelled in a $35 million penthouse in the Bahamas illegally tapped billions of dollars in customer deposits to plug losses at his hedge fund, Alameda Research, during the crypto crash in 2022.

FTX’s downfall

The one time poster boy for the young industry stands accused of seven counts of fraud and conspiracy and related charges. He has pleaded not guilty and has taken the witness stand to testify his innocence.

With the lawyers’ closing arguments concluded, US District Court Judge Lewis Kaplan has asked jurors to stay late on Thursday evening as they begin their deliberations on the verdicts.

Roos opened his closing summation by describing FTX’s downfall.

“Thousands of people were trying to withdraw their investments, their savings, their nest eggs,” he said. “With each additional click of the withdrawal button, their dread turned to despair. Their money was gone.”

He pointed at Bankman-Fried seated at the defence table.

‘He spent his customers’ money and lied to them about it.’

—  Nicolas Roos, prosecutor

“He spent his customers’ money and lied to them about it,” Roos said. “Where did the money go? The money went to pay for investments, to repay loans, to cover expenses, to purchase property, and to make political donations.”

The scheme was simple, according to the prosecutor: Alameda Research, a crypto trading firm Bankman-Fried founded in 2017, got that money via “special privileges” it enjoyed with FTX, the crypto exchange he founded in 2019.

Meanwhile, Bankman-Fried told his followers on social media, reporters, and Congress that FTX was a particularly safe place to trade crypto. He also said FTX and Alameda were wholly separate companies and fears of a conflict of interest were overblown.

“If customers knew that the defendant had directed these special privileges for its own affiliated company, they would have run for the exits,” the prosecutor said. “It would have been clear as day that their money wasn’t safe, that the defendant was treating their deposits as his personal piggy bank by funnelling that money to Alameda.”

Big mistake

Bankman-Fried has insisted the collapse of FTX was all a big mistake, a sequence of poor decisions, and that he didn’t understand the full scope of the problem until the very end.

But to believe that, Roos said, the jurors would have to ignore testimony from three of his closest associates: Caroline Ellison, his one-time girlfriend and Alameda’s CEO; Gary Wang, FTX’s co-founder and chief technology officer; and Nishad Singh, the company’s head of engineering.

All three have pleaded guilty to fraud and other charges. They are cooperating with prosecutors.

‘Good faith … is a complete defence to all the charges in this case.’

—  Mark Cohen, defence lawyer

During their testimony in October, the trio said they committed fraud at Bankman-Fried’s direction.

Wang and Singh, both software engineers, say they bestowed FTX with the special privileges that enabled Alameda’s borrowing. Ellison doctored financial statements in order to defraud Alameda’s lenders, she said.

“If you believe even one of those witnesses is telling the truth about this, then the defendant is guilty,” Roos said.

To believe Bankman-Fried is to also ignore documents that show he knew Alameda was massively indebted to FTX customers, according to Roos.

Those documents show multibillion-dollar deficits at Alameda. Metadata for those documents proves Bankman-Fried had opened them, Roos said.

To hammer home the point, the prosecutor walked jurors through six moments in which Bankman-Fried “doubled down” on the alleged fraud rather than come clean.

The final example was Bankman-Fried’s now infamous tweet from November 7, 2022, in which he assured customers that “assets [at FTX] are fine.”

Private note

But a private note he authored the day before, stated FTX could only redeem about one-third of customers’ assets.

“What was the result of the defendant’s lies? FTX customers didn’t withdraw their money,” Roos said. “That alone is a reason to find him guilty of fraud.”

Bankman-Fried’s attorneys had countered that their client couldn’t have committed fraud because he was acting in good faith. And Alameda was allowed to borrow customer money via FTX’s margin trading programme.

Neither worked, Roos said.

Mathematically impossible

That Bankman-Fried insisted some messages self-delete shows he has something to hide and, in turn, knew his actions were illegal, according to the prosecutor.

More importantly, none of the Alameda accounts that were allowed to go negative were part of FTX’s margin lending programme.

Moreover, accounting expert Peter Easton testified that his analysis of FTX financial records show only $4 billion was ever available to borrow via FTX’s margin trading programme. But at least $8 billion has gone missing.

“It is literally, mathematically impossible that they could have taken the money from the borrow/lend or the spot margin programme,” Roos said.

When it was his turn, Cohen’s message to jurors was simple: mistakes were made.

“In the real world, unlike the movie world, things can get messy,” Cohen said. “In the real world, people misjudge things.”

But making mistakes — even billion-dollar mistakes — isn’t a crime, Cohen said.

“Good faith … is a complete defence to all the charges in this case,” he told jurors.

Turbulent periods

Testimony from Ellison, Wang, and Singh might seem damning, he continued, but all three were pressured by the government. Although they have pleaded guilty, they have yet to be sentenced.

In Cohen’s telling, the four executives, all friends, thought they were steering a successful business through one of the more turbulent periods in crypto history when their mistakes finally caught up with them.

“As FTX’s situation becomes more and more desperate, as regulators pop up in the Bahamas and elsewhere, as there is chaos at the door, something subtle happens,” Cohen said. “Blame is shifted to Sam.”

Long sentences

Ellison is facing 110 years in prison. Wang is facing 50. Singh could spend as much as 75 years in prison.

While sentencing guidelines indicate they will not serve anything close to those terms, the three still face lengthy stays behind bars. Cooperating with the prosecution could secure the shortest sentences possible, Cohen said..

“The point here is not that Gary, Nishad, and Caroline are bad people. We haven’t said that at all during this case,” Cohen said. “But they were under pressure to get out from under, and that meant pointing at Sam.”

But Cohen did little to rebut the prosecution’s charge that documents show Bankman-Fried did, in fact, know Alameda was borrowing from FTX customers.

Bankman-Fried took the risky step of testifying in his own trial. During his cross examination earlier this week, he was made to answer for years of comments to reporters, followers, and Congress.

He repeatedly said he had no recollection of the comments he made at the time, answers that Roos called evasive.

Cohen, however, said Bankman-Fried’s media tour was enough proof there was no criminal scheme.

“Why in the world would he go before Congress and subject himself to public questioning when he doesn’t have to … if the whole idea was that he was running a secret scheme using Alameda to defraud customers,” Cohen asked.

I’m going to go out on a limb here. I think this is the government’s favourite piece of evidence.’

—  Mark Cohen, defence lawyer

Regarding Alameda’s special privileges, Cohen pointed to testimony from Singh, who said the code in question was available for all to see, if they knew where to look.

“The government’s theory is, these codes were secret and that Sam, in perhaps one of his most villainous acts, secretly directed Gary and Nishad to put these codes in place,” Cohen said.

“If these coding rights were actually intended to serve as tools to steal, it makes no sense that the group of people in a company with hundreds of employees would have access to them.”

Cohen also addressed the November 7 tweet in which Bankman-Fried said “assets are fine.”

“I’m going to go out on a limb here. I think this is the government’s favourite piece of evidence,” Cohen said.

Sam’s life

The tweet was sent in good faith, Cohen said. Bankman-Fried did believe he could honour FTX customer withdrawals — until the price of several crypto tokens issued by Alameda fell precipitously.

As he ended his remarks, Cohen turned philosophical.

“In Sam’s life he has gone through more than most do in a lifetime,” Cohen said. “One day he’s a college student. Then he’s in an apartment with his close friends starting a crypto company.”

Bankman-Fried, visibly emotional for the first time since the trial began, turned to look at the jury. Now they will begin deliberating his fate.

Aleks Gilbert, DL News’ New York correspondent, covers DeFi. If you have a tip contact the author at aleks@dlnews.com.