Q9 Weekly | Play it Again, Sam

6 min readOct 5, 2023

5 October 2023

· Trial of Sam Bankman-Fried begins

· Former billionaire charged with defrauding customers and investors

· Michael Lewis’ book on SBF “Going Infinite” released

Almost a year after the collapse of FTX, the high-profile trial of Sam Bankman-Fried has officially kicked off, with plenty of activity both inside and outside of the cramped Manhattan courtroom.

The former crypto billionaire is staring down decades in prison as his trial over what has been called one of the biggest financial frauds in US history gets under way.

Recap from the First Two Days of SBF’s Trial…

· Judge Kaplan clarified that SBF is being charged for defrauding customers and investors. The federal judge also hinted that a verdict could be issued in less than six weeks, noting that his cases “rarely take as long as lawyers think”.

· He faces one count of wire fraud, two counts of conspiracy to commit fraud, and one count of money laundering conspiracy over the alleged theft of customer funds.

Source: Courtroom sketch of SBF in New York City. 3rd October

· In his opening argument, prosecutor Thane Rehn alleged that Bankman-Fried built his empire “on lies” and lived a glamorous life of wealth and power while duping the people who invested in his companies.

· The prosecution alleged that money from customer deposits was effectively going directly into Bankman-Fried’s pocket, claiming that their funds never made it into the FTX exchange and instead were funnelled elsewhere without notice.

Source: Courtroom sketch of SBF in New York City. 4th October

· The Department of Justice said the absence of clear crypto regulations is not relevant to its criminal suit of FTX founder Sam Bankman-Fried, dispelling claims by SBF’s lawyers. Prosecutors also pushed back against the claim that “reallocating customer funds” was common in the crypto industry at the time.

· Defense attorneys countered by presenting Bankman-Fried as a “math nerd” with good intentions who got in over his head. “Sam didn’t defraud anyone. Sam didn’t intend to defraud anyone. Sam acted in good faith,” Mark Cohen said. “There was no theft.”

Source: Courtroom sketch of Assistant US Attorney Thane Rehn as he delivers his opening statement. 4th October

· The defense argued that any mismanagement at FTX was the result of the company’s rapid growth which overwhelmed Bankman-Fried’s ability to make decisions. “Some things got overlooked … things an older company would have built out over time,” Cohen said.

· The prosecution’s opening argument teased blockbuster testimony from Caroline Ellison — Bankman Fried’s on-again, off-again girlfriend and the one-time head of Alameda, who they claimed could describe how she and Bankman-Fried siphoned money to Alameda. Ellison has emerged as a central figure at the trial, with prosecutors claiming SBF told her the truth about the funds.

Source: Courtroom sketch of SBF in New York City. 3rd October

· SBF had received no plea offer from the prosecutor, which both lawyers confirmed. SBF entered the court with five lawyers.

· Former FTX executive Ryan Salame was unwilling to testify against SBF despite reportedly pleading guilty. Sam Trabucco, Sam’s co-chief executive officer, remains missing, though speculators surmised that he might be a surprise witness for the prosecution.

Source: Courtroom sketch of SBF watching one of FTX’s ads on a screen, while Judge Lewis Kaplan and witness Marc-Antoine Julliard look over to him. 4th October

· Approximately 200 people were summoned for jury selection, but just 12 were ultimately selected to hear the trial

· Administrators for the bankrupt FTX had recovered more than $7bn as of August.

Source: Courtroom sketch of New York City court in SBF trial. 4th October

Going Infinite

Michael Lewis, the best selling author of The Big Short and Flashboys, has released his book on the enigmatic founder to coincide with the court case. The author had unparalleled access to SBF and was living in the Bahamas with the firm during its collapse.

In Going Infinite Lewis sets out to answer this question, taking readers into the mind of Bankman-Fried, whose rise and fall offers an education in high-frequency trading, cryptocurrencies, philanthropy, bankruptcy, and the justice system.

Going Infinite by Michael Lewis

You can also watch an interview with Michael Lewis discussing his book and his experience here.

The Broader Industry

A year ago SBF posted a tweet thread on the balance of “safety vs freedom” in cryptocurrency regulation. Now, a different kind of freedom is on the line when he walks into a Manhattan courtroom to face criminal charges that carry a combined maximum sentence of more than a century in prison.

But this trial doesn’t just concern SBF — it concerns the whole industry. It has added significance given the current state of crypto and the state of regulation in the United States. The outcome of the trial will likely determine the wider consequences of the FTX collapse, as Congress debates new rules for the industry and the government pursues legal battles with several other firms and founders. It’s a question of how far regulation will now go to make sure something like this doesn’t happen again.

This story is yet to be told — but the reverberations are going to be felt far and wide.