Sam Bankman-Fried, the founder of the FTX crypto exchange, which collapsed last November, is scheduled to appear in a New York court next week, charged with eight counts of fraud, which, if proven, could mean a 115-year prison sentence.
"It is a matter of public record that customer funds have been mishandled," said Zoe Williams in The Guardian: at least $4 billion in client funds was transferred from the crypto platform to Bankman-Fried's private trading firm, Alameda Research. So the question for the jury is essentially: "conman or idiot".
Yet much more is at stake. Worth $26 billion in his short-lived prime, Bankman-Fried has become "the embodiment of crypto: his rise astronomical, his demise spectacular". The case will shed light on the wild west-style regulation that allowed him to operate. It isn't just "the crypto king" who's on trial; "it's the future of crypto regulation".
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'A mammoth recovery task'
Ahead of the proceedings, FTX's current CEO and restructuring expert, John Ray, has been overseeing "a mammoth recovery task", said Teresa Xie on Bloomberg. Ray helped untangle the mess following energy giant Enron's bankruptcy in 2007. And of late, he has been "accelerating efforts to recoup billions of dollars" – notably suing Bankman-Fried's parents, professors at Stanford Law School, for allegedly siphoning off millions from FTX in "fraudulently transferred and misappropriated funds".
Outside investors are trying to get a piece of the bankruptcy pie too. "Distressed-debt investors", including Silver Point Capital, Diameter Capital and Attestor Capital, have bought more than $250 million worth of FTX debts – "betting that the company's lengthy bankruptcy process will uncover additional valuable assets".
'Pivotal' evidence of former girlfriend
In all, Bankman-Fried is charged with causing the loss of more than $8bn in customer assets, said Sheelah Kolhatkar in The New Yorker. Victims range from the supermodel Gisele Bündchen to "construction workers, small-business owners and college students".
Ironically, before the collapse, SBF, as he was known, was regarded as a white knight in the wider crypto meltdown and an altruistic philanthropist. That profile, and the backing of venture capitalists such as Sequoia Capital, persuaded many investors that his company was sound, despite his eccentric media appearances and reports of louche living at FTX's Bahamas HQ.
It won't help Bankman-Fried's case that four of his close lieutenants – including his on/off girlfriend Caroline Ellison, who ran Alameda Research – have reached deals with prosecutors, said James Gordon in the Daily Mail. Her evidence is likely to be "pivotal". This promises to be a fascinating financial trial, but a powerful human story too.
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