Sam Bankman-Fried’s highly anticipated trial is set to begin on Tuesday and will be closely followed by the cryptocurrency world.
If convicted of the criminal charges, the 31-year-old former CEO of crypto giant FTX could face years behind bars. The trial is scheduled to last for about six weeks, with jury selection beginning on Tuesday in U.S. District Court.
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The charges stem from the sudden and spectacular collapse of FTX last November. The implosion left customers unable to withdraw more than $8 billion in deposits as FTX quickly filed for bankruptcy. Bankman-Fried, who founded the firm, was arrested in the Bahamas the following month.
Prior to the collapse, Bankman-Fried had been becoming the face of the crypto elite. Clad in crumpled clothing, cargo shorts, and a disheveled mop of hair, the FTX CEO found himself in the halls of power, meeting with and donating to senators, wheeling and dealing with high society, and cozying up with celebrities.
Prosecutors allege that Bankman-Fried committed wire fraud, securities fraud, and money laundering while at the helm of FTX, using customer money to make venture capital investments, buy up expensive assets such as real estate, and publicly and privately fund key political campaigns.
John Berlau, a senior fellow and director of finance policy at the Competitive Enterprise Institute, said that the trial also raises the possibility that the public will find out a bit more about the scope of the influence that Bankman-Fried and FTX exerted in public policy.
For instance, Bankman-Fried met with Securities and Exchange Commission Commissioner Gary Gensler, which prompted questions about ethics.
“Hopefully this will have more about his meeting with Gensler, with other regulators, and was he actually proposing things to limit competition from his competitors,” Berlau told the Washington Examiner. “The way he played the regulatory system is the thing I am most interested in.”
Bankman-Fried was arrested last year but was bailed out of prison on a $250 million bond. But the disgraced crypto mogul found himself back in lockup last month after his bond was revoked by Judge Lewis Kaplan of the District Court for the Southern District of New York.
Bankman-Fried will be detained through the duration of his criminal trials, with Kaplan accusing him of sharing information with reporters with the intention “to hurt and frighten” former Alameda Research CEO Caroline Ellison, who was also his on-again, off-again girlfriend.
One major question during the trial is whether Bankman-Fried will end up testifying. That is a scenario that would undoubtedly draw intense public interest but one that many defense attorneys try to avoid given the potential that a cross-examination goes sideways and ends up causing the testimony to hurt more than help.
“It will surely be painful for him to remain quiet if he believes or convinces himself that the government is mischaracterizing his transactions and his closest associates are making up stories about him,” Daniel Richman, a law professor at Columbia University and a former federal prosecutor, told the New York Times.
The FTX collapse had massive repercussions in the cryptocurrency space and caused the price of bitcoin and other cryptocurrencies to plummet and stay low for weeks after. Since then, bitcoin and other cryptocurrencies spent much of 2023 rising, although August and September saw declines.
Berlau doesn’t think the trial will have substantive effects on the price of digital assets. He noted that what caused the FTX collapse wasn’t underlying issues with the cryptocurrency market or digital assets more generally, but rather internal governance issues — issues that are expected to be laid bare during the hotly anticipated trial.
“It will likely not really have any significant negative effect on crypto and it may actually have a positive effect on the price of the major cryptocurrencies,” Berlau said.
Before Bankman-Fried’s arrest, some thought it would take months, if not years, for federal authorities to make a case against him. But prosecutors moved quickly, showing the ability of law enforcement to oversee the cryptocurrency space, which could give investors a bit more confidence in the soundness of the system.
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Bitcoin is now punching in at about $28,800, up 7.7% from a month ago. That represents growth of nearly 68% since the start of the year when the flagship cryptocurrency was still reeling from the FTX debacle. Other cryptocurrencies were also flagging this week, with nearly all of the 100 largest coins in the red.
Ethereum, the second-largest cryptocurrency, is up just over 2% for the past month but has climbed nearly 40% since the start of the year.
