MANHATTAN (CN) — In closing arguments on Wednesday, federal prosecutors urged jurors to convict Sam Bankman-Fried for plundering more than $8 billion from FTX customer funds in one of the largest financial frauds in U.S. history.
“This was a pyramid of deceit built by the defendant on a foundation of lies and false promises, all to get money,” Assistant U.S. Attorney Nicolas Roos told jurors Wednesday morning. “And eventually it collapsed, leaving countless victims in its wake.”
Federal prosecutors have accused Bankman-Fried of fraudulently gambling with customers' money in his own casino by directing his Alameda Research hedge fund to secretly commingle billions of dollars of customers’ deposit funds from his FTX exchange platform as stolen capital for cryptocurrency futures trading on the FTX exchange he also co-founded and controlled.
"When he took the money and played roulette with it, he was stealing," Roos said.
The Southern District of New York prosecutor urged jurors not to be distracted or confused by the minutiae of the novel digital finance industry in deliberating Bankman-Fried’s guilt.
“This is not about complicated issues of cryptocurrency,” he said. “It’s not about hedging, it's not about jargon — it’s about deception, it’s about lies, it’s about stealing, it’s about greed.”
“What happened? He spent his customers’ money and then he lied about it,” Roos told jurors. “He took the money, he knew it was wrong. He did it anyway because he thought he was smarter and better.”
At trial, prosecutors showed evidence that Bankman-Fried spent billions of dollars of customer money on real estate purchases, straw donations to politicians, celebrity endorsements and publicity deals, in addition to large venture capital investments.
Three former executives from FTX and Alameda — Alameda co-CEO Caroline Ellison, FTX co-founder Gary Wang and former FTX Director of Engineering Nishad Singh — pleaded guilty to criminal charges and testified at trial as key prosecution witnesses pursuant to cooperation agreements.
“He was the one that set up the system that allowed Alameda to take the money, and he was the one who directed us to take customer money to repay our loans,” Roos quoted Ellison telling jurors during her cooperator testimony.
“If you believe even any one of these witnesses’ testimony … that is fraud and you should find the defendant guilty,” Roos said.
Roos said that to steal FTX customers’ collateral deposits on the exchange, Bankman-Fried used a “secret system for taking customer money.” That allowed his hedge fund, Alameda Research, to use a $65 billion line of credit to make unlimited withdrawals from FTX and “run up a giant negative balance,” according to the prosecutor.
“The reason it is secret is because he knows it’s wrong,” Roos said.
Wang, who was also FTX's chief technology officer, testified that Bankman-Fried had specifically directed him to engineer FTX code to allow Alameda to make trades with a negative overall balance, which normal FTX customers were not allowed to do.
“This was not typical borrowing,” Roos said. “Those billions came from FTX customers.”
Bankman-Fried’s public statements, in advertisements and in testimony before Congress, about FTX being the safest and most trustworthy custodian for customers to trade cryptocurrency were in complete contrast with the reality of his spending billions of customers’ fiat deposit fund, prosecutors argued in their closing summation.
Bankman-Fried publicly claimed that Alameda was “a wholly separate entity” and “a neutral piece of market infrastructure,” Roos said.
He told media outlets he had “worked to eliminate conflicts of interest” at the same time that he was “internally freaking out about the close relationship between Alameda," Roos told jurors.
“He was lying to the public, and he told the same lies on the witness stand," Roos said.
During his direct testimony, he testified “for hours about things that don’t matter,” Roos said. “Suddenly on cross examination, he couldn’t remember a single detail about his company.”
The disparities between Bankman-Fried’s prepared responses on direct defense testimony and his apparent amnesia in response to prosecutors’ questions on cross-examination “was uncomfortable to hear,” Roos said.
“He never said he couldn’t recall during his direct testimony, but he said it over 140 times on cross-examination,” the prosecutor noted.
Prior to the bankruptcy and collapse of FTX, Bankman-Fried had been lauded as one of the most prominent evangelists of the utilitarian philanthropic social philosophy known as “effective altruism,” which promotes accruing wealth and prioritizing donations to projects that will have the largest impact on the most people.
His defense was barred from invoking the philanthropic theory at trial.
Bankman-Fried’s attorney Mark Cohen handled closing arguments Wednesday afternoon, telling jurors in a gentle and delicate tone that the prosecution’s case relied too heavily on a manufactured caricature of the 31-year-old defendant as a criminal mastermind.
“Time and again, the government has sought to turn Sam into some sort of villain, some sort of monster," Cohen said during the defense’s three-hour closing argument.
The government’s nefarious depiction of Bankman-Fried was “wrong and unfair,” Cohen said, and intended to get jurors to dislike him.
"Every movie needs a villain," the lawyer continued. "And let's face it, an awkward high school math nerd doesn't look particularly villainous. So what did they do? They wrote him into the movie as a villain.
“Testimony about his hair, his clothes, testimony about his sex life, photos of him with big hair, photos of him with messy hair, photos of him with playing cards,” Cohen said. “His appearance and his romantic relationships have nothing to do with whether he’s guilty to the specific charges in the indictment.”
Cohen repeatedly asserted that Bankman-Fried acted in good faith.
“In the real world, people misjudge things, they make mistakes, they hesitate, they don’t plan for the unexpected,” Cohen told jurors.
“If he was a criminal mastermind, why in the world would he go in front of Congress and subject [himself] to public questioning when he didn’t have to?” Cohen said. “The answer? He wouldn’t.
"If you find he acted in good faith, you must find him not guilty on all counts," he advised jurors.
In his instructions to the jury on Thursday, U.S. District Judge Lewis Kaplan will explain how jurors should consider Bankman-Fried’s good faith defense.
Kaplan encouraged jurors to stay late on Thursday if their deliberations require, suggesting the government would foot the bill for dinner and car service home.
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