The trial against Sam Bankman-Fried (SBF), co-founder and CEO of bankrupt crypto exchange FTX, kicked off yesterday in New York. The U.S. Department of Justice (DOJ) began its case by characterizing Bankman-Fried’s crypto venture as a “house of cards built on a lie.” In contrast, the defense argued that Bankman-Fried acted in good faith and that the collapse of FTX was not his doing.

According to a report by Nikhilesh De, Helene Braun, and Sam Kessler for CoinDesk, Assistant U.S. Attorney Nathan Rehn told the 12-person jury that the prosecution would present evidence proving that Bankman-Fried deceived his customers. Rehn accused him of diverting customer funds to a lesser-known entity, Alameda Research, and using the money for personal expenditures and political donations. He also alleged that Bankman-Fried took more than $10 billion from FTX to settle debts for Alameda Research and tried to cover it up by creating false financial statements.

The defense, led by attorney Mark Cohen, countered these allegations by stating that Bankman-Fried never intended to misappropriate customer funds. They argued that he was overwhelmed by the rapid growth of both FTX and Alameda Research. The defense also shifted some of the blame to Caroline Ellison, a former employee and Bankman-Fried’s ex-lover. Ellison has already pleaded guilty and is slated to testify during the trial.

The prosecution’s first witness was Marc-Antoine Julliard, a London-based commodities trader who lost around $134,000 due to FTX’s collapse. Julliard testified that he had conducted his own research on FTX and Bankman-Fried and had been reassured by Bankman-Fried’s tweets claiming the exchange’s solvency. However, when he tried to withdraw his funds on 8 November 2022, he was unsuccessful.

The defense argued that the government was taking statements out of context and emphasized that Bankman-Fried had worked diligently as his companies rapidly expanded. They also pointed out that Bankman-Fried remained a majority owner in Alameda Research and was thus still involved in its business decisions.

The trial continues, with both sides presenting their arguments. While the DOJ is focused on proving that Bankman-Fried knowingly deceived investors, the defense is working to demonstrate that the collapse of FTX was not his fault but was due to external factors, including the actions of Caroline Ellison.

Featured Image via Midjourney