SBF crypto empire constructed on ‘pyramid of deceit,’ prosecutors argue

Prosecutors in Sam Bankman-Fried’s prison fraud trial kicked off their closing argument on Wednesday, reminding the 12 jurors why they’ve spent the previous 4 weeks sitting in a decrease Manhattan courtroom.

“Virtually a 12 months in the past, 1000’s of individuals from everywhere in the world who deposited cash with FTX began withdrawing funds,” Assistant U.S. Legal professional Nicolas Roos informed the courtroom.

Roos stated there’s “no critical dispute” that $10 billion in buyer cash that was sitting in FTX’s crypto alternate went lacking, with a few of it going to to pay for actual property, investments, mortgage repayments and political donations.

The primary factor the jury has to resolve, Roos stated, is whether or not Bankman-Fried knew that taking the cash was incorrect.

“The defendant schemed and lied to get cash, which he spent,” Roos stated.

Bankman-Fried, the 31-year previous son of two Stanford authorized students and graduate of Massachusetts Institute of Know-how, faces a possible life sentence if convicted on costs, which embody wire fraud, securities fraud and cash laundering, all tied to the collapse late final 12 months of FTX and sister hedge fund Alameda Analysis. He pleaded not responsible.

The trial, which started in early October and is ready to wrap up within the coming days, has largely pitted the testimony of Bankman-Fried’s former shut mates and high lieutenants in opposition to the sworn statements of their former boss and, for a lot of of them, former roommate.

The federal government’s key witnesses included Caroline Ellison, Bankman-Fried’s ex-girlfriend and the previous head of Alameda, and FTX co-founder Gary Wang, who was Bankman-Fried’s childhood pal from math camp. Each pleaded responsible in December to a number of costs and cooperated as witnesses for the prosecution.

When it was time for Bankman-Fried’s group to mount a protection, lead counsel Mark Cohen left the majority of the case to his shopper, who spent three days on the stand telling the jury that he did not defraud anybody, did not take buyer cash and tried to work along with his deputies to maintain FTX from failing.

Roos spent Wednesday morning asking the jury to take a look at the proof. At one level, he requested, “Who’s accountable? He then stepped out from behind the rostrum and in the direction of the protection desk, pointed on the defendant and stated, “This man, Samuel-Bankman-Fried.”

“A pyramid of deceit was constructed by the defendant,” Roos stated. “That in the end collapsed.”

The information, as listed by Roos, have been that prospects believed their deposits have been their very own and never for use by anybody else; that FTX adverts regularly stated the alternate was the most secure and simplest way to purchase cryptocurrency; and that $10 billion was lacking.

Roos informed the jury that Bankman-Fried lied to them, reminding them how clean the defendant was in answering questions from his personal lawyer however how “he was a distinct particular person” when it was the prosecutors’ flip. He had an ideal reminiscence on Friday, Roos stated, telling the jury that Bankman-Fried knew the small print concerning the structure of his Airbnb workplace in California, the rationale he went to Hong Kong and why he picked the Miami Warmth enviornment because the one for FTX to sponsor.

That every one modified when the federal government was asking the questions.

“It was uncomfortable to listen to,” Roos stated, including that Bankman-Fried stated “I am unable to recall” over 140 instances throughout questioning by the federal government.

“To consider his story, you’d must ignore the proof,” Roos stated. “You’d must consider the defendant, who graduated from MIT and constructed two multibillion-dollar corporations, was really clueless.”

Crucial to the failure of FTX was the usage of buyer funds to cowl losses in Alameda’s books following the plunge in crypto costs final 12 months. Roos stated Bankman-Fried is the one who gave particular privileges to Alameda, which he began earlier than founding FTX, permitting it to siphon buyer cash. He knew it was incorrect, Roos stated, which is why he stored it secretive.

Roos stated Bankman-Fried had been mendacity to the general public about Alameda’s “secret benefits,” and was being untruthful when he informed the general public and the media that Alameda was identical to everybody else.

“These have been lies,” Roos stated. Had they recognized the reality, “traders would have run for the exits,” he stated.

Bankman-Fried blamed “messy accounting,” Roos stated, including “give me a break.” He stated these feedback contradicted what he informed Congress, that he’d reconciled the books.

Choose Lewis Kaplan, who presided over the trial, began courtroom virtually a half hour late on Wednesday as a result of a juror was caught in site visitors. Then there have been technical points, because the second row of displays within the jury field stopped working. That led to a 1- minute break.

Later in Roos’s closing, he introduced up the notorious spreadsheet of the seven alternate variations of Alameda’s funds that Ellison had put collectively when third-party lenders have been asking for an replace. Bankman-Fried testified that he’d seen a spreadsheet however did not keep in mind the small print and did not ask Ellison questions on it. Roos referred to as the reason “implausible.”

Roos referred to metadata exhibiting that Bankman-Fried was a part of a gathering for about half-hour the place the outlet in FTX’s stability sheet and repaying lenders have been mentioned. Metadata exhibits he was learning the Google Doc of the corporate’s funds, with numbers indicating the billions in borrowing from FTX.

Roos introduced up testimony from three firsthand witnesses who stated that they’d spoken with Bankman-Fried concerning the big gap within the stability sheet. Ellison stated there was no strategy to repay it, and Singh testified that Bankman-Fried admitted to him that “we’re a little bit quick on deliverables.”

Bankman-Fried “had the vanity to assume he might get away with it,” Roos stated.

One other level chatting with the defendant’s intent, Roos stated, was his tweeting.

Bankman-Fried’s plan final November, when he knew there was solely sufficient cash to course of one-third of shopper belongings, was to ship a assured tweet thread. Singh testified that he wasn’t snug with the plan, but Bankman-Fried went on to tweet that “belongings are fantastic” because the financial institution run was underway, Roos stated.

Bankman-Fried knew Alameda had a detrimental internet asset worth of $2.7 billion, Roos stated, however needed to make one other $3 billion in enterprise investments. The one approach to do this was with FTX buyer funds, he stated.

Moreover, Roos informed the jury, shopper cash went to $100 million in actual property bills, together with a $30 million penthouse within the Bahamas and $16 million for his dad and mom’ residence.

In referencing the Tremendous Bowl image with Katy Perry and others, Roos referred to as Bankman-Fried a “superstar chaser.”

Roos walked the jury by way of a timeline of key moments, as follows:

• On Sept. 1, Bankman-Fried noticed that FTX had a $13.7 billion gap.
• On Sept. 7, Bankman-Fried wrote a protracted memo proposing the shutdown of Alameda. Nonetheless, he spent $45 million for a stake in Skybridge Capital.
• Then, on Sept. 22, he paid $4 million to himself.
• 4 days later, he despatched $250 million to Modulo Capital, a hedge fund within the Bahamas.
• And on Oct. 3, he funneled $6 million for political donations.

“That is all you must know to search out him responsible,” Roos stated.

— CNBC’s Daybreak Giel contributed to this report.

WATCH: Closing arguments underway in SBF trial