The Final Act of the SBF Trial
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In the high-stakes legal battle that has captivated the finance and cryptocurrency communities, Sam Bankman-Fried (SBF), the ex-CEO of the now-defunct FTX exchange, continues to face intense scrutiny, as he strives to disentangle himself from the allegations of mishandling billions in customer funds.
Trial and Defense Narrative
SBF's narrative in court painted him as an overwhelmed CEO. He positioned himself as a leader so enmeshed in the broader demands of his role that he overlooked critical financial misconduct within his company. This portrayal sharply contrasts with the reality of his role as the founder and majority owner of FTX, where he had significant authority until he claimed to have delegated much of it by mid-2021. In a curious turn, he pointed fingers at colleagues like Caroline Ellison and Sam Trabucco, suggesting a drift toward inattention and early retirement, respectively.
Cross-Examination and the Courtroom Dynamics
Assistant U.S. Attorney Danielle Sassoon's cross-examination chiseled away at SBF's defense during a pre-trial session—so much so that Judge Lewis Kaplan deemed only certain portions of SBF’s testimony admissible. Sassoon further disassembled SBF’s façade of ignorance by aligning his testimonial evasions with concrete instances where he had been directly apprised of financial discrepancies.
Closing Arguments and Legal Assertions
As closing arguments wrapped, starkly contrasting portraits of SBF emerged. The prosecution, led by Nicolas Roos, depicted SBF as a manipulative figure, pointing to overwhelming evidence and testimonies from former allies turned prosecution witnesses. SBF’s defense, led by Mark Cohen, attempted to humanize him, reducing his actions to good faith misjudgments. They argued that his former colleagues, who had already pleaded guilty to related charges, were shifting blame to lighten their own sentences.
Key Facts and the Broader Context
The FTX platform, once a crown jewel of the crypto industry, collapsed in a sequence that seemed straight out of a thriller. After Binance's CEO, Changpeng Zhao, raised alarms over FTX's stability and sold off his stake, a liquidity crisis ensued, leading to an $8 billion gap and eventual bankruptcy. The domino effect shook the entire crypto world, prompting regulatory crackdowns and magnifying scrutiny on the industry.
Bankman-Fried's legal woes, encapsulated in seven counts of fraud and money laundering, potentially sum up to a life sentence. Witnesses including Ellison, Singh, and Wang—former top executives at FTX—all testified against SBF, affirming his awareness of the precarious financial practices and misuse of customer funds.
Sam Bankman-Fried's extravagant expenditures, including a $30 million apartment and a $16 million house for his parents, underscored his lavish lifestyle.
Reports revealed SBF's use of $15 million for private jet travel, indicating the high costs of his personal transport.
Prosecutors highlighted six critical junctures where SBF repeatedly chose to perpetuate fraud rather than disclose the truth.
SBF's admission during cross-examination that Alameda used customer funds for its borrowing activities pointed to a direct misuse of client assets.
The revelation of Caroline Ellison preparing seven alternative Alameda balance sheets to deceive lenders like Genesis showcased systematic efforts to mask financial instability.
Testimony disclosed that SBF misdirected customer funds to repurchase stock from Binance, illustrating a misallocation of resources.
The court was informed of SBF's approval of a precarious "negative balance" feature following a botched liquidation, which precipitated Alameda's financial distress.
High-profile promotional contracts were scrutinized, including Steph Curry's $35 million deal for 20 hours of annual work over three years with FTX.
Kevin O’Leary's $15.7 million compensation for promotional services for FTX — covering 20 hours of work, 20 social media posts, and 50 autographs — was also examined, casting a light on the celebrity endorsements that bolstered the company's image.
As global observers await with bated breath, the verdict of the trial — now entrusted to the deliberation of the jury — is poised to set a landmark precedent in corporate governance and shape the trajectory of the cryptocurrency industry. TOMORROW IS A BIG DAY :)
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This Week By the Numbers 📈
Interest rates held at a steady range of 5.25% to 5.5% by the Federal Reserve, market rallies
BTC ascends past the $35,000 mark
A notable decline in BTC profit-taking activities
Bernstein Asset Management predicts Bitcoin could reach $150,000 by 2025
MicroStrategy’s Bitcoin investment reflects a $745 million unrealized profit
The SEC is currently reviewing 8-10 Bitcoin ETF proposals.
Invesco and Galaxy Digital's joint Bitcoin ETF application listed on the DTCC’s website
The U.S. Government plans to borrow $1.6 trillion in the next six months
Top Stories 🗞️
A court-ordered liquidation process allows FTX to sell nearly $3.4 billion worth of crypto assets in weekly batches starting from $50 million a week. The crypto wallets linked to the now-defunct crypto exchange FTX and its sister trading firm, Alameda Research, have sent over $13 million in different altcoins to numerous crypto exchanges as of Nov. 1. According to data from on-chain analysis firm Spotonchain, the FTX wallet first transferred $8.12 million worth of altcoins to Coinbase. The assets include 46.5 million of The Graph’s GRT ($4.85 million), 972,073 Render (RNDR) ($2.3 million) and 708.1 Maker ($967,000). The wallet addresses of FTX and Alameda Research made another $5.49-million transfer after three hours to Binance and Coinbase. The top three assets with the highest value in this transaction are 1.14 million dYdX (DYDX) ($2.64 million), 192,888 Axie Infinity ($1.05 million) and 5,858 Aave ($522,000).
According to a report from the Wall Street Journal - which sent WeWork shares spiraling to the tune of 36% as of this writing - the failed workspace company, once valued at $47 billion, is planning to file Chapter 11 as early as next week. The company missed interest payments to bondholders on Oct. 2, which initiated a 30-day grace period. Failing to do so means default - however on Tuesday the company said it had struck an agreement with bondholders which would allow it another seven days to negotiate before a default is triggered. Things took a decided turn for the worse in August, when a management shakeup, followed by September comments from CEO David Tolley regarding the company's lease commitments foreshadowed bad things to come. WeWork had 777 locations across 39 countries as of June, which included 229 locations in the US. The company has an estimated $10 billion in lease obligations ranging from the second half of 2023 through the end of 2027, as well as an additional $15 billion that starts in 2028.
A U.S. jury on Tuesday found the National Association of Realtors and some residential brokerages, including units of Warren Buffett’s Berkshire Hathaway, liable to pay $1.78 billion in damages for conspiring to artificially inflate commissions for home sales. Plaintiffs in the class action included sellers of more than 260,000 homes in Missouri, Kansas and Illinois between 2015 and 2022, who objected to the commissions they were obligated to pay buyers’ brokers. Home sellers complained that this model suppressed competition by keeping commissions for buyer brokers in the 2-1/2 to 3% range despite the brokers’ diminishing role, with many buyers able to find homes independently online.
President Joe Biden on Monday signed an ambitious executive order on artificial intelligence that seeks to balance the needs of cutting-edge technology companies with national security and consumer rights, creating an early set of guardrails that could be fortified by legislation and global agreements. Before signing the order, Biden said AI is driving change at “warp speed” and carries tremendous potential as well as perils. “AI is all around us,” Biden said. “To realize the promise of AI and avoid the risk, we need to govern this technology.” The order is an initial step that is meant to ensure that AI is trustworthy and helpful, rather than deceptive and destructive. The order — which will likely need to be augmented by congressional action — seeks to steer how AI is developed so that companies can profit without putting public safety in jeopardy.
Saudi Arabia looks set to be the host of the 2034 World Cup after the only other country to have shown an interest in hosting — Australia — made a last-minute decision not to bid. It puts Saudi Arabia on track to host the global soccer tournament a decade from now — a move that’s likely to be seen as highly controversial. It would also make it only the second Arab Gulf country to ever host the World Cup, after Qatar did so in 2022. The selection of Qatar as host angered many human rights activists, who accused the state of abusing migrant workers, endangering the lives of the LGBT community and stifling free speech. Qatar pushed back by insisting that everyone was welcome in the country and denying reports that thousands of workers had died building the stadiums, but said that it was entitled to set its own laws. The 2030 FIFA World Cup, meanwhile, will be hosted by Morocco, Spain and Portugal, with the three opening matches to be played in South America.
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About the Author: Tatiana Koffman
Hi there and thanks for reading! If you stumble upon my newsletter, you will notice that I write about money, economics, and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital, and Cryptocurrencies. I write to make financial topics more accessible and create equal opportunity for the next generation of investors. I have personally invested in 20+ companies and funds (👉 my portfolio).