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Former FTX CEO Sam Bankman-Fried's trial has begun in Manhattan. He could face decades in prison after being accused of stealing billions of dollars in FTX customer funds to plug losses at his hedge fund, Alameda Research.
A quick recap of what happened
Sam Bankman-Fried founded FTX in 2019, quickly building a reputation as a mop-topped millennial genius leading one of the world's top digital currency exchange platforms.
Bankman-Fried claimed to be a follower of the "effective altruism" philosophy, which encourages people to get lucrative jobs so they can amass wealth and donate it to charities. He promised his customers that FTX was "the cleanest brand in crypto", guaranteeing "high returns, no risk".
As his personal wealth skyrocketed, Bankman-Fried donated large sums to both Republican and Democrat politicians and vowed to give away 99 per cent of his money.
But then, in November 2022, FTX unravelled when a run on deposits and falling crypto prices left the company with a $US8 billion ($11 billion) shortfall.
Not long after that, US authorities starting digging deeper into what was really happening at FTX.
Bankman-Fried was later arrested in the Bahamas, extradited to the US and is now facing eight criminal charges including wire fraud, money laundering, and conspiracy to commit fraud on the United States. He has pleaded not guilty.
The trial is expected to last up to six weeks.
Some of the points raised in opening statements
Jurors in the trial of Bankman-Fried heard from both sides for the first time on Wednesday.
In his opening statement, prosecutor Thane Rehn said Bankman-Fried used more than $US10 billion in FTX customer funds to amass his own wealth, power and influence. Mr Rehn said he bought beachfront property in the Bahamas and donated to a nonprofit his brother founded.
Mark Cohen, Bankman-Fried's attorney, called that depiction a "cartoon of a villain," and said evidence would show that his client was actually a "maths nerd who didn't drink or party."
Bankman-Fried, he said, was in reality a CEO of a startup company that collapsed after it was faced with an unanticipated "perfect storm."
"It's not a crime to be a CEO of a company that later files for bankruptcy," he said.
Alameda Research and FTX: nefarious or normal?
Bankman-Fried's hedge fund Alameda Research was also mentioned several times during opening statements.
Mr Rehn told jurors that Bankman-Fried stole customer funds in two ways: by duping FTX customers into sending money intended for their trading accounts to Alameda, and through a "secret special privilege" embedded in FTX software that let Alameda make unlimited withdrawals.
Mr Cohen said prosecutors had misconstrued instances of Alameda performing functions for FTX that the fledgling exchange was not yet set up to perform itself.
He said the software allowed FTX to rely on Alameda as a "market maker," which let Alameda buy and sell crypto as the exchange sought to attract more customers.
Caroline Ellison, who is Alameda's former chief executive, has pleaded guilty to fraud and agreed to cooperate against Bankman-Fried.
According to prosecutors, Bankman-Fried installed Ellison, his sometime romantic partner, as a "front" to lead Alameda in 2021.
"In reality he was still calling the shots at Alameda," Mr Rehn said.
But Bankman-Fried's lawyer said that handing over the reins was normal as FTX grew and took up his time. It was just as natural for Bankman-Fried, still Alameda's majority owner, to stay involved, he said.
"He relied on her and he trusted her to act as the CEO and manage the day-to-day," he said.
Mr Cohen also said Bankman-Fried had asked Ellison to hedge Alameda's investments after crypto's successful year in 2021, but that she failed to do so.
Here's what else is expected during the trial
Prosecutors are expected to call three former members of Bankman-Fried's inner circle — including Ms Ellison and former FTX executives Nishad Singh and Gary Wang — to testify against him. All three have pleaded guilty and agreed to cooperate with prosecutors.
"They will give you an insider's view of how the crimes occurred," Mr Rehn said in his opening statement, without naming the witnesses.
Mr Cohen suggested they may "spin" Bankman-Fried's good-faith decisions that they agreed with at the time as deceitful in hindsight.
"Here in the real world, cooperation means testifying against Sam in a way that will help the government's case," Mr Cohen said.
Jurors are expected to hear from Wang by the end of the week, another prosecutor, Danielle Sassoon, said in court.