On the first day of a historic fraud trial, the prosecution alleged that Sam Bankman-Fried misled everyone while he created his cryptocurrency empire at FTX, only informing his friends and girlfriend the truth about what was happening.
The FTX collapse shook the global financial and cryptocurrency industries a year ago. The knock-on effects were so severe that numerous African fintech businesses had to lay off employees to survive. Just two weeks after the Nigerian web3 startup, Nestcoin announced the termination of certain employees for comparable reasons, Quidax laid off 20% of its workforce. Nestcoin had held assets (cash and stablecoins) in FTX to cover operational costs.
Furthermore, Lazerpay’s founder and CEO, Njoku Emmanuel, said that its layoff was not caused by the FTX debacle.
The sad tale of the FTX collapse just got sadder given the recent issue raised in the court trial of Bankman-Fried.
The 31-year-old was described as a calculating criminal by Nathan Rehn, an assistant US attorney, who utilized investor money at FTX as a personal bank account before the company’s bankruptcy filing a year ago. He said that only a small group of people close to Bankman-Fried were aware that he was using customer funds to support his lifestyle. Rehn also noted Bankman-Fried was committing a massive fraud, and taking billions of dollars from thousands of victims.
“He had wealth, he had power, he had influence, but all of that was built on lies,” Rehn told jurors in a federal court in Manhattan on Wednesday. “He was committing a massive fraud, and taking billions of dollars from thousands of victims.”
In their opening arguments, the prosecution made numerous references to Caroline Ellison, a former CEO of Alameda Research, as one of the people who knew what was happening behind the scenes. Following a plea agreement last year, Ellison is now the main witness for the prosecution. Former FTX CTO Gary Wang and former engineering director Nishad Singh are also anticipated to testify as collaborating witnesses.
The case will look into how a clumsy 20-something from California managed to operate and allegedly damage one of the biggest cryptocurrency exchanges in the world, which the government has dubbed one of the worst financial crimes in the nation’s history. The five most serious allegations against the MIT graduate carry a potential 20-year prison sentence.
Rehn used several pieces of evidence to show the jury that FTX committed fraud, including the company’s terms of service and previous tweets from Bankman-Fried promising clients that their money was safe.
Rehn claimed that FTX misled customers into believing that the money was theirs and not the company’s. “FTX’s advertising slogan was about how customers could trust it.” He referred to Bankman-Fried’s statements about FTX keeping customer money safe as lies.
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