Sam Bankman Fried, the onetime cryptocurrency mogul, built his FTX crypto exchange into a “pyramid of deceit” resting on a “foundation of lies and false promises,” a federal prosecutor said on Wednesday at the criminal fraud trial.
Mr. Bankman-Fried’s lawyer countered that his 31-year-old client was simply a “math nerd” who may have made some bad business decisions, but had committed no crimes and never told anyone to break the law.
Those divergent messages formed the core of the closing arguments in Mr. Bankman-Fried’s trial on Wednesday in a Manhattan courtroom. Nicolas Roos, the prosecutor, began by saying that Mr. Bankman-Fried was a liar who was responsible for FTX’s collapse last year, which had left customers unable to recover their deposits.
Mr. Bankman-Fried, who had testified during the trial in his own defense, had “lied about big things and small things,” Mr. Roos said, pointing out that the defendant said he “couldn’t recall” more than 140 times in response to questions on cross-examination.
Then Mark Cohen, a lawyer for Mr. Bankman-Fried, said in his closing argument that the FTX founder had acted in good faith. “Time and again, the prosecution has sought to turn Sam into some sort of villain, some sort of monster,” he said.
Their dueling final arguments came after 15 days of testimony in Mr. Bankman-Fried’s trial, which is one of the most high-profile financial crime cases in years and which has moved far more speedily than anticipated. The outcome of the case will be seen as a referendum not only on the rapid rise and fall of Mr. Bankman-Fried’s business empire, which at its peak was valued at $32 billion, but also on the volatile crypto industry, which only two years ago was riding high before melting down last year.
The spectacular implosion of FTX last November set off a chain reaction that led to the collapse of other crypto firms. Mr. Bankman-Fried’s arrest and subsequent charges also set off regulatory crackdowns across the crypto universe.
At the heart of Mr. Bankman-Fried’s case is whether he committed fraud and treated FTX as his personal piggy bank. Prosecutors contend that he stole as much as $10 billion from FTX’s customers to pay for investments in other crypto firms, buy lavish real-estate in the Bahamas, where the exchange was headquartered, and prop up a crypto trading firm he also founded, Alameda Research.
Mr. Bankman-Fried has pleaded not guilty to seven counts of fraud, conspiracy and money laundering. If convicted, he could face what amounts to a life sentence.
Carl Tobias, a professor at the University of Richmond School of Law, said the prosecution presented a strong case and made a smart decision in “framing this matter as a garden-variety fraud case, rather than a more complex cryptocurrency case.”
Mr. Bankman-Fried’s trial, which began on Oct. 4, has featured plenty of damaging testimony. Prosecutors called 16 witnesses, including three of Mr. Bankman-Fried’s former top lieutenants, each of whom had pleaded guilty to fraud and conspiracy charges and agreed to testify against their former boss. The defense, for its part, called just three witnesses, one of whom was Mr. Bankman-Fried.
At the trial, the prosecution’s three star witnesses — Caroline Ellison, Nishad Singh and Gary Wang, who all worked with Mr. Bankman-Fried — testified that the FTX founder knew for many months that his spending spree was unsustainable and improperly fueled by FTX customer money that had been transferred to Alameda. They also said Mr. Bankman-Fried knew Alameda could not pay back the billions that it had misappropriated from FTX, with Alameda’s debt to FTX concealed from customers and investors.
In response, Mr. Bankman-Fried and his lawyers argued that he was unaware until just a few weeks before FTX collapsed that billions in customer money had been misused. Mr. Bankman-Fried testified that he had thought Alameda’s spending came from corporate money, not customer money. Any mistakes that were made, Mr. Bankman-Fried said, were made in good faith and not intended to defraud anyone.
FTX was supposed to “move the ecosystem forward,” he testified at one point. “It turned out the opposite of that.”
Under cross-examination for nearly seven hours over two days, Mr. Bankman-Fried was asked repeatedly about his many public statements about FTX and how those ran counter to what unfolded behind the scenes at the exchange. Mr. Bankman-Fried often hemmed and hawed in response to questions about his public claims that FTX was one of the safest crypto exchanges in the business.
He was also unable to explain how FTX customer money could have been funneled to Alameda to pay for building out his crypto empire without him knowing about it. At times, he effectively said that former employees who testified against him were not telling the truth.
For closing arguments on Wednesday, Damian Williams, the top federal prosecutor in New York, sat in the front row of the courtroom, accompanied by other government officials. Mr. Bankman-Fried’s parents, who have been fixtures in the gallery throughout the trial, huddled in the courtroom in the morning but left before the government’s presentation began. Mr. Bankman-Fried sat with his lawyers, wearing the same gray suit and purple tie he wore on the stand in recent days.
Standing at the lectern, Mr. Roos went over the highlights of the testimony from the prosecution witnesses, including their statements that Alameda had special privileges with FTX, such as a $65 billion line of credit that permitted the trading firm to borrow billions from FTX’s customers. Mr. Bankman-Fried kept those special privileges secret, Mr. Roos said, “because he knew they were wrong.”
The prosecutor also went over the inconsistencies in Mr. Bankman-Fried’s testimony with those of his former employees. He displayed charts with headings like “The defendant’s lies to the public” and “The defendant’s false tweets in November.” He presented digital records that showed Mr. Bankman-Fried had looked at incriminating documents that he said he couldn’t recall having seen.
Mr. Roos also pointed out instances where Mr. Bankman-Fried appeared to deliberately use FTX’s customer deposits, including to buy back FTX equity from Binance, a competing crypto exchange.
Mr. Cohen began his closing argument by saying prosecutors went out of their way to focus on Mr. Bankman-Fried’s appearance. “We’ll agree there was a time when Sam was probably the worst-dressed C.E.O. and had the worst haircut,” Mr. Cohen said, adding that those weren’t crimes.
The prosecution’s retelling of FTX’s collapse was exaggerated and cinematic, Mr. Cohen said. “In the real world, unlike the movie world, things can get messy,” he said, adding that the big spending by FTX and Alameda “were reasonable corporate expenses” and not a misuse of customer money.
Mr. Bankman-Fried acted in good faith with his business decisions and lacked the criminal intent to defraud anyone, Mr. Cohen said. It was the prosecution’s burden to prove guilt beyond a reasonable doubt, he added, and Mr. Bankman-Fried was not obligated to prove anything.
Mr. Bankman-Fried testified “because he wanted to tell you what happened,” Mr. Cohen said. “It is hard to think of a more stressful situation than that. He was far from polished. He was himself, he was Sam. He told you when he didn’t remember things.”
The jury of nine women and three men is expected to begin deliberating on a verdict after Judge Lewis A. Kaplan of U.S. District Court instructs the jurors on the relevant law.