Sam Bankman-Fried’s parents looked on, stony-faced, as a former employee and friend of their son testified against him in federal court on Wednesday. Asked to identify the defendant, the witness described Bankman-Fried as the man wearing a suit and a purple tie. A year ago, Bankman-Fried was the golden boy of the tech world; observers had no indication that he would wind up in court facing federal fraud charges. That he would appear in a suit and tie, having traded his shaggy curls for close-cropped hair, seemed likewise improbable. The onetime maverick of Silicon Valley looked, from where I was sitting a few rows back in the courtroom, like any other defendant.
The rules, for a time, didn’t apply to Sam Bankman-Fried. Throughout his rise as a crypto leader, Bankman-Fried eschewed formality, consciously cultivating a messy, zany persona. He met with dignitaries in cargo shorts. His hair, constantly unkempt, became a sort of synecdoche for his unbothered attitude (when FTX was gaining renown, he reportedly told a colleague that it was important that his hair stay long so that he would look “crazy”). Now he is confronting a corner of American life reliant on decorum and fact. After FTX’s implosion last year, Bankman-Fried faces seven charges of financial crimes including wire fraud (he has pleaded not guilty to all charges). If convicted, he could face decades in prison. The law, though often unevenly enforced, can at its best serve as an equalizer, where even the powerful must face consequences if they cross lines.
In court this week, Judge Lewis A. Kaplan, a federal-court stalwart who presided over E. Jean Carroll’s case against Donald Trump and other high-profile trials, seemed to epitomize the dignified institution Bankman-Fried is facing. Kaplan did not seem inclined to throw his weight around on behalf of the defendant. On Wednesday afternoon, after the jury filed out, Mark Cohen, one of Bankman-Fried’s defense lawyers, beseeched the judge to help get his client his full prescribed dosage of Adderall. “My problem, of course, is that the last I know, I don’t have a medical license,” the judge snipped, advising that the lawyers contact the Bureau of Prisons about the matter. Bankman-Fried has exasperated this judge in the past: In August, Kaplan ordered the defendant to jail after various infractions (among other things, Bankman-Fried leaked the diary entries of his ex-girlfriend, former Alameda Research CEO Caroline Ellison, to The New York Times).
Bankman-Fried ascended in part based on the idea that he was different from everyone else—smarter, more trustworthy, uniquely able to make sense of the byzantine complexities of cryptocurrency markets. His pedigreed past—he’s an MIT graduate with Stanford Law–professor parents—added to his persona as a disruptive whiz kid. Now the crux of the government’s case against him is that he isn’t so different after all: Bankman-Fried, prosecutors charge, committed good old-fashioned theft.
Using frank language stripped of euphemism, a prosecutor explained to the jury on Wednesday the state’s case of how Bankman-Fried committed fraud on a mass scale. In his opening statement, the government lawyer used, by my count, a version of the word lied 26 times, stole 12 times, took 23 times, and fraud 13 times. Bankman-Fried, the lawyer explained to jurors, stole billions of dollars of customer deposits in order to furnish a lavish lifestyle, make political and charitable donations, and facilitate the purchase of luxury real estate, such as a penthouse in the Bahamas. (A spokesperson for Bankman-Fried did not immediately respond to a request for comment.) That the case revolves around such a complex financial mechanism as crypto is almost incidental; to the prosecution, this was simple fraud, fueled by deception.
Then, in language peppered with metaphors and strained wordplay, Cohen argued in his opening statement that his client acted in good faith trying to run FTX. “There was no theft,” Cohen insisted. Running a start-up, Cohen said, relying on a well-worn tech truism, is like flying a plane as you’re building it. That metaphor was key to the defense’s attempt to explain why Bankman-Fried and his team made such stunning management errors as failing to hire a chief risk officer.
The plane metaphor, which Cohen later repeated, was a bit forced, but it helped to conveniently elide Bankman-Fried’s potential responsibility. The plane was flying into storms while it was being built, his lawyer said; in other words, these were circumstances beyond the defendant’s control. Most of all, Bankman-Fried didn’t intend to steal, Cohen argued. “The defense’s opening statement focused a lot on SBF’s fundamentally good motives and character—as an innovator who made a mistake because the industry and culture are about moving fast and breaking things,” Yesha Yadav, an expert on financial regulation at Vanderbilt Law School, told me over email.
In their opening statements, neither side waded into the complexity of how crypto markets work. The world of crypto is confusing, and, indeed, Bankman-Fried benefited from the perception that he was uniquely qualified to crack it. When it served him, Bankman-Fried relied on his image as a generational genius, a visionary leader who could remake the world of finance. Now his defense is presenting a different narrative: Bankman-Fried might have been “a math nerd,” but he’s also just an overextended businessman who lost track of things as his company ballooned.
Over the next several weeks, the government will need to convince all 12 members of the jury that beyond a reasonable doubt, Bankman-Fried committed fraud. Whether Bankman-Fried will take the stand in his own defense is a big, open question here. In the past, Bankman-Fried has been his own most visible advocate. But in court, where gravity and propriety reign, how his renegade attitude will play—even with his new look—is a wild card.
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Guest Author: Lora Kelley
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