On the eve of the hearings: Client-witnesses and Bankman-Fried’s opening remarks

On October 3, the first hearing will take place in the case of the collapsed FTX exchange and its former CEO Sam Bankman-Fried (SBF). Ahead of the hearing, ForkLog has gathered the latest news from the defense and the prosecution.

Potential witnesses

Federal prosecutors plan to call former clients, investors and employees of FTX to the forthcoming trial, the U.S. Department of Justice said.

Depositors may describe their expectations regarding how FTX should have safeguarded their assets. Former exchange employees will testify about their interactions with the defendant and their understanding of his goals, the statements and actions he has defined.

The Justice Department intends to draw in retail clients who ‘moved assets to tens of thousands of dollars’ to FTX, and institutions with ‘tens of millions of dollars’.

Among those helping the investigation are former: FTX’s chief technology officer Gary Wang, head of engineering Nishad Singh and Alameda Research CEO Caroline Ellison.

One of the witnesses the DOJ designated as ‘FTX Client-1’ lives in Ukraine. He will seek permission from the country’s government to travel to give live testimony in a U.S. court.

Opening remarks

Bankman-Fried’s lawyers said that some of the DOJ’s questions to jurors could give rise to bias or cause them to reach a guilty verdict before the trial begins.

In their view, the absence of the word ‘alleged’ when describing the defendant’s crimes ‘unlawfully implies that the fraud by the defendant is an established fact’.

Other proposed questions are too restrictive or provide ‘instructions’ for action, the lawyers emphasized.

The jury selection process will begin on October 3 and will last no more than a day.

Bankman-Fried will not be able to pin the collapse of the company on FTX’s lawyers in his opening statement, ruled the federal judge presiding over the case, Lewis Kaplan.

SBF could still employ the ‘defense attorney recommendations’ strategy, by shifting responsibility to a third party. However, without specifics, that argument risks confusing the jury, the judge noted.

He is likely to argue that in-house FTX lawyers and Fenwick & West were involved in many management decisions.

“Whether the defendant should be allowed to argue or introduce evidence regarding the presence or involvement of attorneys, and to what extent, will depend on the circumstances. The best thing to do at this point is to provide sufficient notice to the court to take appropriate measures in each specific case,” Kaplan concluded.

Interference in politics

According to Michael Lewis, author of the bestseller ‘The Big Short’, one day SBF planned to pay former U.S. President Donald Trump $5 billion to withdraw from participating in the elections.

“This will shock you only if you don’t know Sam,” the writer noted.

Lewis added that Bankman-Fried studied the legality of the deal and negotiated with Trump even after the exchange collapsed. He stressed that this did not happen only because SBF did not have such a sum.

The founder of FTX regarded the former president as a threat to democracy and included him on his list of ‘existential risks’ for the United States.

Hacker awakening

On September 30, a wallet connected with the FTX hack was activated and began moving funds. Over the weekend, the alleged hacker transferred 15 000 ETH worth about $25.8 million.

Some assets were routed through the cross-chain protocol THORChain Router, the privacy tool Railgun, and intermediary wallets.

On November 15, 2022, a few hours after FTX announced its bankruptcy, an unknown actor emptied the exchange’s storages and withdrew digital assets totaling about $340 million. The bulk were Bitcoin (25.4%) and Ethereum (68%).

Earlier, lawyers shared their views on the upcoming hearings in the SBF case. They recalled the charges and estimated a possible sentence for the defendant.