Sequoia Capital, Bankman-Fried and Alameda Research: What the FTX Indictment in November 2022 Indicated allegedly Didn’t Happen
Bankman-Fried told its partners that whatever due diligence was done by Sequoia Capital could be important. Did FTX just send Alameda customer funds at that point? Did Bankman-Fried know about it? And did he tell VCs at the time? (If he told them it wasn’t happening, that would establish intent). Hermine Wong, the former head of policy at Coinbase and the SEC, says former executives could be called on to testify because of the early investment they made in FTX.
LaVigne says he had him going out to the internet. If he wrote things on Twitter or said things in interviews that weren’t true, that’s more fodder for the government’s case. “They can point to that and say, ‘This is what he said, this is what actually happened.’”
To further establish intent, the government can use Bankman-Fried’s own words. Bankman-Fried was accused of making a false and misleading statement in November 2022, according to the indictment.
“What was he saying to his parents and his other advisors about this?” “LaVigne says.” “What conversations happened between him and his co-conspirators that are now cooperating against him?”
Christopher LaVigne, a partner at the law firm Withers and co-chair of the criptocurrency practice, said that there will be all the drama in the second part. Prosecutors need to connect the transactions to Bankman- Fried, show that he lied about it, and show that he knew what was going on.
The first part of proving the government’s case is pretty simple and a little boring: prosecutors must show that certain transactions took place. Whatever records the Southern District of New York has for the transactions will be shown.
Is he going to throw the whole industry under the bus? Wong wants to know. An idea like ‘Everyone was doing this’ it’s not fair that I was the only one who was charged. That may not fly in a court of law, but it could absolutely damage public perception of crypto at large.
A report published by news outlet coin desk last fall cast doubt over the health of FTXs sibling company, Alameda Research, with which it had very close ties. FTX was unable to meet withdrawals when customers rushed to withdraw their money. FTX was in the middle of a rescue deal with another exchange when it filed for bankruptcy. A month later, Bankman-Fried was arrested in the Bahamas, where FTX was headquartered, and extradited to the US.
How embarrassing is the Bankman-Fried trial? An old friend of mine turned into a new friend, and it is embarrassing for the crypto industry
“How much damage can this trial do to the already beaten-down reputation of the industry at this point?” asks Yesha Yadav, a law professor at Vanderbilt University. “This trial is going to be an excruciating moment for the industry because no one knows what kind of evidence might come out.”
Bankman-Fried’s attorneys are arguing that his rights have been violated because his internet connection is not good enough for his defense, reports LaVigne. That could be grounds for an appeal.
For instance, just before he was arrested, Bankman-Fried brought forward messages from a crypto group chat in testimony he planned to give before Congress. He blamed his lawyers at Sullivan & Cromwell in the testimony.
It is possible other messages from the group chats will be brought up during the trial. Wong says that could be embarrassing for the whole industry.
“You can imagine some of these founders, CEOs, people of that echelon talk to each other somewhat informally about what’s going on,” she says. If it seems like his peer group supported him, or worse, fawned over him, that’s a real problem for the industry’s reputation.”
There’s no question the Bankman-Fried trial is going to be embarrassing for the crypto industry. The salacious details of his past are likely to come back to haunt him in the upcoming trial. Bankman-Fried has an appetite for risk and given that, the sky may well be the limit.
The co-owner of FTX and Alameda Research. Wang met Bankman-Fried in high school, and the pair were later roommates at MIT. He has pleaded guilty to four charges.
The co-CEO of Alameda Research alongside Ellison, Trabucco left the post three months before the collapse of FTX. The DOJ has not accused Trabucco of any wrongdoing, and it is unclear whether he’s cooperating with prosecutors. His whereabouts are unknown.
The director of engineering at FTX. Singh worked as an engineer at Meta before being headhunted by Bankman-Fried. He has pleaded guilty to six criminal charges, including wire fraud, securities and commodities fraud, and money laundering.
FTX is being steered through Chapter 11 by the attorney. Ray became known as a restructuring savant after his work at Enron, a company that engaged in extensive accounting and corporate fraud. The prosecution can cite Ray’s work as part of its case against Bankman-Fried.
Bankman-Fried pleaded not guilty to all of the charges. He has spent most of the intervening period under house arrest but was taken into custody in August after the prosecution alleged he was tampering with witnesses. If convicted at the end of the trial, which is expected to last around a month, the one-time crypto wunderkind could face decades in prison.