LAGOS, Nigeria (VOICE OF NAIJA) Sam Bankman-Fried, the founder of cryptocurrency exchange FTX and Alameda Research hedge fund, is set to face trial on seven conspiracy and fraud counts related to allegations of siphoning investors’ money into risky trades and other illegal activities.
The Manhattan US attorney’s office has accused him of using FTX customer funds to cover increasing loan expenses at Alameda and engaging in extravagant real estate purchases and political donations.
Bankman-Fried’s legal troubles began when it was revealed in November 2022 that Alameda held a substantial amount of FTX’s cryptocurrency, FTT.
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This led to a Twitter announcement by Changpeng Zhao, CEO of FTX competitor Binance, that his company would sell its $50 million in FTT, causing a sharp decline in its value and triggering a mass withdrawal of funds by FTX clients.
The withdrawal frenzy, reminiscent of a bank run, resulted in users attempting to withdraw around $6 billion in crypto tokens from FTX in three days.
This crisis raised concerns of a potential industry-wide collapse similar to the 2008 real estate crisis, leading FTX to file for bankruptcy protection, and Bankman-Fried subsequently resigned.
Federal prosecutors claim that Bankman-Fried and several co-conspirators, including his occasional girlfriend Caroline Ellison, diverted billions for personal use.
Ellison, who pleaded guilty to her role in the alleged conspiracy in December, is expected to be a key witness for the prosecution.
The trial is anticipated to reveal significant details about FTX’s collapse and the inner workings of cryptocurrency trading, with prosecutors planning to present recordings from an Alameda staff meeting held on November 9th, where Ellison attempted to address staff concerns.