Crypto’s Trial of the Century: Bankman-Fried Prepares for Battle
In the past year, Alameda engaged in extensive borrowing through open-term loans to invest in illiquid assets.
However, the crypto market’s downturn and credit constraints this year led to most of Alameda’s loans being called, creating a crisis. To meet these loan recalls, they borrowed funds from FTX, resulting in a user fund shortfall.
Concerns arose about who knew of the customer fund shortage, with Bankman-Fried’s name being mentioned. It was revealed that the decision to use user deposits was attributed to Sam.
Facing trial, Bankman-Fried, the founder of FTX and Alameda Research, is accused of financial crimes linked to FTX’s collapse, including seven conspiracy and fraud charges. He’s also alleged to have used FTX customer funds to cover Alameda’s loan expenses, acquire real estate, and make political donations.
The downfall began when it was disclosed that Alameda held billions in FTX’s cryptocurrency, FTT, used as collateral for loans. A decrease in FTT’s value posed a threat to both FTX and Alameda.
Following this revelation, Binance’s CEO announced selling $50 million in FTT, causing FTT’s value to plummet. Users rushed to withdraw approximately $6 billion in crypto tokens from FTX within three days.
READ MORE: DeFi’s Hidden Risk: Oracle-Related Losses Soar
FTX’s crisis raised fears of a broader industry collapse akin to the 2008 financial crisis. FTX filed for bankruptcy protection, and Bankman-Fried resigned.
The collapse incurred “billions of dollars in losses to its customers, lenders, and investors.” Federal prosecutors allege Bankman-Fried and co-conspirators, including Alameda’s CEO Caroline Ellison, diverted billions for personal use.
Ellison, having pleaded guilty to her role in the conspiracy, is set to be a key witness in Bankman-Fried’s trial. Prosecutors plan to present recordings of a crucial Alameda staff meeting where Ellison addressed staff concerns.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
