Sam Bankman-Fried, the former billionaire and founder of the now-bankrupt cryptocurrency exchange FTX, will stand trial on a series of charges related to fraud and conspiracy in a legal battle set to commence on Tuesday, October 3. The 31-year-old entrepreneur has vehemently pleaded not guilty as he faces a web of allegations.

With the cryptocurrency world and legal circles watching closely, here is an in-depth look at the charges against him.

Stealing customer funds:

Prosecutors have levelled serious allegations against Bankman-Fried, asserting that he embezzled customer funds to mitigate losses at Alameda Research, a crypto hedge fund under his ownership.

These misappropriated funds were allegedly diverted for a range of purposes, including personal investments, the acquisition of real estate in the Bahamas, and donations to US political campaigns.

Prosecutors contend that Bankman-Fried employed 'straw' donors to obscure the true origin of these funds. The charges stemming from these actions include one count of wire fraud, two counts of conspiracy to commit fraud, and one count of money laundering conspiracy.

Lying to investors and lenders: Another set of charges centres on allegations that Bankman-Fried concealed the fact that Alameda Research had borrowed substantial sums from FTX.

It is claimed that he kept this information from the exchange's auditors, which led to the production of inaccurate financial statements that, in turn, reassured investors about the company's risk management.

Additionally, Bankman-Fried is accused of instructing former Alameda CEO Caroline Ellison to mislead the fund's creditors about the money borrowed from FTX, in a bid to dissuade them from recalling their loans.

Ellison, who has already pleaded guilty, is expected to be a key witness during the trial. These charges encompass one wire fraud count and two conspiracy counts related to misleading investors and lenders.

The defence's stance

Bankman-Fried's defence is expected to pivot on FTX's terms of service, arguing that the exchange was not expressly prohibited from using customer funds for its own purposes, provided users had the option to withdraw their funds.

He acknowledges shortcomings in risk management but vehemently denies any involvement in the theft of funds.

His legal team has pointed out that the pooling and reallocation of customer funds was a common practice among cryptocurrency platforms. They have also hinted at potential challenges to witnesses from FTX investors and Alameda lenders, questioning whether they conducted sufficient due diligence.

Additional charges and developments

Originally facing a staggering 13 charges, Bankman-Fried will now only be tried on the seven mentioned above. The remaining five charges, including bank fraud and foreign bribery conspiracy, have been separated into a distinct trial scheduled for March 2024.

Furthermore, one count related to conspiring to violate US election laws was dropped by prosecutors after the Bahamas clarified that it never intended to extradite him on that particular charge.

Prosecutors are expected to argue during the upcoming trial that Bankman-Fried's political donations were an integral part of his broader fraudulent scheme.

(Edited by : Shoma Bhattacharjee)

First Published:Oct 3, 2023 8:57 PM IST