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Nearly a year after cryptocurrency exchange FTX went down in flames, the trial of its disgraced founder Sam Bankman-Fried is set to begin in a Manhattan federal court on Tuesday.
SBF—a once-feted wunderkind who often cast himself as an embodiment of responsible stewardship in crypto—faces a litany of charges, including money laundering, wire fraud, and illegal political donations. If convicted, SBF faces potentially decades in prison for his role in the implosion of FTX, forcibly removed from the stage as a man who left the entire industry with lasting scars.
Experts interviewed by Decrypt say that it is clear that prosecutors are confident that they can secure a conviction. From the speed at which the case is going to trial to securing cooperation deals with key figures in SBF’s orbit, they say the government is starting from a strong position.
"I think it's going to be pretty overwhelming if it is brought to a jury in the same way that it was laid out in the indictment," said Daniel C. Silva, a former federal prosecutor. Silva participated in last February’s prosecution of cryptocurrency platform BitConnect, and is a shareholder at the law firm Buchalter.
As with any criminal trial, SBF’s will come down to whether or not prosecutors can prove his intent to defraud customers based on his actions—beyond a reasonable doubt. To this end, legal experts told Decrypt that this will put a lot of importance on the witnesses assembled by the government and the defense’s ability to counter them.
Not long after the first indictments, federal prosecutors announced that they had flipped key members of SBF's inner circle, including FTX co-founder Gary Wang and former head of engineering Nishad Singh. They also revealed that they struck a cooperation deal with Caroline Ellison, former CEO of Alameda Research and SBF's former lover.
Ellison, who has already admitted that she and other executives “knew it was wrong” to be siphoning FTX customer funds to pay off loans at Alameda Research, will likely be closely watched because of her proximity to SBF.
"I certainly think Caroline Ellison has the potential to bring a lot of dramatic moments to the trial, and as a prosecutor in a fraud case, that can be really important for telling the story and grabbing the jury's attention," Jordan Estes, a former prosecutor with the Southern District of New York and a partner at the law firm Kramer Levin, told Decrypt.
If Ellison and others from SBF’s orbit testify for the prosecution, it can help hold the jury’s attention on the main allegations of fraud and away from knottier questions that can confound a jury—questions about how cryptocurrency works, for example. Such questions can often be complicated for jurors to understand and risk distracting from the issues prosecutors want them to focus on.
If questions around crypto are unaddressed, however, that can muddy the picture for jurors, and be something "important for the defense to keep in mind" for an opening, said Brian Newman, an attorney at the law firm Dykema Gossett.
"I think it's not really possible for the prosecution to win without giving the jury some understanding about what these tokens are that are being misappropriated," Newman told Decrypt. "If the jury doesn't know what the prosecution's talking about, it's pretty hard to convict beyond a reasonable doubt."
How SBF’s defense may ultimately play out won’t be seen until trial, but they are facing limits after experiencing some setbacks in recent weeks.
On September 6, SBF's lawyers protested to the judge that the prosecutors' decision to release millions of documents so close to the trial date was hampering their preparations. This was made more complicated by Judge Lewis Kaplan’s rejection of requests to release SBF early so that he could better prepare, and his rejection of the defense’s proposed witnesses.
With their options squeezed, SBF's legal team will likely have to rely on a strategy based on sowing doubt around the idea SBF knowingly committed any crimes at FTX. SBF has already claimed that FTX’s counsel approved his decisions and didn't raise any objections at the time.
Other possible defense strategies may involve using the prosecution’s own witnesses to support their argument that SBF was acting in good faith, and by discrediting their witnesses. In July, prosecutors accused SBF of leaking Ellison's diary as a way to discredit her. Estes said if Ellison or other co-conspirators are cross-examined, it can widen the opening for the defense.
"You're definitely going to have to discredit some of their testimony to suggest that they're lying about certain things because you want to make it look like this was a legitimate business," Estes told Decrypt.
None of these defenses will be easy to make, however. Judge Kaplan has rejected SBF’s request to get access to documents from the law firm Fenwick & West LLP, on which he relied for counsel while helming FTX. Without these documents to prove his case, any “advice of counsel” defense to show that SBF was acting in good faith will be a tougher sell, said Paul Tuchmann, a partner with law firm Wiggin and Dana's litigation practice.
“You'd need access to a lot of documents" to make this defense work, said Tuchmann, who is a former federal prosecutor in Brooklyn. Without them to support his case, the argument becomes "more difficult to make.”
Attacking Ellison or other prosecution witnesses can also backfire, especially if the hope is to frame FTX’s failure as a result of their actions and not their client's. The fact that these witnesses admitted responsibility—unlike SBF—could risk casting him as aloof and irresponsible as an executive, not a misled but well-intentioned one.
"If you get an unsympathetic jury, they look at you almost with disdain when you attack Caroline or someone else who pled guilty and admitted responsibility," said Silva, the former prosecutor. "That can really cause them to see evidence in the worst possible light against you."