Bankman-Fried’s fraud trial begins

This is an audio transcript of the FT News Briefing podcast episode: ‘Bankman-Fried’s fraud trial begins’

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Marc Filippino
Good morning from the Financial Times. Today is Thursday, October 5th, and this is your FT News Briefing.

FTX founder Sam Bankman-Fried had his first big day in court yesterday. World Cup is going intercontinental. And Rishi Sunak is cutting back on a long promised high-speed rail project. I’m Marc Filippino, and here’s the news you need to start your day.

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The trial against cryptocurrency exchange founder Sam Bankman-Fried began this week. Opening statements happened yesterday in Manhattan. Investors sank nearly $2bn into Bankman-Fried’s FTX exchange before it collapsed last year. And now SBF, as he’s called, is facing multiple fraud charges. Joe Miller is the FT’s US legal correspondent, and he’s covering the trial. Hey, Joe. 

Joe Miller
Hi, Marc. 

Marc Filippino
So remind listeners what Sam Bankman-Fried is accused of. 

Joe Miller
Sam Bankman-Fried is accused of essentially orchestrating a vast, massive fraud on customers of FTX. It became one of the world’s biggest platforms on which cryptocurrencies, like bitcoin and ether and others were bought and sold and traded on. And essentially, as you mentioned there, there was a dip in the crypto market last summer, and during that downturn it became apparent that billions were allegedly missing from FTX’s balance sheet. That led to a run on the exchange where people tried to withdraw their money and lo and behold, that money was not there. 

Marc Filippino
What are SBF’s attorneys saying? I mean, what’s his defence strategy? 

Joe Miller
Well, this is what we’ve all been waiting for. Opening arguments began in the trial. First, we heard from the government, and then we heard from Bankman-Fried’s lawyer, Mark Cohen. And essentially what he said is that the government has painted his client as this kind of cartoon villain, when in fact he was a math nerd who didn’t drink or parties. What Cohen told the jury, that maybe his risk management wasn’t perfect and he was blindsided by this dip in the crypto market. But what they were really honing in on is intent. And what they were trying to say is this is a young entrepreneur trying to build a crypto empire, and it all went wrong. And it’s a tragedy rather than a crime. 

Marc Filippino
Yeah. What evidence does the government say it has? 

Joe Miller
Well, the government’s evidence will be laid out over the next few weeks. We know already that the government plans to call a few witnesses who have pleaded guilty and agreed to co-operate with the government, and these include Caroline Ellison, who used to be Bankman-Fried’s girlfriend, but, more importantly, was the chief executive of FTX’s sister firm, a company called Alameda. And Alameda was allegedly where many of the billions in customer deposits ended up and was subsequently lost. Now, soon after Bankman-Fried was charged last year, she agreed to plead guilty. She is set to be the star witness. And I think we can also expect to hear from investors into FTX, who essentially thought that this was a legit business and then got burnt. 

Marc Filippino
What are you looking out for as this unfolds? I mean, what are the broader consequences of a trial like this? 

Joe Miller
Well, SBF could face up to a lifetime in prison if he’s found guilty on all of the counts. What I’m looking out for is, this is of course a trial about Sam Bankman-Fried. He was the public face of cryptocurrency. And the question here is, aside from his personal criminal culpability, is there anything in this case that points to the viability of this entire sector as a whole? What were the things that people believed when they were investing in FTX and why did they believe them? And are those things still true? I think that is a big part of what we’ll be looking for in the next few weeks. 

Marc Filippino
Joe Miller is the FT’s US legal and enforcement correspondent. Thanks, Joe. 

Joe Miller
Thank you, Marc. 

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Marc Filippino
Oil prices are finally starting to cool off. Yesterday, liquid gold had its biggest one-day drop in more than a year. Brent crude and West Texas Intermediate fell to about $85 a barrel. To put that into context, just last week, oil was nearly $98 a barrel. The decline yesterday wiped out gains that started at the beginning of September. That’s when Russia and Saudi Arabia said they would extend voluntary production cuts.

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UK prime minister Rishi Sunak addressed members of the Conservative party at its annual conference on Wednesday. His mission: convince the British public that after more than a decade in power, Conservatives still have fresh ideas. Here to discuss this is the FT’s political editor George Parker. Hey, George. 

George Parker
Hi there. 

Marc Filippino
So, George, where are you talking to us from today? 

George Parker
Well, I’m here at the Conservative party conference in Manchester. The press area is in a disused railway shed. We’re working with the scenery being taken down around us. I just see a handful of journalists still here in the press room. 

Marc Filippino
And that probably explains all the noise going on behind you. So we’re speaking to you on Wednesday, right after Rishi Sunak addressed Conservative party members. What did he want to accomplish? 

George Parker
Well, he’s the leader of the Conservative party, which has been in power since 2010, so for 13 years. There’s a general election coming up we expect next year. And so the very strong mood in the country is it’s time for a change. Now, Rishi Sunak’s task at the Conservative party conference here in Manchester was to try to persuade people that he could be the change himself. So what we heard about him was a lot of talk about taking difficult long-term decisions for the country and marking a break from politics as usual. 

Marc Filippino
And Sunak faced a lot of pressure going into the party’s conference over his plans for transportation infrastructure in the country. What did he have to say about that? 

George Parker
Yeah, there’s a scheme called High Speed 2 Rail. It’s the most significant transport infrastructure project in the UK. The intention was to build a high-speed railway line from London to the great cities of the Midlands and the north of England, places like Manchester and Leeds. It was emblematic of what Boris Johnson called the levelling up agenda. So the idea was you were gonna spread wealth away from the wealthy parts of London or the south-east of England to the whole of the United Kingdom. And building this railway line was seen as an important part of that. And what we saw Rishi Sunak doing today was announce the axing of the entire northern section of High Speed 2. What he did instead was to say, look, we’re gonna save £36bn from not building this overbudget project. And we’re gonna spend the money on more local transport schemes that people will benefit from, and he hopes that will be more popular with voters in building this very prestigious project to the north. 

Marc Filippino
And how did his Conservative party react to this? 

George Parker
Surprisingly well. I think he thinks he’s explained it well enough. You know, judging by the reaction of party membership in the whole. Yeah, I think Rishi Sunak frankly got away with it. 

Marc Filippino
Did he, though? I mean, a lot of prominent people were advising him not to do this. Or, is that what Sunak wanted? 

George Parker
Exactly. He’s almost revelling in the fact that this decision has been criticised by four previous prime ministers, actually — Gordon Brown, David Cameron, Theresa May and Boris Johnson. And what he was saying there is, we’re making a virtue about, saying that I’ma break from the failed status quo politics of the past where people are not prepared to challenge false consensus, you know, try to convince the public that if they want change at the next election, they don’t have to go away and vote for the Labour party. 

Marc Filippino
George, I’m curious whether or not this conference or, you know, Sunak’s speech gave any insight into how Conservatives might perform in the next general election. 

George Parker
Well, at the moment the Conservatives are trailing the Labour party typically by 15 to 20 points. So most predictions are that the Conservative party is heading out of power. However, their hope is really built on Rishi Sunak as this change candidate. 

Marc Filippino
Yeah, Labour of course isn’t likely to let their lead in the polls go easily. Their conference starts on Sunday. George Parker is the FT’s political editor. Thanks, George. 

George Parker
Pleasure. 

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Marc Filippino
Before we go, yesterday, we got our first glimpse of the 2030 men’s World Cup from Fifa president Gianni Infantino. 

Gianni Infantino voice clip
Two continents, Africa and Europe, united not only in a celebration of football but also in providing unique social and cultural cohesion. What a great message of peace, of tolerance and of inclusion. 

Marc Filippino
Spain, Portugal and Morocco will jointly host the tournament and three single matches will be played in South America. This is the first time that the World Cup will be held on more than one continent, which is kind of cool if you think about it. The United States, Canada and Mexico are set to host the next World Cup in 2026.

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You can read more on all these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news. 

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