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“The case has turned out to be not solely as sturdy because it was anticipated to be however, if something, stronger,” mentioned Samuel Buell, a former federal prosecutor and a legislation professor at Duke College. “Protection legal professionals can’t make sturdy proof go away. I don’t know the place they go from right here.”
The trial, anticipated to run for six weeks, is simply coming into its third week. Protection legal professionals have but to name their very own witnesses, a roster that would embrace Bankman-Fried himself. The previous government has pleaded not responsible to seven counts, together with wire fraud and conspiracy to commit cash laundering.
Bankman-Fried’s protection staff signaled of their opening assertion they might search to current him to jurors as a well-intentioned entrepreneur whose enterprise grew extra rapidly than his capability to adequately guard in opposition to the dangers to it.
However prosecutors could have already succeeded in convincing jurors Bankman-Fried was a manipulative swindler and bully who ordered his high deputies to hold out one of many greatest monetary frauds in historical past, specialists mentioned.
Authorities legal professionals at the moment are questioning the final of the three key witnesses who as soon as shaped Bankman-Fried’s tightknit social {and professional} inside circle earlier than pleading responsible to crimes they are saying he directed. Prosecutors’ case arguably culminated with testimony final week from Caroline Ellison, the defendant’s sometimes-girlfriend and the chief government of his crypto hedge fund, Alameda Analysis.
Ellison spent hours on the witness stand strolling the court docket via the rise and fall of FTX, Bankman-Fried’s crypto buying and selling platform, because the hedge fund borrowed more and more enormous sums of FTX buyer funds at his path.
In at instances emotional testimony, the Stanford-trained mathematician mentioned Bankman-Fried gave her an moral framework that justified mendacity to clients and buyers, together with by falsifying stability sheets. She described the “overwhelming feeling of reduction” she felt when the fraud was uncovered and the enterprise collapsed as a result of she “didn’t must lie anymore.”
Prosecutors backed up her account with documentary proof, together with a recording of her speak to Alameda workers final November as FTX grew to become bancrupt wherein she tearfully admitted to tapping FTX buyer funds at Bankman-Fried’s instruction.
For his or her half, Bankman-Fried’s staff appeared to wrestle to reply throughout their cross-examination, though lead protection lawyer Mark Cohen, who additionally represented convicted intercourse trafficker Ghislaine Maxwell, did notch some minor victories: Ellison acknowledged at one level that Bankman-Fried was unaware that some legacy FTX clients continued wiring funds to Alameda-controlled financial institution accounts even after the trade arrange its personal accounts to deal with their cash — suggesting Bankman-Fried was not calling all the pictures at Alameda.
However the protection didn’t discredit Ellison or the thrust of her testimony. “It’s very tough for the protection when you’ve gotten a witness within the inside circle who has fully embraced that they’ve been concerned with wrongdoing,” mentioned Jordan Estes, a former federal prosecutor for the U.S. lawyer’s workplace for Southern District of New York, which is prosecuting the case.
Rebecca Mermelstein, one other former prosecutor for the Southern District, mentioned of the protection there may be “no query they’re having a extremely onerous time.”
Along with the sheer weight of the proof the prosecution has gathered, Bankman-Fried’s attorneys have additionally grappled with unfavorable rulings from Choose Lewis A. Kaplan, she added.
Earlier than the trial started, Kaplan granted a request by prosecutors to dam the seven witnesses that Bankman-Fried’s staff wished to name. They included a British barrister who was set to testify that FTX’s phrases of service didn’t prohibit the corporate’s management from tapping buyer funds.
Cohen wrote to Kaplan final week asking him to revisit that ruling, arguing the matter goes to the guts of Bankman-Fried’s protection. “A key component of the protection is that no theft occurred. Theft requires the wrongful taking of property,” he wrote.
But Kaplan already has signaled he’s not inclined to permit the protection to push that argument. Within the first week of the trial, he instructed legal professionals to look into the “buried information doctrine,” which holds that it may be deceptive to bury necessary info in a prolonged disclosure. “I used to be very shocked by that,” Mermelstein mentioned. “Judges don’t normally supply strategic strategies to the events.”
Kaplan has in any other case saved protection legal professionals on a brief leash, often remonstrating them for repetitive questioning. Daniel Silva, a former federal prosecutor centered on monetary crimes, mentioned the protection’s technique in asking questions already coated by prosecutors was not clear.
The protection legal professionals could also be searching for to pull out the method to present Bankman-Fried, who has been imprisoned in a Brooklyn jail since Kaplan revoked his bail in August, extra time to digest the prosecution’s proof, Silva mentioned. That would turn out to be consequential towards the top of the trial, when Bankman-Fried has to make the high-stakes choice whether or not to testify himself.
Certainly, the decision on whether or not Bankman-Fried takes the stand may very well be an all-or-nothing gamble. “It’s very onerous if the prosecution has a powerful case to do nothing,” Estes mentioned, including the defendant could face a must “shake it as much as change the sport.”
However taking the stand would additionally expose Bankman-Fried to cross-examination by prosecutors. “That will probably be actually, actually robust to get via unscathed, when he’s on the stand and contradicting a complete ton of proof that the federal government has already introduced,” mentioned Buell, who served because the lead prosecutor for the Justice Division’s Enron Activity Pressure. “It’s very uncommon {that a} defendant can flip a case round from the witness stand.”
Buell identified one other issue that would favor the prosecution: The trial has turned out to be easy, regardless of the complexity of crypto. “It’s a simple fraud case: Did he take the cash? Did he lie about it? Did he know he was mendacity about it?”
Eli Tan contributed to this report.
correction
An earlier model of this story incorrectly said that Caroline Ellison obtained her diploma from MIT. It was Stanford.
