DOJ Plans to Call FTX Customers and Investors in SBF Trial

When Sam Bankman-Fried heads to trial, his former customers will likely testify against him.

Bankman-Fried, founder of the bankrupt cryptocurrency exchange FTX, will go on trial this week for allegedly masterminding one of the largest fraud cases in U.S. history. In a court filing Saturday (Sept. 30), federal prosecutors say they plan to call FTX’s customers and investors as witnesses against him.

According to the filing, the customers will be asked to testify that when they deposited assets with FTX, “they did so with the expectation and understanding that FTX would custody their assets separate from those of the company, would not transfer customer assets to Alameda Research, and would not use their assets for FTX’s or Alameda’s own expenses.”

Alameda Research was FTX’s sister company. Its CEO, Caroline Ellison, pleaded guilty late last year conspiring to use billions of dollars from FTX customers to pay back loans that Alameda had taken out to make risky investments.

Ellison is expected to testify against Bankman-Fried as well, as are other figures who have already pleaded guilty, though Saturday’s court filing does not mention her by name. Bankman-Fried has pleaded not guilty.

“This coconspirator testimony is probative of the manner in which the conspirators agreed to perpetrate the scheme and the method by which they communicated in furtherance of the scheme,” the filing said.

Meanwhile, investors who purchased FTX shares are expected to testify that they understood that FTX would act as a “custodian of customer funds,” “a term that was used in multiple FTX investor pitches, along with similar statements,” the filing said.

As PYMNTS wrote last week, Bankman-Fried’s trial is the biggest white-collar trial in 15 years, with its outcome determining whether the 31-year-old one-time crypto wunderkind will spend decades — if not the remainder of his life — in prison.

At the very least, he’ll be jailed for the duration of the six-week trial, as Judge Lewis Kaplan ruled last week that a defense request for bail be denied, as Bankman-Fried could be considered a flight risk.

“The closer we get to trial, the more I’m wondering about that,” Kaplan said to the defense team. “Your client, if there is conviction, could be looking at a very long sentence. If things begin to look bleak — maybe he feels that now — if that were to happen and if he had the opportunity, maybe the time would come that he would seek to flee.”