Bankman-Fried’s lawyers argued that Alameda’s losses and FTX’s bank run were caused by Caroline Ellison and Changpeng Zhao, respectively.

With jury selection complete, the trial of FTX co-founder Sam Bankman-Fried (SBF) has officially begun, with prosecutors and defense attorneys set to deliver opening statements on Wednesday.

In his remarks, SBF’s lawyer Mark Cohen insisted that the former exchange mogul “didn’t defraud anyone,” instead blaming Binance CEO Changpeng Zhao (CZ) for causing the “FTX bank run.”

SBF "is just a math nerd"

As Inner City Press summarized on Wednesday, Cohen insisted that SBF acted in “good faith” and “did not steal from anyone,” and argued that any loans FTX made to its sister hedge fund Alameda Research were “permitted.”

As prosecutors alleged, Bankman-Fried secretly arranged that fiat and cryptocurrency deposited by customers at his exchange could be secretly spent at Alameda.

The fiat was allegedly stolen by having customers deposit money into Silvergate’s bank account, which actually belonged to Alameda (not FTX). Meanwhile, a hidden backdoor within FTX’s computer system led to cryptocurrency being stolen from FTX customers’ accounts, a feature Reuters reported days after the exchange collapsed.

“They would have you think he’s a cartoon villain,” counters SBF’s Cohen. “He’s a math nerd who doesn’t drink or party.”

Cohen claimed that Silvergate’s Alameda account was created for FTX’s use because FTX did not have an account that accepted USD in its early days. Although the money was intended for FTX’s customers, poor risk management led Bankman-Fried to believe that the money could be loaned out like other Alameda assets.

caroline ellison role

Bankman-Fried ceded his position as Alameda’s CEO to his on-again, off-again girlfriend, Caroline Ellison, in 2021. While prosecutors said he continued to “call the shots” at Alameda afterward, Cohen said Ellison’s failure to heed Bankman-Fried’s advice during the bear market led to the bank’s collapse.

In fact, Alameda’s losses led Bankman-Fried to believe the fund’s bank accounts no longer held FTX customer funds, Cohen said.

“Remember the fiat account? There’s $8-10 billion in there right now,” he said. “Sam has reason to believe Alameda has stopped accepting FTX deposits.”

The lawyer said Bankman-Fried still believed Alameda and FTX were solvent during the market downturn, but that changed when CZ posted a tweet in early November that raised concerns about the two companies. “This triggered a run on the FTX bank,” the defense said.

Ellison and two other executives closely associated with SBF, co-founder Gary Wang and engineering chief Nishad Singh, have reached plea agreements admitting to conspiracy to commit fraud with SBF.

"Now, in the real world, they have to testify in favor of the government," Cohen added. "In the end, we're asking you to acquit Sam."