2.Government Opening Statement

MR. REHN: One year ago, it looked like Sam Bankman-Fried was on top of the world. He ran a huge company called FTX. He lived in a $30 million apartment in the Bahamas. He jetted around the world on private planes. He hung out with celebrities like Tom Brady and politicians like Bill Clinton. His face was on magazine covers. He had wealth, he had power, he had influence. But all of that, all of it, was built on lies. Behind the curtain, Sam Bankman-Fried was not who he appeared to be. He was using his company, FTX, to commit fraud on a massive scale. And the money he was spending to build his empire, it was money he was stealing from FTX's customers. He was committing a massive fraud and taking billions of dollars from thousands of victims. Let me say that again. Sam Bankman-Fried, the defendant, was committing a massive fraud and taking billions of dollars from thousands of victims. You see, the defendant had started a company called FTX, which was a cryptocurrency exchange. That means that customers of FTX could deposit money with the company and use it to trade with each other.

MR. REHN: But while the defendant told his customers that they could deposit their money with FTX and FTX would keep it safe for them, in reality, he was taking those customer deposits and spending them for himself. He spent the money on lavish houses for himself, his parents, and his friends. He spent it so he could get introduced to celebrities. He spent millions more on political donations to gain influence in Washington. He poured money, other people's money, into his own investments to try to make himself even richer. But about a year ago the truth started to come out. Customers tried to get their money back, the money they had been told FTX was holding for them. But that money, the customers' money, was gone. The defendant had taken it. FTX collapsed and its customers were left with billions of dollars in losses. That's why we are here today. Because when the defendant wanted money he didn't have, he committed fraud. He took other people's money. He spent that money in all sorts of ways on himself, and he lied about it. We are here today to hold the defendant accountable for his crimes. This morning I am going to talk about what we expect you will see in this trial. First, I'll tell you what we expect the evidence will show, and then I'll tell you about the types of evidence that you will see at this trial. First, let me tell you what the evidence will show the defendant did. The defendant was the founder and chief executive officer of FTX, a cryptocurrency exchange that he created in 2019. Now, at this trial you will learn all about how cryptocurrency exchange works. For now, understand that FTX was a website where people could buy and sell cryptocurrency from each other. It's not a bank. An exchange is a marketplace that matches buyers and sellers. An exchange is supposed to make money by taking a fee from each trade, not by borrowing or spending customer money. Customers could go to the FTX website or use an FTX app on their phones to buy and sell cryptocurrency. And cryptocurrency is just a kind of money that exists on the Internet and is sometimes called crypto. You can buy crypto through a cryptocurrency exchange, and then you can either spend that crypto or hold onto it as an investment, hoping the price will go up. You may have heard of Bitcoin. That's one example of cryptocurrency. And there are others as well. But to buy and sell crypto, using the FTX exchange, customers needed to have money in their accounts. So FTX customers had to first deposit money with FTX to set up their accounts. They might send dollars from their bank accounts or they might send cryptocurrency that they had already bought somewhere else. How did the defendant convince people to trust FTX with their money? Well, the defendant assured customers that FTX was holding the money for them and that they would be able to withdraw the money whenever they wanted. He went to Washington, D.C., and he told Congress and the whole world that FTX had controls in place to protect customer money. He also said that FTX would not use customer money for itself. In other words, the defendant promised customers that the money that he put into FTX was still their money. It was not FTX's money. And the defendant set up the FTX website and the app to lie to customers. If you were a customer, you could open the FTX app and this is what it looked like. It would tell you how much money you had in your account, tell you that it was there for you and that it was available to you to withdraw at any time. And the defendant put this same promise in FTX's terms of service, which told customers how the company would treat their money. Those terms of service told customers that their crypto belonged to them and not to FTX, that the customers could withdraw the money whenever they wanted and that FTX would not use the customers' money. In addition to the website, the defendant put commercials on TV and the Internet, like this one, saying that FTX was the most trusted way to buy and sell Bitcoin. That's right. FTX's advertising slogan was about how customers could trust it. And the defendant went on Twitter and claimed that he was keeping customer money safe. He said, and this is a quote from just one of his tweets, that FTX had a long history of safeguarding client assets, and that remains true today. But that wasn't true. You will learn that this tweet and all of the defendant's other statements about keeping customer money safe were lies. You

MR. REHN: will learn that the defendant knew these were lies. He knew his company didn't keep customer money safe. Why? Because he was the one taking their money. When customers deposited dollars with FTX, he stole that money. And when customers deposited crypto with FTX, he stole that too. Now I will explain just how he did that. The defendant used a second company, a smaller and more secretive company that he owned and controlled. That company was called Alameda Research. You can see here that the defendant owned both FTX and Alameda. They were both his companies. Before the defendant had started FTX, he had started Alameda. Alameda was a company that bought and sold crypto. It made some money, but it also suffered some losses, and he wanted to be more successful and to make even more money, so he started FTX. He named a trader at Alameda, who was also his on-and-off girlfriend, to be the CEO of Alameda. But he was using her as a front. In reality, he was still calling the shots at Alameda, and he came up with a scheme to take money from FTX and give it to Alameda. When the defendant created FTX, he set FTX up so that Alameda had secret access to FTX customer money, and with that access came the ability to take customer money. And once Alameda had the money, then the defendant walked out the door with it and spent it as he pleased. So how did the defendant give himself the secret ability to send FTX customer money straight to his other company, Alameda? There were two ways. First, as I mentioned, customers sometimes deposited dollars onto FTX to trade crypto. When customers sent dollars to FTX, the company would tell them that the money was in their accounts at FTX. You saw the app earlier. They could go onto the FTX website or go on the app and see how much money supposedly sat in their FTX accounts. This was what the customer saw. This is what they were told was happening with their money. But the defendant was keeping his customers in the dark about what is really happening. In fact, the money never actually made it to FTX. Instead, the defendant opened a bank account that was under the control of Alameda, his other company. He put the information for that Alameda bank account on FTX's website as the place where customers should send their money. So when customers thought their money was going to the exchange, they were actually sending their money right into the defendant's pocket. You will hear that the defendant even lied to a bank to set up an Alameda bank account that he used for this. Then the defendant told customers that the money was on FTX and in their accounts. But that was all a lie. The website told them that they had money in their FTX accounts, but the defendant had the money in Alameda bank accounts that he controlled where he could spend it whenever he wanted, and he didn't hold it in those Alameda bank accounts. He did spend it. You will learn that the defendant took billions of dollars in FTX customer deposits from those Alameda bank accounts and he spent it, and the customers had no way to know that their money was being used in this way. Now, here is the second way that the defendant sent customer money to Alameda for his own spending. The second way involved the defendant taking customers' crypto. When customers transferred crypto, they already had to FTX, it went to an account that FTX controlled. You will learn that accounts that hold crypto are called digital wallets. And, again, this is what it looked like to customers. The customers could look into FTX and they were told that the crypto was there in their accounts. But, again, the defendant was keeping his customers in the dark about what was really happening. The defendant set up FTX with a secret special privilege for Alameda, again, his other company. He gave Alameda the ability to secretly withdraw as much of the FTX customers' crypto as Alameda wanted. The defendant made sure that Alameda's special access to customer money was written right into FTX's computer code. It allowed the defendant to use Alameda to make unlimited withdrawals and spend unlimited amounts of money, and that is just what the defendant did. Using Alameda, the defendant withdrew billions of dollars worth of customer crypto out of the FTX digital wallet and into Alameda's digital wallet that he owned and controlled. Again, as you can see here, customers were told that the crypto was there for them in FTX, but that was a lie. The defendant

MR. REHN: had taken that crypto out through Alameda and spent it. And in these two ways the defendant used Alameda to take both dollars and crypto from FTX customers. All that was left in FTX was what amounted to an IOU from Alameda. Now, you will hear that the defendant didn't steal all the customer money from the beginning. He started by taking some of the money from the bank accounts and some of the money from the FTX digital wallets, and for a while customers were able to make withdrawals from their accounts because he left some money in FTX and more and more customers were joining FTX, and they had no reason to suspect that the defendant was pulling some of their money out whenever he wanted to. You will also hear that FTX had various programs for its customers. For example, customers could choose to lend out their crypto to other customers on FTX. But that's not what happened when the defendant took money. You will learn that the defendant took money secretly, that he took money from customers who never agreed to that and who had no way of knowing that he was taking their money. He took it from customers who were told that FTX would hold their money for them and would not use it. The billions of dollars that he took for his own investments, for real estate, for his political donations, he took it from people without their consent or approval and after lying to them that he would keep their money safe. And, as time went by, the defendant used Alameda to pull more and more customer money out of FTX, and the money the defendant stole really started to add up. By the summer of 2022, the defendant had used Alameda to take more than $10 billion of customer money out of FTX, $10 billion stolen from thousands of customers. That's not all. The defendant didn't just defraud his customers. You will also hear that the defendant defrauded other people as well. He sold millions of dollars worth of stock in FTX to investors by lying to them about how the business worked and the money he was stealing, and he used Alameda to borrow millions of dollars from lenders, and he lied to those lenders by sending them false documents. Just like the fraud on his customers, the defendant lied to get money from his investors, and he lied to get money from his lenders. That's how the defendant took money from other people, based on lies and misrepresentations. During this trial you will also hear about how the defendant spent the money that he got through his fraud. He took a lot of the money and put it into investments through Alameda to try to make himself even richer. He took millions more and spent it on political donations so he could get influence in Washington to help his businesses. He bought beachfront property in the Bahamas. And to boost his public image, he gave stolen customer money to a nonprofit organization that his brother controlled. You will also learn that the defendant tried to hide how he was spending this stolen money. He sent it through various bank accounts to conceal where it came from. He gave some money to his friends and had them make political donations in their own names, even though the money came from the defendant. In May and June of 2022, the defendant's schemes started to fall apart. At his direction, Alameda had made a bunch of risky investments in crypto and a lot of those investments were losing money. That meant that Alameda didn't have enough money to pay its bills. But the defendant didn't come clean. Instead, he doubled down. The defendant pulled even more customer money out of FTX to pay off Alameda's loans, more than he ever had before, and to cover up his fraud he directed the creation of false financial statements for Alameda and he lied some more. Within days of stealing billions of dollars of customer money to cover Alameda's debts, he testified to Congress again that FTX wasn't using customer money. A few days later he tweeted that protecting customer money was his top priority. The defendant lied to the world, and he kept the truth about what he was doing with customer money a secret. It was a secret that he only shared with a few members of his inner circle, his girlfriend and some of his closest friends, the people who were helping him commit these crimes. In September 2022, the defendant talked with his inner circle about how deep the hole had gotten at FTX, how many billions of dollars the defendant had taken, and how customers could never be repaid. But the defendant kept lying. He kept

MR. REHN: encouraging customers to deposit more money with FTX, and he kept trying to get more money from investors and lenders. But the defendant couldn't hide the truth forever. You will hear that, in November 2022, some of Alameda's financial information was leaked and published online. People started to realize that the defendant's companies were house of cards and customers began asking to withdraw their money from FTX. Remember, this was the money that FTX had told its customers was being kept safe for them, but FTX did not have the money to pay the customers back. It didn't have the money because the defendant had stolen billions in customer money and spent it. What did the defendant do? He lied some more. He went on Twitter and said his customers' money was safe. He tweeted, and this is a quote from November, FTX is fine. Assets are fine. That was a lie. He said that he had never invested customer money in anything. "We don't invest client assets, even in treasuries." That was a lie. He had taken customer money and sent it to Alameda and then spent it. Where FTX was supposed to have enough money for customers to withdraw their money, now it just had a huge hole, a hole that was billions of dollars deep. Now, you will hear that the defendant knew all along that his schemes might be exposed. It planned for it. He had orchestrated a coverup in advance. You will see how he took steps to cover his tracks, to hide his crimes, how he acted like he was no longer in charge of Alameda when the opposite was true, how he backdated contracts to mislead outsiders about how the company worked, about how he insisted that his employees communicate over an encrypted messaging app, and also demanded that they set their messages to auto delete after 30 days. He didn't want a paper trail for his crimes. In fact, the defendant also lied to FTX's employees, and he used them as a front to make his business appear more legitimate. Only his small inner circle knew the truth, that he was taking customer money. In the end, the hole that the defendant had created at FTX was too big. Once customers started asking for their money back, the whole thing came crashing down. Those customers were left with billions of dollars in losses, and his investors and lenders were left with nothing. You will learn that even after his company collapsed, the defendant tried to cover up his crimes. He tried to confuse the issue by pointing to parts of FTX's terms of service that had nothing to do with the way he took customer money, and by claiming that the customer's losses were caused by a downturn in the crypto markets. But you will see that those excuses were false and that the truth was that the defendant had committed fraud on his customers and taken their money. That is what the evidence at this trial will show. The defendant lied to his customers, and he took the money that they had entrusted to him. He also lied to his investors and to his lenders, and he spent other people's money for himself, and then he lied to try and avoid being caught. Now, what will the evidence be in this case? First, you will see documents. The defendant wasn't able to delete everything. You will see documents he hopes to keep secret. You will see internal company files that document the money that he took and the ways in which he tried to cover it up. You will see how customers were told they had money in their accounts as if it was sitting right there. And you will see and hear the defendant's own words. You will see the ways he made his customers believe that their money was safe and secure when they deposited it with FTX, even while he was secretly taking the money and spending it. You will read parts of his testimony before Congress. And those tweets I told you about, the ones where he told his customers their assets were fine, the defendant tried to delete those tweets, but you will see them here at this trial. You will also see the documents that the defendant gave to his investors and the financial statements he sent to his lenders and the lies they contain. You will hear live testimony from witnesses. You will hear from some of the defendant's victims. You will hear from customers who put money into FTX, who trusted the defendant's company with their money and believed the money would be kept safe and available to withdraw. And you will hear from investors who trusted the defendant and bought stock in FTX after hearing the defendant's lies.

MR. REHN: You will also hear directly from the members of the defendant's inner circle, including his close friends who were his most trusted employees at FTX and who knew about and helped the defendant commit the fraud. They will give you an insider's view of how the defendant's crimes occurred. They will tell you about how the defendant told them to create the secret access that Alameda had that let it take customer money out of FTX. They knew this meant that the defendant was taking customer money, but they agreed to do it anyway. They will tell you how they helped the defendant commit the fraud and helped him keep it a secret. One of the members of the defendant's inner circle was his girlfriend who he put in charge of Alameda. She will tell you about how she and the defendant stole the money that customers entrusted to FTX and used it to make investments through Alameda. She will testify that she and the defendant took customer money again and again to spend it and invest it through Alameda. Make no mistake about it, these witnesses have committed crimes, and they have accepted responsibility for their conduct, pled guilty, and agreed to testify in the hope of receiving a shorter sentence. So you should scrutinize their testimony carefully, ask yourself whether it is consistent with the documents and other testimony in this case. When you do that, you will see that what these witnesses say makes sense and is backed up by the other evidence in the case. Now, the evidence is not going to come in all at once. You will see it witness by witness, document by document, one piece at a time. But by the end of this trial, after you have heard the testimony and you have seen the evidence, you will see the full picture. This man stole billions of dollars from thousands of people. He defrauded sophisticated investors and lenders, and he emptied the accounts of ordinary customers too. He bought himself wealth, power, and influence. At the end of this trial you will know how he committed this fraud and you will have seen the evidence that holds him to account. And you will see that there is only one verdict consistent with the evidence in this case and with your common sense, that the defendant, Sam Bankman-Fried, is guilty.