Crypto Wire- SBF’s crypto fraud trial

FTX-founder Sam Bankman-Fried‘s trial is less than a week away. Here’s what you need to know:

• Sam Bankman-Frieds trial to test dueling explanations for collapse of crypto exchange

• Hong Kong crypto firm hit by $200 million hack

• JPMorgans UK bank Chase to bank crypto transactions

The basics: Sam Bankman-Fried, the 31-year-old founder of crypto exchange FTX, will go on trial before a federal jury in Manhattan. It begins on Oct. 3 and will last six weeks. (Want to know more about the man known as “SBF”？ Full profile here .)

The charges: Bankman-Fried faces seven counts of fraud and conspiracy, to which he has pleaded not guilty. ( More on that here. )

The background: The charges relate to the collapse of U.S. crypto exchange FTX in November last year. The exchange froze withdrawals and filed for bankruptcy , leaving investors facing billions of dollars of losses. FTX was just one in a series of big crypto firm bankruptcies in 2022, but it caught the worlds attention because Bankman-Fried had become a poster child for the crypto industry. His net worth had surged to $26 billion and FTX was backed by top investors .

The arguments: Bankman-Fried is charged with stealing billions of dollars in FTX deposits, which he spent on luxury real estate , U.S. political campaign donations and on plugging losses at his hedge fund . U.S. prosecutors will argue that SBF embezzled money from people who had deposited in FTX. But SBF‘s lawyers will argue that FTX, like a bank, was allowed to invest his customers’ deposits if there was enough for them still to be able to withdraw it. They‘ll also argue that he didn’t know that actions taken by his closest colleagues had jeopardised the funds.

The witnesses: Prosecutors plan to call three members of Bankman-Fried‘s inner circle : former Alameda chief executive Caroline Ellison, former FTX technology chief Gary Wang and former engineering chief Nishad Singh. Last Thursday a judge restricted Bankman-Fried’s ability to call witnesses to testify. Hed wanted to call on seven experts on topics ranging from cryptocurrency markets to English contracts to convince the jurors to acquit him, but the judge said three of the proposed witnesses could not take the stand because their testimony was irrelevant or could confuse the jury. Bankman-Fried is currently in jail after a judge found he had likely attempted to tamper with two witnesses.

The U.S. Attorney in Manhattan has called it “one of the biggest financial frauds in American history.” You can read a full preview here .

Crypto essentials

• Customer crypto: Chase, JPMorgan‘s British retail bank, said it will ban crypto transactions by customers to protect them from scams and crime. NatWest and Santander have also restricted UK customers’ crypto transactions.

• Another hack : Hong Kong crypto firm Mixin said it was hit by a $200 million hack, although it has since said that the total looks lower than they first thought.

• Australia lawsuit: Australias corporate regulator is suing Bit Trade Pty Ltd, which provides the Kraken crypto exchange to Australian customers.

• ETF latest: If the U.S. government shuts down next month, almost 90% of the SECs employees will be furloughed, meaning approvals on bitcoin spot ETFs could face further delays.

• Binance quits Russia: Binance will sell its Russia business to a newly launched exchange called CommEx. Binance said operating in Russia is “not compatible with Binances compliance strategy”.

• Galaxy in Europe: Former hedge fund manager Mike Novogratz said his crypto firm, Galaxy Digital, is expanding in Europe.

What I'm reading

• Crypto companies are trying to influence U.S. lawmakers to pass crypto-friendly laws. The industry is on track to spend record amounts on lobbying. But lawmakers are focused on other things, and do not necessarily want the crypto industry to write its own rulebook .

• Reuters BreakingViews opinion columnist Ben Winck argues that crypto could be left as a legislative casualty of the U.S. Congress‘s budget fight. Here’s why .

• U.S. Federal Reserve officials have signaled to the world that interest rates are not going to drop any time soon. But markets are betting on rate cuts regardless .