Sam Bankman-Fried pleads not guilty. Despite the avalanche of information about his crypto explosion, one big question remains

Cryptocurrency entrepreneur Sam Bankman-Fried, second from right, arrives in Manhattan federal court onTuesday, January 3, 2023 in New York.Bankman-Fried will appear in federal court in Manhattan on Tuesday on charges that he defrauded investors and robbed customer deposits on his cryptocurrency trading platform. (AP Photo/Craig Ruttle) January 3, 2023 | WASHINGTON

After the collapse of his empire in November, Mr. Bankman-Freed was arrested in the Bahamas and then extradited to New York on charges of fraud and money laundering.

He flew to California on December 22 just afterafter a judge in the Southern District Court of New York agreed to release him under a $250 million "appearance guarantee" that his parents and two others agreed to pay if he didn't comply.

They demand that he stand trial, wearankle bracelet and lived with his parents. On January 3, he returned to New York, this time to plead not guilty to the various charges against him.

A tentative trial date was set for October 2. But it is possible that Bankman-Fried, who continues to maintain that he did not intentionally deceive anyone, will take a plea deal.

If there is a trial, he will face the testimony of hisformer colleagues: Caroline Ellison, who ran Alameda, the hedge fund founded and majority-owned by Bankman-Fried, and Gary Wang, co-founder of ftx, both of whom are now cooperating with authorities.

On December 21, Allison pleaded guilty to sevencharges that could carry a maximum penalty of 110 years in prison, including wire fraud and conspiracy to commit money laundering.

Wang, meanwhile, pleaded guilty to fraud, which can carry a maximum of 50 years.

The evidence these two providedprosecutors helped substantiate criminal charges against Bankman-Fried and civil lawsuits from the Securities and Exchange Commission (sec) and the Commodity and Futures Trading Commission (cftc), two regulators.

Their material suggests that since ftxwas created in 2019, Bankman-Freed was improperly redirecting customer deposits to Alameda. They also speculate that he ordered Wang to free the hedge fund from important ftx procedures.

The rules were designed to ensure that trading positions that clients have borrowed to open are closed if trades move against them.

The exception allowed Alameda to have a negative balance on the exchange; in other words, it allowed the firm to borrow client assets.

Furthermore, the complaints against Allison suggest that Bankman-Fried instructed his business partner (and former romantic partner) to support the price of the ftt token.

Bankman-Fried created this cryptocurrency himself and donated it to Alameda for free so that the hedge fund could use it to borrow even more money from other crypto institutions.

Having established ways for Alameda to take as much as possiblemore loans, Mr. Bankman-Fried then used the firm as his “piggy bank,” according to the section, distributing donations, buying real estate and making investments.

Given the amount of information released since the collapse of ftx, the most interesting question about the demise of the firm and the Bankman-Freed empire is no longer what happened.

It is clear that billions of dollars of client assets ended up in Alameda, either because they were directed there directly or because of special treatment for the firm.

The bigger question, which remains unanswered, is why Bankman-Fried and his colleagues did this.

Bankman-Fried's plea of ​​innocence sets the stage for a possible trial that could bring observers closer to an answer. Or maybe the truth will come out the other way.

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