Downfall of a Fraud: Crypto Kingpin and Democratic Megadonor Sam Bankman-Fried Convicted in FTX Collapse, Faces Up to 110 Years in Prison

Sam Bankman-Fried, the founder of cryptocurrency giant FTX who used his ill-gotten gains to become a Democratic megadonor, was convicted of fraud on Thursday in a New York court for stealing at least $10 billion from his customers and investors.

Summary

Sam Bankman-Fried, the founder of cryptocurrency giant FTX who used his ill-gotten gains to become a Democratic megadonor, was convicted of fraud on Thursday in a New York court for stealing at least $10 billion from his customers and investors.

• Jurors did not buy Bankman-Fried’s argument that he never meant to commit fraud or hurt his customers. The forewoman of the jury read out seven guilty verdicts on charges of wire fraud, wire fraud conspiracy and three other conspiracy charges.
• Bankman-Fried was accused of looting $8 billion of customer money and using it to prop up FTX’s sister hedge fund Alameda Research. The jury took fewer than 5 hours to reach their guilty verdict.
• “Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history,” said Damian Williams, the U.S. attorney for the Southern District of New York, after the verdict was reached.
• “While the cryptocurrency industry might be new and the players like Sam Bankman-Fried might be new, this kind of corruption is as old as time. This case has always been about lying, cheating, and stealing, and we have no patience for it,” he added.
• The month long trial comes one year after FTX collapsed and was forced to file for bankruptcy after experiencing “the crypto equivalent of a bank run.” The company’s $32 billion valuation disappeared nearly overnight. Bankman-Fried was arrested in the Bahamas five weeks after his company’s collapse. 
• Bankman-Fried, known as SBF, faces up to 110 years in prison. He will learn his fate at a March 28 sentencing hearing, but he is likely to receive a sentence far smaller than the maximum possible penalty.

• There comes a moment in the development of a new technology when the hype is so common it passes for common sense. Lawyers, accountants and regulators are nowhere to be found. Investors insist entrepreneurs take their money. The world trembles on the brink of change. For dot-coms, the moment was 1999. For artificial intelligence, it was just over nine months ago. For cryptocurrency, it was 2017. Six years ago, Sam Bankman-Fried knew little about alternative currencies. But he correctly bet there were huge opportunities in grabbing a tiny piece of millions of crypto trades. In the blink of an eye, he was lauded as being worth $23 billion. Only Mark Zuckerberg had accumulated so much wealth so young. (New York Times)
• “Bankman-Fried, known as SBF, began his career as a trader at Jane Street Capital after studying math and physics at MIT. In 2017, he left Jane Street to strike out on his own, starting a cryptocurrency hedge fund he called Alameda Research. The firm’s first office was a two-bedroom Airbnb in North Berkeley, California…His entrepreneurial drive didn’t stop there: In 2019, Bankman-Fried co-founded cryptocurrency exchange FTX and became its CEO. But Bankman-Fried testified Friday that he knew “basically nothing” about crypto.” (CNN)
• Bankman-Fried’s parents, Stanford professors Joseph Bankman and Barbara Fried — who became fixtures in the courtroom seated behind their son throughout the trial — embraced each other in the moments before the verdict was announced. The defendant stood frozen, facing the jury, as the foreman announced the findings on each count. Fried appeared to hold back tears, then plugged her ears with her fingers as U.S. District Judge Lewis A. Kaplan commended the jurors for their work. (Washington Post)

• “Several members of Bankman-Fried’s inner circle testified against him during the trial. The prosecution’s key witnesses were Caroline Ellison – Bankman-Fried’s ex-girlfriend and the former CEO of Alameda Research – as well as FTX co-founder Gary Wang and former FTX engineering chief Nishad Singh. The trio had all previously pleaded guilty and agreed to cooperate with the government.” (Fox News)
• “Bankman-Fried still has other legal troubles looming. He is facing additional charges that could go to trial in March, including allegations of bank fraud and bribery conspiracies. Those charges were added after the initial indictment and separated from the first trial because of litigation in the Bahamas over the terms of his extradition. Kaplan instructed prosecutors to let him know by Feb. 1 if they plan to proceed with those charges.” (Wall Street Journal)
• “[SBF] claimed more than 100 times during four days on the witness stand that he could not “recall” repeatedly promising that his platform was “safe” — or ordering an underling to set up secret computer code allowing Alameda to siphon FTX customer funds. The cocky math whiz was then confronted with a mountain of tweets, emails, congressional appearances and media interviews revealing that he did in fact say dozens of things he claimed not to remember.” (New York Post)

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© Dominic Moore, 2023