Sam Bankman-Fried, the tousled-haired mogul who founded the FTX cryptocurrency exchange, was convicted on seven charges of fraud and conspiracy on Thursday after a months-long trial that exposed rampant arrogance and risk-taking in the crypto industry.
Mr. Bankman-Fried became a symbol of crypto’s excesses last year when FTX collapsed and was accused of stealing $10 billion from clients to finance political contributions, venture capital investments and other extravagant spending. A jury of nine women and three men took more than four hours to reach a verdict Thursday, finding Mr. Bankman-Fried guilty of wire fraud and conspiracy.
The maximum punishment for all the cases combined is 110 years. Mr Bankman-Fried, 31, is expected to appeal. He is scheduled to be sentenced on March 28.
The decision put a stop to one of the fastest and most spectacular collapses in modern corporate history. Just a year ago, Mr. Bankman-Fried was worth more than $20 billion and was known as a rare good guy in the freewheeling crypto industry, his face splashed on billboards and magazine covers. FTX, which was valued at $32 billion at its peak, was one of the world’s largest marketplaces for people to buy and sell digital coins like Bitcoin and Ether.
Crypto enthusiasts, many of whom were openly in favor of Mr. Bankman-Fried being found guilty, hope his sentencing will provide a moment of catharsis that will allow the industry to move on from the scandal-plagued year. But critics hailed the decision as a sign that the industry could face more legal consequences as it struggles to regain public trust.
“Scam perpetrators will face the law and face the consequences of their crimes, even in crypto,” said Corey Clipston, founder of Swan Bitcoin financial services firm and frequent critic of the industry. “The days of the ‘Wild West’ are over.”
Mr Bankman-Fried was always expected to face an uphill battle in court. After FTX failed, three of their top representatives pleaded guilty to fraud and agreed to cooperate with prosecutors in exchange for leniency. At trial, he testified that Mr. Bankman-Fried had repeatedly instructed him to steal FTX client funds and lie to the public that billions of clients’ money had been sent to his affiliated trading firm, Alameda Research.
Mr Bankman-Freed’s lawyers argued that he had operated his business in good faith and never intended to break the law. But he struggled to plug significant holes in the co-operatives’ stories, which were hampered by a wave of government objections. And when Mr. Bankman-Fried stepped forward to defend himself, he often seemed nervous, claiming several times that he did not remember the potentially incriminating conversation.
Mr Bankman-Fried rose to prominence by promoting himself as an unusual kind of billionaire – a force for good who accumulated wealth in the hope of eventually giving it all away. He founded FTX in 2019, and raised billions of dollars from investors to turn it into one of the world’s leading crypto companies.
During trips to Washington and Los Angeles, he socialized with politicians and movie stars and garnered millions of dollars in campaign contributions for both Democrats and Republicans. During his rise, business partners compared him to John Pierpont Morgan, the pioneering banker who once dominated the finance industry.
Then Mr. Bankman-Fried’s business empire collapsed in a matter of days last November, when an investigation into deposits revealed an $8 billion gap in FTX’s accounts. By the end of the week, FTX had filed for bankruptcy and Mr. Bankman-Fried stepped down as chief executive. In December, he was arrested at his home in the Bahamas, where FTX was headquartered.
Mr Bankman-Fried tried to dismiss FTX’s collapse as the unfortunate result of a major accounting error rather than deliberate fraud. But at his trial, prosecutors argued that he repeatedly lied to customers, lenders and investors by using their wealth to build himself a crypto titan.
“This was a fraud on a massive scale,” Nicholas Ross, one of the federal prosecutors, said in the government’s closing statement. “Thousands of people lost billions of dollars.”
During the trial, the government called more than a dozen witnesses, including three associates who lived with Mr. Bankman-Fried in a luxurious, five-bedroom penthouse in the Bahamas, which the government claimed was used by FTX clients. Was bought by. Wealth.
FTX co-founder Gary Wang testified that Mr. Bankman-Fried instructed him to create a secret backdoor in the exchange’s code that would have allowed Alameda to borrow almost unlimited amounts of customer funds. Nishad Singh, another top FTX executive, said Mr. Bankman-Fried spent heavily on investments and endorsement deals, even after knowing that client accounts were at risk.
The most emotional moment of the prosecution’s case came during the testimony of Caroline Ellison, Alameda’s chief executive and Mr Bankman-Fried’s current girlfriend. Taking the witness stand over three days, Ms Ellison said she had conspired with Mr Bankman-Fried to mislead the public and doctors about balance sheets which they sent to creditors.
Fighting back tears, Ms. Ellison said the collapse of FTX was strangely devastating. “I felt relieved that I no longer had to lie,” she said, “and I could start taking responsibility, even though I felt indescribably bad.”
Ms Ellison, Mr Wang and Mr Singh, who pleaded guilty to fraud, will be sentenced in late 2024.
The trial reached a climax late last month when Mr Bankman-Fried took the stand. He insisted that he never intended to commit a crime and that he just wanted to build a successful company. But on cross-examination, lead prosecutor Danielle Sassoon exposed cracks in his story, showing contradictions between his public statements and his behavior in private.
Mr Bankman-Fried’s legal battle is likely to continue after the verdict. His second trial on campaign finance and other charges is tentatively scheduled for early next year, though it is unclear whether that will take place. And some of the sanctions Mr Bankman-Fried and his lawyers face in court could become fodder for an appeal.
Before the trial, the judge overseeing the case, Lewis A. Kaplan, issued a series of rulings that Mr. Bankman-Fried’s lawyers could argue to the jury. He was prevented from calling several expert witnesses, and prevented from claiming that FTX’s lawyers reviewed many of Mr. Bankman-Fried’s actions during his time as chief executive.
Mr Bankman-Fried also spent the final weeks in jail before his trial after Judge Kaplan revoked his bail and ruled that he had tried to intimidate witnesses.
