Sam Bankman-Fried, the founder of FTX, the world’s largest cryptocurrency exchange, was found guilty of fraud and money laundering at the end of a month-long trial in New York.
The jury returned its verdict this Thursday, at the end of its first day of deliberations.
This decision concludes a surprising fall from grace for Bankman-Fried, who became one of the youngest billionaires in the world, heading a company that was valued at $32 billion.
The 31-year-old Bankman-Fried became known as the “king of cryptocurrencies” and was arrested last year after FTX filed for bankruptcy.
Now, he faces decades in prison.
An elaborate plot
During the trial, prosecutors accused him of lying to investors and lenders and stealing billions of dollars from FTX, which helped precipitate the company’s collapse. He was charged with seven counts of fraud and money laundering.
Bankman-Fred pleaded not guilty and maintained that while he had made mistakes, he had acted in good faith.
But the case was against him from the start, after three of his former friends and close colleagues, including his ex-girlfriend Caroline Ellison, pleaded guilty and agreed to testify against him in the hope of reducing their own sentences.
The length of their sentences will be decided at a later date.
During the proceedings, evidence was presented that Bankman-Fried’s cryptocurrency trading company, Alameda Research, received deposits on behalf of FTX clients since the exchange’s early days, when traditional banks were unwilling to allow it to open a account.
But instead of safeguarding those funds, as Bankman-Fried repeatedly promised to do publicly, she spent the money to pay off Alameda lenders, buy property, and make investments and political donations.
When FTX went bankrupt last November, Alameda owed it $8 billion.
“He took the money. He knew it was wrong. He did it anyway, because he thought he was smarter and better and that he could find a way out,” Assistant U.S. Attorney Nicolas Roos said in his closing arguments.
The defense argument
Bankman-Fried took the risky step of taking the stand in her own defense, hoping to convince the jury that prosecutors had failed to prove she acted with criminal intent.
“There was poor judgment,” said defense attorney Mark Cohe, offering a portrait of a “nerd” overwhelmed by the rapid growth of his companies. “That does not constitute a crime.”
Bankman-Fried defended money transfers between his companies as “permissible” and stated that he was largely unaware of the financial hole described by his former colleagues until a few weeks before the FTX collapse late last year.
The crash left many clients unable to recover their funds.
Lawyers working on the bankruptcy case have since said they have recovered the vast majority of the missing money.
The Bankman-Fried trial was closely watched for its implications for the broader cryptocurrency industry, which has failed to recover from last year’s market turmoil.
It has been seen as an example of the problems in the sector, which top US regulators have described as rife with crime.
Before the collapse of his companies, Bankman-Fried was known for hobnobbing with celebrities and appearing frequently in Washington and in the media, often in casual clothing, to talk about the industry.
FTX’s rapid growth and the deals it made in 2022, when a market crash hit other cryptocurrency companies, earned it the nickname “the king of cryptocurrencies.”
So, few could imagine that a few months later, FTX would also fall and with it, the “king” would lose his crown and his freedom.
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