Sam Bankman-Fried has been found guilty of fraud by a jury in a court in New York. The founder of bankrupt crypto exchange FTX has been convicted on all of the seven counts on which he was tried. He awaits sentencing.
The US government had accused Bankman-Fried of overseeing a multi-billion-dollar fraud, whereby money belonging to FTX customers was swept into a sibling company, Alameda Research, and used to fund high-risk trades, debt repayments, personal loans, political donations and a life of luxury in the Bahamas. The exchange collapsed in November 2022 after it failed to meet customer withdrawals.
The defense attempted to argue that Bankman-Fried acted as any rational businessperson would, amongst trying market conditions, and never intended to defraud anyone. Bankman-Fried even took the stand himself, against conventional legal wisdom, to appeal directly to the jury’s sympathies. But confronted with testimony from members of Bankman-Fried’s inner circle, who spoke of their own guilt, as well as customers and investors that lost money in the fall of FTX, the jury found against the defendant.
The testimony of Caroline Ellison, CEO of Alameda Research and Bankman-Fried’s former girlfriend, “stood out,” says Jordan Estes, a former US prosecutor and partner at law firm Kramer Levin. Ellison painted Bankman-Fried as reckless, forceful and calculating; she described for the jury his various deceptions, the careful curation of his public image, and his miscalibrated moral compass. Ellison cried on the stand when she recalled her “state of dread,” racked with guilt about the stolen funds, and the sense of relief when FTX began to crumble.
The US Department of Justice (DoJ), says Estes, will consider Bankman-Fried’s conviction a “signature victory,” as its first high-profile crypto scalp. Cryptocurrency has been used for more than a decade to conceal payment for illicit products, enable extortion-based cyberattacks and launder the proceeds of criminal activity. In 2021, the DoJ announced the formation of a specialist crypto enforcement team, to “tackle complex investigations and prosecutions of criminal misuses of cryptocurrency,” it said. But until now, the agency had secured few landmark convictions.
Though he was charged with old-fashioned fraud, Bankman-Fried was crypto royalty, which lends his conviction a symbolic importance, says Estes. The DoJ, she says, has sent “a message to the crypto industry that fraud and wheeling-and-dealing is not to be tolerated.” An investigation into another member of crypto’s elite, Changpeng Zhao, CEO of Binance, the world’s largest crypto exchange, is reportedly ongoing.
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