The seven criminal charges that Sam Bankman-Fried, the former CEO of the cryptocurrency exchange FTX, was found guilty of represent a stunning fall from grace for a once-famous “math nerd” in the banking industry.
Bankman-convicted Fried on accusations of money laundering, wire fraud, and securities fraud, she now faces the possibility of spending decades behind bars. The jury deliberated for barely five hours before returning a verdict.
I expect Bankman-Fried to file an appeal.
“We honor the jury’s verdict. However, we are rather dissatisfied with the outcome. In a statement, Bankman Fried’s attorney, Mark Cohen, stated, “Mr. Bankman Fried believes his innocence & will continue to vigorously defend the charges against him.”
Prosecutors attempted to establish throughout a trial that lasted over four weeks that Bankman-Fried was a criminal mastermind who planned a significant financial scam.
Prosecutors described how Bankman-Fried and several of his senior lieutenants stole billions of dollars’ worth of customer assets from FTX and transferred them to Alameda Research, a private trading company he also owned, in a regularly filled courtroom.
In addition to using FTX client funds to purchase opulent real estate for friends and family, the U.S. government claimed that the former millionaire used Alameda as his personal piggybank, making hazardous investments and contributing to political causes.
“It’s true that Sam Bankman-Fried committed one of the largest financial scams in American history, a multibillion-dollar plan aimed at positioning him as the King of Crypto, but this type of corruption is as old as time, even though the cryptocurrency industry and its players may be relatively new,” stated a statement from Damian Williams, the U.S. attorney for the Southern District of New York.
“This case is always about lying, cheating, & stealing, and we have no tolerance for it,” he continued.
From a Bahamas penthouse to a prison
The conviction represents a dramatic turnabout in the life of the now 31-year-old M.I.T. alumnus, who just a year ago was living large in a $35 million penthouse alongside some of his colleagues while running a cryptocurrency business valued at tens of billions of dollars during its peak.
As FTX expanded, Bankman-Fried attained celebrity status during a period of significant rise in the use of cryptocurrencies. Both novice traders and well-known Wall Street businesses made a surge of investments, and Bankman-Fried profited from the frenzy.
Easily identifiable by his unkempt hair and his go-to outfit of shorts and a T-shirt, he was praised at conventions and socialized with A-listers such as former quarterback Tom Brady.
However, once a story raised questions about Alameda’s financial stability, his firms began to fail. Customers at FTX began to withdraw their money as a result, starting what was essentially a cryptocurrency run on the bank.
FTX and Alameda Research declared bankruptcy on November 11. Bankman-Fried was taken into custody in The Bahamas one month later.
Friends of Bankman-Fried turned against him
Bankman-Fried’s former executives began to turn against him one by one. Among them was Caroline Ellison, who had formerly headed Alameda and was also his intermittent lover.
She and several of her coworkers, including Gary Wang, who together with Bankman-Fried created FTX and Alameda Research, entered into plea agreements and cooperated with federal authorities.
During the trial, their testimony was found to be damning.
They told the court that Bankman-Fried gave them orders to conduct crimes, and their testimony was particularly strong because the collaborating witnesses were not only some of Bankman-Fried’s closest friends but also some of his coworkers.
For instance, Wang lived with Bankman-Fried at M.I.T. and they met in math camp.
Bankman-Hail Mary Fried’s
When Bankman-Fried testified in his own defense—something that most white-collar criminal defendants don’t do—it was arguably the most dramatic moment of the trial.
He was so disappointed with the outcome of the trial that he chose to stage a Hail Mary in the hopes of avoiding going to jail.
Even for someone who is known for taking risks, it was a risky bet. But it was ineffective.
Bankman-Fried withered under the relentless cross-examination of Danielle Sassoon, a tough prosecutor who served as Justice Antonin Scalia’s clerk on the Supreme Court.
She made a brilliant play out of Bankman-Fried’s own comments against him, and Sassoon had enough to pick from.
Bankman-Fried served as FTX’s public face for many years, actively pursuing journalists, sending out tweets, and giving speeches at conferences.
Even after receiving a house arrest order and being placed under indictment at his parents’ Northern California home, he persisted in pursuing the spotlight.
Judge Lewis Kaplan was so enraged with Bankman-Fried’s repeated conversations with and disclosure of confidential material about the case to media that he revoked his bail and put him in jail.
The case for Bankman-Fried falls apart
Using Bankman-Fried’s remarks, Sassoon demonstrated the glaring discrepancy between Bankman-Fried’s public persona and his private behavior.
For instance, even as prosecutors claimed he knew that couldn’t have been further from the truth, Bankman-Fried assured his hundreds of thousands of followers on X, the former Twitter, that the company was in good shape when FTX was on the verge of collapse.
Days before it collapsed, on November 7, he tweeted, “FTX is fine.” “Assets are fine.”
Bankman-Fried argued that he was a “math nerd” who had gotten himself into trouble rather than a “movie villain,” but the prosecution’s narrative ran counter to this.
Additionally, the defense attempted to contend that Bankman-Fried was an inexperienced leader who was too busy to effectively manage executives at FTX and Alameda and that he was unable to monitor events at two multibillion-dollar corporations.
Bankman-Fried’s attorney, Mark Cohen, acknowledged in his closing statement that his client made errors but maintained that he always operated with good intentions and never planned to conduct any crimes.
Cohen stated, “People make mistakes in the real world.” They are hesitant. They do not account for unforeseen events. They make both wise and foolish business judgments, as well as errors that they later wish they had avoided.”
Ultimately, the jury found in favor of the prosecution.
Thus, Bankman-Fried could potentially spend the remainder of his life behind bars while he is detained in a federal jail located in Brooklyn.
On March 28, Judge Kaplan will determine Bankman-sentence Fried’s.