A king no more: the fall of Sam Bankman-Fried

3 November 2023

End of an empire? Sam Bankman-Fried continues to assert his innocence.

• Sam Bankman-Fried guilty of fraud and money laundering.
• The former FTX CEO presided over the collapse of the cryptocurrency exchange.
• Bankman-Fried could face decades in prison.

“Crypto king” no more, Sam Bankman-Fried has been found guilty of fraud and money laundering. Bankman-Fried rose to notoriety running one of the world’s largest cryptocurrency exchanges, FTX.

After a month-long trial and less than five hours of deliberation, the 31-year-old’s fall from grace was complete. His sentencing has been set for March 28th next year; he faces decades in prison.

Five of the charges on which Bankman-Fried was found guilty carry a maximum prison term of 20 years, with a five-year maximum on the other two charges.

That creates a potential maximum sentence of 110 years, and although it is unlikely the judge will actually impose that (realistically whole-life), term, Bankman-Fried is expected to face a sentence lasting decades.

FTX was once valued at $32bn, but when it went bankrupt in November last year, $8bn in customer funds (a full quarter of the company’s valuation) was missing. Bankman-Fried was arrested shortly afterwards.

Sam Bankman-Fried - guilty on all counts.

Guilty, seven times over.

“Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history – a multibillion-dollar scheme designed to make him the king of crypto,” US attorney Damian Williams said in a statement after the verdict.

“This case has always been about lying, cheating and stealing, and we have no patience for it,” he added.

The jury found him guilty of lying to investors and lenders and stealing billions of dollars from FTX, helping to precipitate its collapse. He had been charged with seven counts of fraud and money laundering.

He pleaded not guilty to all charges, maintaining that he had acted in good faith, just made some mistakes.

After the verdict, Bankman-Fried’s lawyer Mark Cohen said: “We respect the jury’s decision. But we are very disappointed with the result.

“Mr Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him,” he added.

Despite his claims to innocence, three of Bankman-Fried’s former friends and colleagues, including his ex-girlfriend, pleaded guilty and agreed to testify against him in the hopes of reduced sentences.

Bankman-Fried’s ex-girlfriend Caroline Ellison testified against him.

The trial was closely watched because of its implications for the cryptocurrency industry, which has so far failed to recover from last year’s market turmoil. Bankman-Fried has been seen as a poster child for problems in the sector, which regulators in the US have described as “rife with criminality.”

With Congress unlikely to pass new rules for cryptocurrency trading anytime soon, former federal prosecutor Renato Mariotti said he expected US courts to continue to be the site of battles over the industry.

“I really think having specific crypto regulations in the United States would reduce the sort of crime that occurred in this particular case,” he said.

Who is Sam Bankman-Fried?

The son of prominent liberal academics (who reportedly had their heads in their hands during his sentencing), Bankman-Fried was a math whizz from just outside Silicon Valley. He graduated with a physics degree from MIT.

Straight out of college, he began donating half his salary to charity and embracing effective altruism – a movement that purports to take an evidence-based approach to charitable giving.

Sam Bankman-Fried alongside two luckier gentlemen who "made mistakes."

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An author of a book about Bankman-Fried, Michael Lewis, told the BBC he believes the entrepreneur simply saw cryptocurrency as a means to make money to change the world.

In 2019, Bankman-Fried and former MIT classmate Gary Wang launched FTX. The exchange acted like an unregulated bank, allowing people to trade money for crypto-coins, such as Bitcoin, and store their funds for safekeeping.

At its peak, FTX executives said the platform was facilitating $10bn-$15bn trading every day.

Then, a bombshell investigation into FTX by Coindesk revealed that Bankman-Fried’s companies were in a risky financial position. Further reporting accused FTX of misusing customer funds.

Those reports led customers to withdraw billions of dollars, causing FTX to file for bankruptcy on November 11th last year. The rest, as they say, is crypto-history.

Will crypto ever recover what reputation it had?

US Attorney Damian Williams says Bankman-Fried committed one of the biggest financial frauds in US history. The cynical (if usually accurate) world of social media is already wondering who Netflix will cast in the docudrama of Bankman-Fried’s downfall.

Commentators say it will take years for the cryptocurrency industry to rehabilitate its image, if it ever does. The volatility of crypto had long been regarded cynically by the public – disregarded as “Monopoly money” because of its infamous volatility.

Now, Sam Bankman-Fried will always be associated with the industry, reinforcing the narrative of a Wild West where consumers have no protection. Move over, Wolf of Wall Street – the King of Crypto is coming to a jail cell, and probably a movie screen, near you – soon.

Fraud and money laundering on an epic scale: the story of Sam Bankman-Fried.