Sam Bankman-Fried charged with multi-billion dollar FTX fraud

FTX founder Sam Bankman-Fried has been found guilty of defrauding customers of his cryptocurrency exchange, marking one of the largest financial fraud cases in recent memory.

Bankman-Fried was arrested in the Bahamas last December and extradited to the United States, where he was freed on a $250 million (€235 million) personal recognisance bond with electronic monitoring and a requirement that he remain at the home of his parents in Palo Alto, California.

After a month-long trial, a jury in Manhattan federal court convicted Bankman-Fried on all seven counts, alleging that he greedily embezzled $8 billion from the exchange's users.

This outcome comes almost a year after FTX filed for bankruptcy, a stunning event that had a profound impact on financial markets, causing Bankman-Fried's personal fortune of around $26 billion to vanish.

The jury reached its decision after just over four hours of deliberation. Bankman-Fried, who had pleaded not guilty to the charges, stood before the jury with his hands clasped in front of him as the verdict was announced.

This conviction is a significant win for the U.S. Justice Department and Damian Williams, the top federal prosecutor in Manhattan, who made it a priority to root out financial market corruption. Williams emphasized that even though the cryptocurrency industry and figures like Bankman-Fried may be relatively new, financial fraud is an age-old problem and will not be tolerated.

Bankman-Fried, once a prominent figure in the crypto world, now joins the ranks of notorious financial criminals like Bernie Madoff and Jordan Belfort, who were convicted of major U.S. financial crimes.

U.S. District Judge Lewis Kaplan has scheduled Bankman-Fried's sentencing for March 28, 2024, potentially facing decades in prison. His defense lawyer, Mark Cohen, expressed disappointment with the jury's decision but stated that Bankman-Fried maintains his innocence and will continue to fight the charges vigorously.

The trial concluded with an emotional moment as Bankman-Fried was led away by U.S. Marshals, and he nodded to his parents, Joseph Bankman and Barbara Fried, who were law professors at Stanford University and were present in the courtroom.

Bankman-Fried is also set to face a second set of charges, including allegations of foreign bribery and bank fraud conspiracies, in a trial scheduled for the next March.

Throughout the trial, prosecutors argued that Bankman-Fried diverted funds from FTX to his cryptocurrency-focused hedge fund, Alameda Research, despite publicly claiming to prioritize the safety of customer funds. Alameda used these funds to pay off debts, make loans to Bankman-Fried and other executives, and support political campaigns, with the aim of promoting cryptocurrency legislation favorable to his business.

Bankman-Fried took the risk of testifying in his own defense during the trial, acknowledging mistakes in managing FTX but denying the theft of customer funds. He expressed that he believed Alameda's borrowing from FTX was allowed and was unaware of the extent of the debt until shortly before both companies collapsed.

Prosecutors made it clear to the jury that the person they observed in the courtroom, neatly dressed with short hair, was quite different from the individual recognized for his untamed, long hair and casual attire, a trademark look he adopted when he established his cryptocurrency hedge fund, Alameda Research, in 2017, and later, FTX, his cryptocurrency exchange, two years later.

To emphasize this contrast, they presented the jury with images of Bankman-Fried relaxing on a private jet, playing cards, and socializing at events like the Super Bowl, where he rubbed shoulders with celebrities, including the singer Katy Perry.

The prosecution heavily relied on the testimony of three former high-ranking members of Bankman-Fried's inner circle, which included his ex-girlfriend, Caroline Ellison who explained how he utilized Alameda Research to divert billions of dollars from customer accounts at FTX.

The trial involved 15 days of testimony, with key witnesses, including former Alameda CEO Caroline Ellison and former FTX executives Gary Wang and Nishad Singh, who testified for the prosecution and admitted their own guilt. They claimed that Bankman-Fried directed them to commit crimes and deceive lenders and investors about the financial state of both companies.

The defense countered that these witnesses may have falsely implicated Bankman-Fried in an attempt to secure more lenient sentences for themselves. The prosecution may seek Kaplan's consideration in the sentencing of these witnesses based on their cooperation.

Former federal prosecutors said the quick verdict after only half a day of deliberation — showed how well the government tried the case.