“Crypto King” Sam Bankman-Fried faces decades in prison after guilty verdict

• By Natalie Sherman and Peter Hoskins
• Business reporter

November 2, 2023

Updated November 3, 2023

Image caption, courtroom sketch of Sam Bankman-Fried as the verdict is read in his fraud trial

Sam Bankman-Fried, who once ran one of the world’s largest cryptocurrency exchanges, was found guilty of fraud and money laundering following a month-long trial in New York.

The jury reached its verdict after less than five hours of deliberations.

Thus ends the extraordinary fall from grace of the 31-year-old former billionaire, once known as the “King of Cryptocurrencies”, who now faces decades in prison.

Bankman-Fried was arrested last year after his company, FTX, went bankrupt.

His sentencing has been set for March 28 next year.

Cryptocurrency exchange FTX was once valued at $32 billion (£26 billion), but was missing $8 billion in customer funds when it collapsed in November last year.

“Sam Bankman-Fried perpetrated one of the largest financial frauds in American history: a multibillion-dollar scheme designed to make him the king of cryptocurrency,” U.S. 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 that,” he added.

Bankman-Fried stood before the jury with her hands clasped as the verdict was read, while her parents sat with their heads in their hands.

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

He had pleaded not guilty to all charges, arguing that although he had made mistakes, he had acted in good faith.

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

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

A spokesperson for Bankman-Fried did not immediately respond to the BBC’s request for comment on whether she planned to appeal the verdict.

Three of his former close friends and colleagues, including his ex-girlfriend Caroline Ellison, pleaded guilty and agreed to testify against him in hopes of reducing their sentences.

They will be sentenced at a later date.

The indictment presented evidence that Bankman-Fried’s Alameda Research cryptocurrency trading firm has been receiving deposits on behalf of FTX customers since the exchange’s early days, when traditional banks were unwilling to allow it to open a I count.

Instead of safeguarding those funds, as Bankman-Fried has repeatedly pledged to do in public, he used the money to pay off Alameda lenders, buy properties and make investments and political donations.

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

This creates a potential maximum sentence of 110 years. While the judge is unlikely to actually impose it, Bankman-Fried is expected to face a sentence lasting decades.

Image caption, Bankman-Fried’s parents looked shocked when the guilty verdict was read in court

When FTX went bankrupt, Alameda owed the company $8 billion.

“He took the money. He knew it was wrong. He did it anyway, because he thought he was smarter and better and could find a way out,” Assistant U.S. Attorney Nicolas Roos said in his closing arguments.

Bankman-Fried made the risky move of taking the stand in his own defense, hoping to convince jurors that prosecutors had failed to prove he acted with criminal intent.

“There was bad judgment,” said his lawyer, Cohen, offering a portrait of a nerdy mathematician overwhelmed by the rapid growth of his companies.

“This does not constitute a crime.”

Speaking to the BBC last year, the entrepreneur appeared calm, wearing his T-shirt and shorts.

During the interview, which was filmed in the Bahamas, he appeared calm and like someone who genuinely thought he had done nothing wrong in the eyes of the law, as opposed to the awkward personality that had been captured in other interviews and later. means of social communication.

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Video caption: Speaking to the BBC last year, Sam Bankman-Fried denied knowing that FTX customers’ money was being used for risky financial bets

In court, Bankman-Fried defended the money transfers between his companies as “permissible” and testified that he was largely unaware of the financial hole described by his deputies until just weeks before FTX’s collapse the year last.

The collapse left many customers 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 has been closely watched for its implications for the cryptocurrency industry as a whole, which has failed to recover from last year’s market turmoil.

It was seen as emblematic of the industry’s problems, which top regulators in the United States have described as crime-ridden.

Bankman-Fried himself faces a potential second trial on other charges, including campaign finance violations. Judge Lewis Kaplan has asked prosecutors to let him know by February whether they will move forward with that case, which could affect his sentencing date.

Before the collapse of his companies, he was known for hobnobbing with celebrities and appearing frequently in Washington and the media to discuss the industry.

FTX’s rapid growth and its dealings last year, as a market downturn affected other cryptocurrency firms, earned it the nickname “the king of cryptocurrencies.”

With Congress unlikely to pass new rules for cryptocurrencies anytime soon, former federal prosecutor Renato Mariotti said he expects US courts to continue to see battles over the sector.

“I really think that having cryptocurrency-specific regulation in the United States would reduce the type of crime that occurred in this particular case,” he said.

“Unfortunately, I don’t think we will see regulation in the very short term. But it certainly means that the fight will continue in the courts and in civil cases litigated by the SEC (Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission),” he added, referring to US financial regulatory agencies.

Find out more (for UK readers)

Panorama explores the meteoric rise and sensational fall of Sam Bankman-Fried, the mathematical genius who began to transform the world of cryptocurrency but was ultimately its biggest loser.

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