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Sam Bankman-Fried was found guilty in the FTX crypto fraud case
Founder of FTX Sam Bankman Fried was found guilty of all seven counts of fraud, conspiracy and money laundering after more than two weeks of testimony in one of the highest profile financial crime cases in recent years.
The 31-year-old former cryptocurrency billionaire was convicted on all seven counts of fraud, conspiracy and money laundering, charges that each carry a maximum sentence of 20 years in prison. He was also convicted of conspiracy to commit commodities fraud and conspiracy to commit securities fraud, each of which carries a maximum sentence of five years.
“Sam Bankman-Fried perpetrated one of the largest frauds in American history, a multibillion-dollar scheme designed to make him the king of cryptocurrency,” Damian Williams, U.S. Attorney for the Southern District of New York, said in a press conference after the ‘accident. verdict. “The point is this: The cryptocurrency industry may be new. Players like Sam Bankman-Fried may be new. This type of fraud, this type of corruption, is as old as time and we have no patience for it.”
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The MIT graduate has steadfastly maintained his innocence since his arrest late last year following the stunning implosion of FTX, the cryptocurrency exchange he co-founded, amid an $8 billion funding shortfall and allegations that he used client money to prop up his ailing hedge fund. He searches for Alameda.
An attorney for Bankman-Fried, Mark S. Cohen, said in a statement that: “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 .”
Bankman-Fried was accused of using some of that money to buy real estate, make political contributions and fund charitable projects, among other purposes unrelated to FTX’s business of allowing people to buy and trade digital currencies.
More generally, the FTX bankruptcy in November 2022 cast a cloud over the entire cryptocurrency industry, while the sudden collapse of other major industry players has vaporized billions in client wealth.
As the verdict was read, Bankman-Fried stood motionless, facing the jury. His parents, sitting in the courtroom, held each other, watching intently.
It was a stunning, supersonic fall from grace for a man who, according to his lawyers, still believed his billion-dollar empire was solvent twelve months ago.
“So many people believed in him, he was a genius,” Natalie Tien, a former FTX employee, told CBS News.
Tien said attending her former boss’s trial was cathartic after experiencing months of confusion and depression as her empire collapsed and she also “lost a lot of money.”
“Sam Bankman-Fried thought he was above the law,” U.S. Attorney Merrick Garland said in a statement. “Today’s verdict proves he was wrong. This case should send a clear message to anyone trying to hide their crimes behind a shiny new thing that they think no one else is smart enough to understand: The Department of Justice will hold you accountable. “
Bankman-Fried’s attorney and federal prosecutors made the closing arguments to a New York City juror Wednesday after more than four weeks of testimony.
Prosecution witnesses included Caroline Ellison, Nishad Singh and Gary Wang, who once worked for Bankman-Fried at FTX or Alameda and who pleaded guilty to multiple charges, including participation in an alleged scheme to defraud millions of customers.
The three accused him of orchestrating the use of FTX clients’ money to make purchases ranging from a luxury condo in the Bahamas to covering losses at Alameda, Bankman-Fried’s cryptocurrency hedge fund.
Ellison testified that Bankman-Fried directed her to siphon money from FTX client accounts to fund investments and trading strategies at Alameda, where she was CEO until FTX’s collapse. FTX co-founder Wang detailed how he and the defendant engaged in financial crimes and lied about it, while Singh, FTX’s former director of engineering, detailed how Bankman-Fried spent FTX money.
Defense lawyers have tried to portray Bankman-Fried as a math nerd who made bad decisions running FTX, but who had nothing criminal on his mind as he built his crypto empire.
FTX founder Sam Bankman-Fried questioned by prosecutors in fraud and money laundering trial
In the end, it was perhaps the display of arrogance during Bankman-Fried’s testimony that carried the most weight and caused the most damage. During cross-examination by the prosecution, Bankman-Fried said “more than 140 times” that he did not remember a document, a conversation or other key details. The government said over and over again that this was because she was “lying.”
Bankman-Fried testified that he believed Alameda’s expenses came from company funds, not clients, and that any mistakes he made were not ill-intentioned. FTX was intended to “advance the ecosystem,” he testified during the proceedings. “It turned out the opposite.”
It will now be up to Judge Lewis Kaplan to decide what Bankman-Fried’s sentence will be. Although the charges have a statutory minimum of 110 years and sentencing guidelines provide one type of formula, the judge has broad discretion to rule below that guidance. However, CBS News legal analyst Rikki Klieman says that if Judge Kaplan “believes the defendant committed perjury in his courtroom, he may even go beyond the guidelines.”
For his part, Tien, a former FTX employee, said prison time might be too harsh, questioning whether Bankman-Fried could instead help the government investigate other potential cryptocurrency trading frauds.
The next trial in the United States vs. Sam Bankman-Fried saga is scheduled for March 11, 2024, when other charges that the government did not bring will be turned into another prosecution.
This process concludes almost a year to the day that FTX stopped allowing customers to withdraw deposits, marking the beginning of the end of the meteoric rise of the so-called cryptocurrency king.