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Sam Bankman-Fried, the former CEO of bitcoin exchange FTX, was found guilty on all seven criminal charges he faced, a remarkable fall from grace for a “math nerd” who was once a rising figure in finance.
Bankman-Fried now faces decades in jail after being convicted on counts such as securities fraud, wire fraud, and money laundering. The jury deliberated for only a few hours before reaching its decision.
Bankman-Fried is expected to file an appeal.
“We respect the verdict of the jury.” However, we are really disappointed with the outcome. Mr. Bankman Fried maintains his innocence and will fiercely fight the charges against him,” Bankman-Fried’s lawyer, Mark Cohen, said in a statement.
During a four-week trial, prosecutors attempted to prove that Bankman-Fried was a criminal mastermind who engineered a large financial fraud.
Prosecutors recounted how Bankman-Fried and several of his top lieutenants secretly transferred billions of dollars in customer assets from FTX to Alameda Research, a private trading firm he also controlled, before an often packed courtroom.
According to the US government, the former tycoon used Alameda as a personal piggybank, buying luxury real estate for friends and relatives, as well as making political donations and dubious investments.
“While the cryptocurrency industry and players like Sam Bankman-Fried are new, this kind of corruption is as old as time,” said Damian Williams, US Attorney for the Southern District of New York, in a statement.
“This case has always been about lying, cheating, and stealing, and we have no patience for it,” he said.
From a penthouse in The Bahamas to prison
The conviction is a startling reversal of fortune for a now 31-year-old M.I.T. alumnus who was living rich in a $35 million penthouse with some of his co-workers just a year ago as he oversaw a crypto business worth tens of billions of dollars during its peak.
As FTX rose in popularity, Bankman-Fried became a star in his own right, coinciding with the rise in popularity of cryptocurrencies. Amateur traders and prominent Wall Street firms both made investments, and Bankman-Fried took advantage of the enthusiasm.
He was feted at conventions and hung around with celebrities such as former quarterback Tom Brady, thanks to his messy hair and typical clothing of a T-shirt and shorts.
However, his businesses began to fail after an article raised concerns about Alameda’s financial health. Customers at FTX were frightened and withdrew their funds, effectively resulting in a crypto run on the bank.
On November 11, FTX and Alameda Research declared bankruptcy. Bankman-Fried was arrested in The Bahamas one month later.
Bankman-Fried’s friends turned against him
Then, one by one, Bankman-Fried’s former executives began to turn against him, including Caroline Ellison, the former CEO of Alameda and his on-again, off-again girlfriend.
She and other co-founders of Alameda Research and FTX, including Gary Wang, pleaded guilty to separate charges and agreed to cooperate with federal prosecutors.
Their testimony proved damning during the trial.
They testified in court that Bankman-Fried directed them to commit crimes, and their testimony was particularly compelling because the cooperating witnesses were not only Bankman-Fried’s colleagues, but also some of his closest friends.
Wang, for example, was Bankman-Fried’s math camp friend and M.I.T. roommate.
Bankman-Fried’s Hail Mary
Perhaps the most dramatic moment in the trial occurred when Bankman-Fried testified in his own defense, which is unusual for white-collar criminal defendants.
The trial had gone so badly for him that he decided to throw a Hail Mary in the hopes of avoiding prison.
It was a high-stakes gamble for someone who is known for taking risks. However, it did not work.
Bankman-Fried buckled under cross-examination from Danielle Sassoon, a formidable prosecutor who clerked for the late Supreme Court Justice Antonin Scalia.
She effectively used Bankman-Fried’s own words against him, and she had plenty to choose from.
For many years, Bankman-Fried was FTX’s public face, eagerly courting reporters, tweeting, and speaking at conferences.
Even after he was indicted and placed under house arrest at his parents’ home in Northern California, he continued to seek the spotlight.
Bankman-Fried continued to speak with and share sensitive information about the case with journalists, causing Judge Lewis Kaplan to revoke Bankman-Fried’s bail and incarcerate him.
Bankman-Fried’s defense crumbles
Sassoon used Bankman-Fried’s comments to demonstrate the disparity between what he said in public and how he acted behind the scenes.
For example, when FTX was on the verge of collapse, Bankman-Fried assured his hundreds of thousands of followers on X, formerly known as Twitter, that it was in good hands, even though prosecutors claimed he knew that couldn’t be further from the truth.
“FTX is fine,” he tweeted on November 7, just days before the company went bankrupt. “Assets are fine.”
The prosecution’s portrayal of Bankman-Fried was at odds with his defense, which claimed that he was not a “movie villain,” but rather a “math nerd” who got in over his head.
The defense also claimed Bankman-Fried was an inexperienced executive incapable of keeping track of what was going on at two multibillion-dollar companies or properly supervising executives at FTX and Alameda Research.
Bankman-Fried’s lawyer, Mark Cohen, argued in his closing argument that while Bankman-Fried made mistakes, he always acted in good faith and never intended to commit any crimes.
“In the real world, people misjudge things,” Cohen said. “They are hesitant. They make no preparations for the unexpected. They make both good and bad business decisions, and they make mistakes that they later regret.”
The jury sided with the prosecution after several hours of deliberation.
That means Bankman-Fried is still incarcerated in a federal prison in Brooklyn, facing the prospect of spending the rest of his life behind bars.
On March 28, Judge Kaplan will hand down Bankman-Fried’s sentence.