Sam Bankman-Fried, the co-founder and former CEO of crypto exchange FTX, and trading firm Alameda Research, has been found guilty on all seven counts related to fraud and money laundering. The defendant is “charged with a wide-ranging scheme to misappropriate billions of dollars of customer funds deposited with FTX, and mislead investors and lenders to FTX and to Alameda Research,” a release from the U.S. attorney’s office at the Southern District of New York stated.
The decision was handed down on Thursday, following a five-week trial that dug deep into how one of the biggest crypto exchanges, and its sister trading company collapsed about a year ago. The downfall 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 U.S. Department of Justice charged 31-year-old Bankman-Fried about 11 months ago. The jury took about four hours to come to a verdict on six counts relating to fraud and one count relating to money laundering.
Bankman-Fried fell quickly from the top of the crypto totem pole after a faulty Alameda balance sheet was unveiled by CoinDesk in November 2022, which resulted in industry-wide panic and concern around FTX, and its liquidity. As the story unraveled, Ireport247 learned that the problem was bigger than many originally thought: The executives behind the now-bankrupt FTX and Alameda allegedly stole over $8 billion in customer funds.
In his trial, Bankman-Fried testified that he didn’t defraud FTX customers or take their funds, but that Alameda “borrowed” money from the exchange. He maintained that while he had made mistakes, he had acted in good faith. But the case went against him from the beginning, after three of his former close friends and colleagues, including ex-girlfriend Caroline Ellison, pleaded guilty and agreed to testify against him in hopes of reducing their own sentences. They are to be sentenced at a later date.
They presented evidence that Bankman-Fried’s crypto trading firm Alameda Research received deposits on behalf of FTX customers from the early days of the exchange, when traditional banks were unwilling to let it open an account. Instead of safeguarding those funds, as Bankman-Fried repeatedly pledged to do in public, he spent the money to repay Alameda lenders, buy property, and make investments and political donations. When FTX went bankrupt last November, Alameda owed it $8bn (£6.5bn).
“He took the money. He knew it was wrong. He did it anyway, because he thought he was smarter and better, and that he could figure his way out of it,” assistant US attorney Nicolas Roos said in his closing arguments. Prosecutors also argued Bankman-Fried made false promises, and was responsible for the loss of billions of dollars for thousands of investors on FTX, adding that he had many opportunities to come clean, but he doubled down instead.
The DOJ’s December 2022 indictment stated Bankman-Fried knowingly defrauded FTX customers by misusing their deposits to invest in other companies, and pay off lenders and expenses. After mounds of evidence and a verdict, that statement has been deemed true by the court and jury. The seven charges bring a total possible sentence of 115 years in prison for the defendant.
The statutory maximum sentences are provided by The U.S. Congress as “informational purposes only,” as any sentencing will be determined by a judge, typically within 90 days of a guilty verdict
Bankman-Fried’s trial was closely watched for its implications for the crypto industry as a whole, which has failed to recover from last year’s market turmoil. He has been seen as a poster child for the problems in the sector, which top regulators in the US have described as rife with criminality.
Before the collapse of his companies, he was known for hobnobbing with celebrities and appearing frequently in Washington and in the media, to discuss the sector. The rapid growth of FTX and his deal-making last year, when a market downturn hit other crypto firms, earned him the moniker “the king of crypto.”
