FTX founder Sam Bankman-Fried’s spectacular rise and fall in the cryptocurrency industry — a journey that included his testimony before Congress, a Super Bowl advertisement, and dreams of a future run for president — hit rock bottom Thursday when a New York jury convicted him of fraud for stealing at least US$10 billion from customers and investors.
After the monthlong trial, jurors rejected Bankman-Fried’s claim during testimony in Manhattan federal court that he never committed fraud or meant to cheat customers before FTX, once the world’s second-largest crypto exchange, collapsed into bankruptcy a year ago.
“Mr Bankman-Fried. Please rise and face the jury,” Judge Lewis A. Kaplan commanded just before a jury forewoman responded “guilty” seven times to two counts of wire fraud, two counts of wire fraud conspiracy, and three other conspiracy charges, which carry potential penalties adding up to 110 years in prison. Bankman-Fried is likely to face far less than the maximum at a sentencing set for March 28.
As the verdict was read, Bankman-Fried seemed stunned, appearing stone-faced, his hands clasped before him, as his lawyers remained sitting beside him. When he sat down, he looked down for several minutes.
His lawyer, Mark Cohen, later read a statement outside court to say they “respect the jury’s decision. But we are very disappointed with the result.”
“Mr Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him,” Cohen said.
US Attorney Damian Williams, who sat in the front row of the spectator section during the verdict, stood before cameras outside the courthouse and said Bankman-Fried “perpetrated one of the biggest financial frauds in American history, a multibillion-dollar scheme designed to make him the king of crypto”.
“But here’s the thing: The cryptocurrency industry might be new. The players like Sam Bankman-Fried might be new. This kind of fraud, this kind of corruption is as old as time, and we have no patience for it,” he said.
He said the case should serve as a warning to every other fraudster who “thinks they’re untouchable, that their crimes are too complex,” that they are too powerful to prosecute or can talk their way out of their crimes because “I promise we’ll have enough handcuffs for all of them”.
The jury rejected Bankman-Fried’s insistence during three days of testimony that he never committed fraud or plotted to steal from customers, investors, and lenders and didn’t realise his companies were at least US$10 billion in debt until October 2022.
The trial attracted intense interest with its focus on a fraud on a scale not seen since the 2009 prosecution of Bernard Madoff, whose Ponzi scheme over decades cheated thousands of investors out of about US$20 billion. Madoff pleaded guilty and was sentenced to 150 years in prison, where he died in 2021.
The prosecution of Bankman-Fried, 31, put a spotlight on the emerging industry of cryptocurrency and a group of young executives in their 20s who lived together in a US$30 million luxury apartment in the Bahamas as they dreamed of becoming the most powerful player in a new financial field.
Prosecutors made sure jurors knew that the defendant they saw in court with short hair and a suit was not the man with big messy hair and shorts that became his trademark appearance after he started his cryptocurrency hedge fund, Alameda Research, in 2017 and FTX, his cryptocurrency exchange, two years later.
They showed the jury pictures of Bankman-Fried sleeping on a private jet, sitting with a deck of cards and mingling at the Super Bowl with celebrities including the singer Katy Perry. Assistant US Attorney Nicolas Roos called Bankman-Fried someone who liked “celebrity chasing”.
The government relied heavily on the testimony of three former members of Bankman-Fried’s inner circle, his top executives including his former girlfriend, Caroline Ellison, to explain how Bankman-Fried used Alameda Research to siphon billions of dollars from customer accounts at FTX.
With that money, prosecutors said, the Massachusetts Institute of Technology graduate gained influence and power through investments, contributions, tens of millions of dollars in political contributions, Congressional testimony, and a publicity campaign that enlisted celebrities like comedian Larry David and football quarterback Tom Brady.
Ellison, 28, testified that Bankman-Fried directed her while she was chief executive of Alameda Research to commit fraud as he pursued ambitions to lead huge companies, spend money influentially, and run for US president someday. She said he thought he had a five per cent chance to eventually be US president.
FTX co-founder Gary Wang, who was FTX’s chief technology officer, revealed in his testimony that Bankman-Fried directed him to insert code into FTX’s operations so that Alameda Research could make unlimited withdrawals from FTX and have a credit line up to US$65 billion. Wang said the money came from customers.
Nishad Singh, the former head of engineering at FTX, testified that he felt “blindsided and horrified” at the result of the actions of a man he once admired when he saw the extent of the fraud. He said the collapse last November left him suicidal.
Ellison, Wang ,and Singh all pleaded guilty to fraud charges and testified against Bankman-Fried in the hopes of leniency at sentencing.
Bankman-Fried was arrested in The Bahamas last December and extradited to the United States to face trial.