A 31-year-old entrepreneur and co-founder of FTX, Sam Bankman-Fried, has been found guilty by a Manhattan federal jury for defrauding his customers, investors, and lenders. This marks a significant downfall for Bankman-Fried, who was in charge during the largest cryptocurrency collapse in history. The jury deliberated for several hours and ultimately found him guilty on all seven criminal charges, including wire fraud and money laundering. Bankman-Fried’s sentencing is scheduled for March 28, and he could face a maximum sentence of 110 years.
When the verdict was read in the courtroom, Bankman-Fried remained stoic and did not turn to look at his parents. His father lowered his head, and his mother took off her glasses and wiped her eyes. However, Bankman-Fried may face further legal challenges in the coming year. He is set to face additional criminal charges in March, accusing him of bank fraud and bribing Chinese officials.
During the trial, prosecutors argued that Bankman-Fried intentionally stole up to $14 billion in customer deposits from his cryptocurrency exchange. They claimed that he worked with three top executives – Caroline Ellison, CEO of Alameda, Gary Wang, and Nishad Singh, co-founders of FTX – to execute this scheme. All three executives pleaded guilty to fraud charges and provided testimony against Bankman-Fried.
Prosecutors alleged that Bankman-Fried and his accomplices granted Alameda Research, Bankman-Fried’s sister trading firm, secret backdoor access to FTX’s customer deposits. The money was then used for various purposes, including investments, loan repayments, political donations, and real estate. The government argued that Bankman-Fried spent his customers’ money and deceived them about it.
Bankman-Fried, on the other hand, testified that poor business decisions and management errors, not fraud, led to the collapse of FTX. When asked if he defrauded anyone, he firmly denied it. He also denied taking customer funds. The charges against Bankman-Fried centered on the accusation that he and FTX falsely represented that customer deposits were securely held by the exchange. Prosecutors cited public tweets, FTX’s website, and private communications as evidence.
Bankman-Fried’s attorney argued that FTX’s terms of service allowed Alameda to borrow from FTX deposits as long as the funds were held in accounts participating in the margin-trading program. He claimed that no one considered this a problem at the time since customers had to provide collateral, and the collateral could be used to offset losses resulting from borrowing.
Prosecutors maintained that Bankman-Fried and his team manipulated FTX’s computer code to give Alameda access to billions in customer funds. They alleged that Alameda received special privileges not available to other accounts, including exemption from collateral requirements and liquidation. Bankman-Fried admitted that his deputies created the code but claimed that Alameda’s privileges were necessary for the firm to function as a market maker, payment processor, and liquidity provider for FTX.
Prosecutors disputed Bankman-Fried’s claim that he only discovered the liquidity crisis at FTX in October 2022. They argued that Bankman-Fried and his executives knew about it as early as June. According to the prosecution, a project in June revealed that Alameda had an $8 billion deficit owed to FTX. One of the trial’s most impactful moments occurred when the Assistant US Attorney asked Bankman-Fried if he fired anyone for using $8 billion of customer deposits to pay off Alameda’s debts. Bankman-Fried replied that he did not.
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