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 ad, and dreams of a future run for president — reached a low point on Nov. 2 when a jury in New York convicted him of fraud for stealing at least $10 billion from customers and investors.
After the month-long trial, jurors rejected Mr. Bankman-Fried’s claim during testimony in Manhattan federal court that he had never committed fraud or sought to defraud customers before FTX, once the world’s second-largest cryptocurrency exchange , went bankrupt a year ago.
“Mr. Bankman-Fried. Please stand up and face the jury,” Judge Lewis A. Kaplan ordered just before a jury foreman returned seven counts of “guilty” on two counts of wire fraud, two counts of conspiracy to commit involving bank fraud and three other conspiracy charges, which carry possible penalties of up to 110 years in prison. Mr. Bankman-Fried is likely to face far less than the maximum at his sentencing on March 28.
As the verdict was read out, Mr Bankman-Fried appeared stunned, stone-faced, his hands clasped in front of him as his lawyers remained seated next to him. When he sat down, he looked down for several minutes.
His attorney, Mark Cohen, later read a statement outside court saying 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.
United States Attorney Damian Williams, who sat in the front row of the spectator section during the sentencing, stood before cameras outside the courthouse and said that Mr. Bankman-Fried committed “one of the largest financial frauds in American history, a multi-billion dollar scheme designed to make him the king of crypto.”
“But the point is: the cryptocurrency industry may be new. Players like Sam Bankman-Fried may 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 any other fraudster who “thinks they are 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 I have enough handcuffs for all of them.’
The jury rejected Mr. Bankman-Fried’s three-day testimony that he never committed fraud or schemed to steal from customers, investors and lenders, and did not realize that his companies were at least $10 in debt until October 2022 billion had.
After the jury left the room, Mr. Bankman-Fried’s parents, both law professors at Stanford University, sat behind him in the front row. His father put his arm around his wife. As Mr Bankman-Fried was led out of the courtroom, he looked back and nodded to his mother, who nodded back and then became emotional and wiped her hand over her face after leaving the room.
The trial attracted widespread interest because it focused on fraud on a scale not seen since the 2009 prosecution of Bernard Madoff, whose Ponzi scheme defrauded thousands of investors of about $20 billion over decades. Mr. Madoff pleaded guilty and was sentenced to 150 years in prison, where he died in 2021.
The prosecution of Mr. Bankman-Fried put a spotlight on the emerging cryptocurrency industry and a group of young executives in their 20s who lived together in a $30 million luxury apartment in the Bahamas while dreaming of becoming the most powerful players in a new world. financial area.
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 who became his signature look after he founded his cryptocurrency hedge fund, Alameda Research, in 2017. and FTX, its cryptocurrency exchange, two years later.
They showed the jury photos of Mr Bankman-Fried sleeping on a private jet, sitting with a deck of cards and mingling with celebrities including singer Katy Perry at the Super Bowl. Assistant U.S. Attorney Nicolas Roos called Mr. Bankman-Fried someone who enjoyed “celebrity hunting.”
In closing arguments, Mr. Cohen said prosecutors were trying to turn “Sam into some kind of villain, some kind of monster.”
“It is both wrong and unfair, and I hope and believe you have realized that it is simply not true,” he said. “According to the government, everything Sam ever touched and said was fraudulent.”
The government relied heavily on the testimony of three former members of Mr. Bankman-Fried’s inner circle, his top executives, including his former girlfriend, Caroline Ellison, to explain how Mr. Bankman-Fried used Alameda Research to extract billions of dollars from transfer customer accounts. at FTX.
With that money, prosecutors said, the Massachusetts Institute of Technology graduate acquired influence and power through investments, contributions, tens of millions of dollars in political contributions, congressional testimony and a publicity campaign that included celebrities like comedian Larry David and football quarterback Tom Brady were enabled. .
Ms. Ellison testified that when she was CEO of Alameda Research, Mr. Bankman-Fried directed her to commit fraud as he pursued ambitions to run major companies, spend money influentially and one day run for office the American president. She said he thought he had a 5% chance of being elected U.S. president.
Breaking down in tears as she described the collapse of the cryptocurrency empire last November, Ms. Ellison said the revelations that led to customers collectively demanding their money back, exposing the fraud, brought a “relief that I no longer had to lie.”
FTX co-founder Gary Wang, who was FTX’s Chief Technology Officer, revealed in his testimony that Mr. Bankman-Fried instructed him to insert code into FTX’s operations so that Alameda Research could make unlimited withdrawals from FTX and a credit limit of up to $65 billion. Mr Wang said the money came from customers.
Nishad Singh, former head of engineering at FTX, testified that he felt “blindsided and shocked” by the outcome of the actions of a man he once admired when he saw the extent of the fraud. He said the collapse last November made him suicidal.
Ms. Ellison, Mr. Wang and Mr. Singh all pleaded guilty to fraud charges and testified against Mr. Bankman-Fried in hopes of leniency at sentencing.
Mr. Bankman-Fried was arrested in the Bahamas last December and extradited to the United States, where he was released on a $250 million personal recognizance bond with electronic monitoring and a requirement to live with his parents in Palo Alto, California to stay. .
His communications, which included hundreds of phone calls to journalists and Internet influencers, along with emails and text messages, ultimately landed him in trouble when the judge concluded he was trying to influence potential witnesses and ordered him jailed in August.
During the trial, prosecutors used the public statements, online announcements and his congressional testimony against him, showing how the entrepreneur repeatedly promised his customers that their deposits were safe, until November 7 last year, when he tweeted: “FTX.” is good. Assets are fine,” as customers furiously tried to withdraw their money. The next day he deleted the tweet. FTX filed for bankruptcy four days later.
In his closing, Mr Roos mocked Mr Bankman-Fried’s testimony, saying the defendant’s words, under questioning by his lawyer, were “smooth, as if it had been rehearsed a number of times?”
But under cross-examination “he was a different person,” the prosecutor said. ‘Under cross-examination, he suddenly couldn’t remember any details about his business or what he said in public. It was uncomfortable to hear. During his direct examination he never said he couldn’t remember, but during his cross-examination it happened over 140 times.”
Former federal prosecutors said the quick verdict — after just half a day of deliberation — showed how well the government had handled the case.
“The government handled the case as we expected,” said Joshua A. Naftalis, a partner at Pallas Partners LLP and a former Manhattan district attorney. “It was a massive fraud, but that doesn’t mean it had to be an elaborate fraud, and I think the jury understood that argument.”
This story was reported by The Associated Press. AP writer Ken Sweet contributed from Palm Springs, California.