Sam Bankman-Fried found guilty of defrauding FTX customers out of billions | Sam Bankman-Fried
Sam Bankman-Fried, the founder of now-bankrupt crypto exchange FTX, was found guilty on all counts of defrauding his customers on Thursday in Manhattan federal court.
The one-time mogul was found guilty on seven counts of wire fraud and conspiracy to launder money. He faces decades in prison at a sentencing hearing that US district Judge Lewis Kaplan set for 28 March 2024. The verdict, reached after just four hours of jury deliberation, brought an end to nearly a month of court proceedings that featured stunning testimony from his closest allies and the disgraced entrepreneur himself. He maintained his innocence until the end.
“We 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,” read a statement from Mark Cohen, Bankman-Fried’s lawyer.
Bankman-Fried was accused of swindling FTX customers out of some $10bn. Prosecutors said that his fraud extended from 2019 to November 2022, when FTX collapsed under the weight of a liquidity crisis, caused by the lending of customer funds to Alameda Research, FTX’s sister hedge fund, without telling them.
Bankman-Fried admitted to “large mistakes” in his management of the exchange during his testimony, including never putting a risk management team in place. He attempted to evade prosecutors’ questions with many statements of “I don’t recall” only to be confronted with on-the-record statements he had made during his extensive post-collapse media tour. When asked whether he had ever sent the message “Fuck regulators” to a journalist, he admitted: “I said that once.”
Bankman-Fried siphoned “stolen funds” to make himself rich and cover Alameda’s high-risk investments, prosecutors said. He boosted his luxe lifestyle with “exorbitant spending unrelated” to FTX operations like $100m in political contributions and A-list celebrity endorsements, according to the indictment. This also included footing the bill for personal expenses such as $200m in Bahamas property and repaying loans given to Alameda, which faced an $8bn budget shortfall as the crypto market cratered in 2022.
He came to court with a haircut, a significant gesture for a man whose chaotic mane became part of his signature look as a tech innovator. The prosecution grilled him on his appearance and public persona, asking him whether he used them to woo investors and customers. He likewise faced questions about his co-living arrangement with other FTX executives.
Caroline Ellison, Bankman-Fried’s on-again, off-again girlfriend and the CEO of Alameda, served as the star prosecution witness. Within moments of taking the stand, Ellison said that Bankman-Fried “directed me to commit these crimes”. She also said his unkempt appearance was a carefully curated act.
Other members of his inner circle repeatedly implicated him in financial wrongdoing. Gary Wang, Bankman-Fried’s longtime friend and roommate at the Massachusetts Institute of Technology and a FTX co-founder, and Nishad Singh, an executive at the exchange, also testified for the government.
Ellison, who pleaded guilty in December 2022 to her involvement in FTX and Alameda’s collapse, described her uneasy relationship with Bankman-Fried. She cast him as hubristic and ready to blame others for his mistakes. Bankman-Fried directed Ellison to shuttle customer funds into Alameda following the spring 2022 drop in crypto, she said. Alameda was saddled with billions of dollars in open-term loans – meaning that lenders could demand their money back at any point – and started to call them that summer. But Alameda couldn’t repay the loans – and Bankman-Fried blamed Ellison for not hedging the fund’s money earlier that year.
“Sam started saying … it was a big mistake, and that it was my fault, and that I was largely responsible for the financial situation Alameda found itself in,” Ellison testified. Bankman-Fried said it was “Sam’s decision” to use FTX customer funds to cover Alameda’s shortfall – without telling them.
Wang similarly implicated his former friend. The prosecution asked: “Who are the main people you committed these crimes with?” Wang replied: “Sam Bankman-Fried, Nishad Singh and Caroline Ellison.”
Wang had also told jurors that Bankman-Fried wasn’t shocked by FTX’s massive debt. After apprising Bankman-Fried of this debt, he said “that sounds correct” and that he “had a neutral demeanor”, Wang testified.
Over the course of trial, Bankman-Fried’s attorneys tried to cast him as a “math nerd” who was in over his head. “Sam didn’t defraud anyone. Sam didn’t intend to defraud anyone,” lawyer Mark Cohen told jurors. “Sam acted in good faith in trying to build and run FTX and Alameda,.” The defense also tried to blame Ellison and rival cryptocurrency exchange Binance for FTX’s collapse.
“Some things got overlooked, some things were still in progress, things a more mature company, an older company would have built out over time,” Cohen argued. “But at FTX they were still works in progress.”