News
‘Crypto King’ Sam Bankman-Fried Faces Decades in Prison After Guilty Verdict
November 3, 2023
By Natalie Sherman and Peter Hoskins, business reporters
Courtroom sketch of Sam Bankman-Fried listening to the verdict in his fraud trial
Sam Bankman-Fried, who once ran one of the world’s largest cryptocurrency exchanges, has been found guilty of fraud and money laundering after a month-long trial in New York.
The jury reached its verdict after less than five hours of deliberations.
It caps a stunning fall from grace for the 31-year-old former billionaire, once known as the “King of Crypto,” who now faces decades in prison.
Bankman-Fried was arrested last year after his company, FTX, went bankrupt.
His trial has been set for March 28.
Cryptocurrency exchange FTX was once valued at $32bn (£26bn), but when it went bust in November last year, $8bn in customer funds were gone.
“Sam Bankman-Fried perpetrated one of the largest financial frauds in American history – a multi-billion dollar scheme designed to make him the king of crypto,” U.S. Attorney Damian Williams said in a statement after the verdict.
“This case has always been about lying, cheating and stealing, and we have no patience for that,” he added.
Bankman-Fried stood before the jury with his hands clasped as the verdict was read, while his parents sat with their heads in their hands.
The jury found him guilty of lying to investors and lenders and stealing billions of dollars from FTX, helping to precipitate its collapse. He was charged with seven counts of fraud and money laundering.
He had pleaded not guilty to all charges, saying that while he had made mistakes, he had acted in good faith.
After the verdict, Bankman-Fried’s attorney, Mark Cohen, said: “We respect the jury’s decision. But we are very disappointed with the outcome.”
“Mr. Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him,” he added.
A spokesman for Bankman-Fried did not immediately respond to a BBC request for comment on whether he planned to appeal the verdict.
Three of his former close friends and colleagues, including his ex-girlfriend Caroline Ellison, pleaded guilty and agreed to testify against him in hopes of reducing their own sentences.
They will be judged later.
The prosecution presented evidence that Bankman-Fried’s cryptocurrency trading firm, Alameda Research, was taking deposits on behalf of FTX clients in the early days of the exchange, when traditional banks were unwilling to allow him to open an account.
Instead of protecting those funds, as Bankman-Fried has repeatedly pledged to do in public, he used the money to pay off Alameda lenders, buy properties, and make political investments and donations.
Five of the charges Bankman-Fried was convicted of carry a maximum sentence of 20 years in prison, and the other two charges carry a maximum sentence of five years.
That creates a potential maximum sentence of 110 years. While it’s unlikely the judge will actually impose that sentence, Bankman-Fried is expected to face a sentence of decades.
Bankman-Fried’s parents appeared distraught as the guilty verdict was read out in court
When FTX went bankrupt, Alameda owed the company $8 billion.
“He took the money. He knew it was wrong. He did it anyway, because he thought he was smarter and better and he could figure out a way to get out of it,” Assistant U.S. Attorney Nicolas Roos said in his closing argument.
Bankman-Fried took the risk of testifying in his own defense, hoping to convince jurors that prosecutors had failed to prove he acted with criminal intent.
“There was a bad judgment,” said his lawyer, Mr. Cohen, painting a portrait of a slovenly mathematician, overwhelmed by the rapid growth of his businesses.
“This is not a crime.”
Speaking to the BBC last year, the entrepreneur appeared calm, wearing his signature T-shirt and shorts.
During the interview, filmed in the Bahamas, he came across as someone who was calm and genuinely believed he had done nothing wrong in the eyes of the law – unlike the awkward personality that had been captured in other interviews and on social media.
Speaking to the BBC last year, Sam Bankman-Fried denied allegations he knew FTX customers’ money was being used for risky financial bets.
In court, Bankman-Fried defended the money transfers between his companies as “authorized” and testified that he was largely unaware of the financial hole described by his deputies until weeks before FTX collapsed last year.
The crash 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.
Bankman-Fried’s trial has been closely watched because of its implications for the crypto industry as a whole, which has failed to recover from last year’s market turmoil.
It is seen as a prime example of the problems in the sector, which top US regulators describe as being rife with crime.
Bankman-Fried himself faces a second trial on other charges, including campaign finance violations. Judge Lewis Kaplan has asked prosecutors to let him know by February whether they will pursue the case, which could affect his sentencing date.
Before his businesses collapsed, he was known for hobnobbing with celebrities and frequently appearing in Washington and in the media to discuss the industry.
FTX’s rapid growth and trading over the past year, as a market downturn hit other cryptocurrency companies, has earned it the nickname “the king of crypto.”
With Congress unlikely to pass new rules for cryptocurrencies anytime soon, former federal prosecutor Renato Mariotti said he expects U.S. courts to continue to see battles over the industry.
“I really think that specific regulation of cryptocurrencies in the United States would reduce the type of crime that occurred in this particular case,” he said.
“I don’t think we’re going to see regulation in the very near term, unfortunately. But it certainly means that the fight will continue in the courts and in civil cases brought by the SEC (Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission),” he added, referring to the U.S. financial regulators.
Read more (for UK readers)
Panorama explores the meteoric rise and sensational fall of Sam Bankman-Fried, the mathematical genius who set out to transform the world of cryptography but ended up being its biggest loser.
