News
‘King of Crypto’ Sam Bankman-Fried Faces Decades in Prison After Guilty Verdict
- By Natalie Sherman and Peter Hoskins
- Economic journalists
November 2, 2023
Updated November 3, 2023
Image caption, courtroom sketch of Sam Bankman-Fried reading the verdict in his fraud trial
Sam Bankman-Fried, who once ran one of the world’s largest cryptocurrency exchanges, was found guilty of fraud and money laundering following a month-long trial in New York.
The jury returned its verdict after less than five hours of deliberations.
This concludes 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, collapsed.
His sentencing has been set for March 28 next year.
Cryptocurrency exchange FTX was once valued at $32bn (£26bn), but when it went bust in November last year it was missing $8bn in customer funds.
“Sam Bankman-Fried perpetrated one of the largest financial frauds in American history – a multibillion-dollar scheme intended to make him the king of crypto,” said U.S. Attorney Damian Williams in a communicated 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 precipitate its collapse. He had been charged with seven counts of fraud and money laundering.
He had pleaded not guilty to all charges, saying that although he made mistakes, he acted in good faith.
After the verdict, Bankman-Fried’s lawyer, Mark Cohen, said: “We respect the jury’s decision. But we are very disappointed in 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 asking 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 getting their sentences reduced.
They are expected to be sentenced later.
The prosecution presented evidence that Bankman-Fried’s cryptocurrency trading company, Alameda Research, received deposits on behalf of FTX clients in the exchange’s early days, when traditional banks did not were unwilling to let her open an account.
Instead of protecting those funds, as Bankman-Fried has repeatedly publicly pledged to do, he used the money to pay off Alameda lenders, purchase properties, and make investments and political donations.
Five of the counts Bankman-Fried was convicted of carry a maximum prison sentence of 20 years, with a maximum of five years for the other two counts.
This creates a potential maximum sentence of 110 years. Although the judge is unlikely to impose such a measure, Bankman-Fried faces a sentence of several decades.
Image caption 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 could get away with it,” said Assistant U.S. Attorney Nicolas Roos in his closing arguments.
Bankman-Fried took the risk of speaking out in his own defense, hoping to convince jurors that prosecutors had failed to prove he acted with criminal intent.
“There was poor judgment,” said his lawyer, Mr. Cohen, painting a portrait of a nerdy mathematician overwhelmed by the rapid growth of his businesses.
“This does not constitute a crime.”
Speaking to the BBC last year, the entrepreneur appeared calm, wearing his trademark t-shirt and shorts.
During the interview, which was filmed in the Bahamas, he came across as someone who genuinely believed he had done nothing wrong in the eyes of the law – unlike the bumbling personality that had been captured in other interviews and on social networks.
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Video caption, Speaking to the BBC last year, Sam Bankman-Fried denied claims that he knew FTX customers’ money was being used for risky financial bets.
In court, Bankman-Fried defended money transfers between his companies as “permissible” and said he was largely unaware of the financial hole described by his deputies until weeks before FTX’s collapse Last year.
The fall 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 poster child for the problems in the sector, which top U.S. regulators have described as riddled with crime.
Bankman-Fried himself faces a potential second trial on other charges, including campaign finance violations. Judge Lewis Kaplan asked prosecutors to let him know by February whether they would move forward in the case, which could affect his sentencing date.
Before his companies collapsed, he was known for hobnobbing with celebrities and frequently appearing in Washington and the media to discuss the industry.
FTX’s rapid growth and trading last year, when a market downturn hit other crypto companies, earned it the nickname “King of Crypto.”
With Congress unlikely to pass new rules for crypto anytime soon, former federal prosecutor Renato Mariotti said he expects U.S. courts to continue to be the scene of battles over crypto. ‘industry.
“I really think that having specific crypto regulations in the United States would reduce the type of crime that occurred in this particular case,” he said.
“Unfortunately, I don’t think we’ll see any regulation in the very near term. But that certainly means the fight will continue in the courts and in civil cases brought by the SEC (Securities and Exchange Commission) and the CFTC (Commodity Commission). Futures Trading Commission),” he added, referring to US financial regulatory agencies.
Find out 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.