Sam Bankman-Fried Convicted in One of History’s Largest Financial Frauds

Indicted FTX founder Sam Bankman-Fried leaves the United States Courthouse in New York City, U.S., July 26, 2023. REUTERS/Amr Alfiky

The FTX founder faces lengthy prison sentence after jury finds him guilty of defrauding customers in one of the largest financial fraud cases in U.S. history.

Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, was convicted Thursday of defrauding customers, ending his swift rise and precipitous fall in the cryptocurrency industry. The jury in Manhattan federal court found Bankman-Fried guilty on all counts, including wire fraud and conspiracy, which could result in a prison sentence spanning decades.

“Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history,” said U.S. Attorney Damian Williams outside the courthouse. “But here’s the thing: The cryptocurrency industry might be new. The players like Sam Bankman-Fried might be new. This kind of fraud, this kind of corruption is as old as time and we have no patience for it.”

The former billionaire’s conviction comes nearly a year after FTX filed for bankruptcy, which erased Bankman-Fried’s estimated $26 billion personal fortune and shocked financial markets globally. The trial, which lasted a month, captivated public attention, underscoring the volatility and risks of the burgeoning cryptocurrency sector.

In a statement, Bankman-Fried’s defense lawyer, Mark Cohen, said, “We are very disappointed with the result. Mr. Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him.”

Throughout the trial, prosecutors painted a picture of greed and deceit, accusing Bankman-Fried of siphoning $8 billion from FTX’s users to cover debts and investments by his hedge fund, Alameda Research, and to fund a lavish lifestyle and political aspirations.

FTX founder Sam Bankman-Fried will be released on a $250 million US bond package while he awaits trial on fraud charges related to the collapse of the FTX crypto exchange, a federal magistrate judge said on Thursday.

“Mr. Bankman-Fried. Please rise and face the jury,” Judge Lewis A. Kaplan said as the verdict was delivered. The jury forewoman pronounced “guilty” seven times, as Bankman-Fried, once the darling of the crypto world, remained stone-faced, his hands clasped before him.

The conviction marks a significant victory for the Justice Department and prosecutor Damian Williams, who has prioritized combating corruption in the financial markets.

Bankman-Fried, an MIT graduate who fashioned an image of casual disarray with his mop of unkempt curly hair and preference for T-shirts over business attire, now joins the ranks of high-profile financial criminals like Bernie Madoff and Jordan Belfort.

Testifying in his own defense, Bankman-Fried admitted to making mistakes at FTX, such as not implementing a risk management team, but denied any intent to defraud customers. He claimed he was unaware of the significant debts incurred by Alameda Research.

The prosecution’s case was bolstered by testimonies from three former close associates of Bankman-Fried, including his former girlfriend and Alameda Research CEO, Caroline Ellison. Ellison, along with FTX cofounder Gary Wang and former head of engineering Nishad Singh, pleaded guilty to fraud charges and cooperated with prosecutors, detailing how customer funds were misused under Bankman-Fried’s direction.

U.S. District Judge Lewis Kaplan has set Bankman-Fried’s sentencing for March 28, 2024. Meanwhile, the crypto industry is left grappling with the aftermath of one of its most significant scandals.