In a landmark financial fraud case, Sam Bankman-Fried, the founder of FTX, was declared guilty on Thursday for embezzlement from the now-insolvent cryptocurrency exchange, marking one of the most significant financial fraud convictions to date. This verdict firmly seals the 31-year-old's dramatic fall from billionaire status. Following a month-long trial in Manhattan federal court, a twelve-member jury found Bankman-Fried guilty on all seven charges brought against him. Prosecutors argued that he had plundered a staggering $8 billion from the exchange's users, motivated solely by greed.
This verdict comes nearly one year after FTX's abrupt bankruptcy announcement, which sent shockwaves through financial markets and led to the obliteration of Bankman-Fried's estimated $26 billion personal wealth.
After slightly over four hours of deliberation, the jury reached a unanimous decision. Bankman-Fried, who had pleaded not guilty to two counts of fraud and five counts of conspiracy, stood before the jury with his hands folded as the verdict was announced.
The US Justice Department and Damian Williams, the top federal prosecutor in Manhattan, celebrated the conviction as a victory in their ongoing efforts to combat financial market corruption. Williams stated, "The crypto industry and individuals like Sam Bankman-Fried may be relatively new, but this type of fraud has deep historical roots, and we will not tolerate it."
Once regarded as a prominent figure in the crypto world, Bankman-Fried, known for his distinctive unruly hair and casual attire, now joins the ranks of infamous financial criminals such as Bernie Madoff and Jordan Belfort.
US District Judge Lewis Kaplan scheduled Bankman-Fried's sentencing for March 28, 2024, with the MIT graduate facing the possibility of several decades in prison. Despite expressing disappointment, his defense attorney, Mark Cohen, emphasised their respect for the jury's decision and maintained Bankman-Fried's innocence, pledging to continue their legal battle.
Following the court proceedings, Bankman-Fried and Cohen engaged in a private conversation as they left the courtroom, demonstrating their commitment to the case.
As US Marshals led Bankman-Fried away, he shared a parting nod with his parents, both Stanford Law School professors, Joseph Bankman and Barbara Fried, seated in the front row of the courtroom audience. Fried's crossed-arm gesture signified her support for her son.
This conviction is just the beginning of Bankman-Fried's legal challenges, as he is set to face another trial in March for additional charges, including alleged foreign bribery and bank fraud conspiracies, filed earlier this year by prosecutors.
The case against Bankman-Fried is the first of several high-profile trials brought by Damian Williams against former cryptocurrency executives involved in last year's crypto market turbulence, marked by the collapse of Bitcoin and other digital assets' values after a prolonged boom.
During the trial, prosecutors contended that Bankman-Fried diverted funds from FTX to his cryptocurrency-focused hedge fund, Alameda Research, despite publicly proclaiming the exchange's commitment to safeguarding customer assets. Alameda, in turn, used these funds to repay lenders and provide loans to Bankman-Fried and other company executives. These loans were used for speculative investments and significant political campaign contributions to advance cryptocurrency-friendly legislation, as claimed by the prosecution.
Bankman-Fried took the witness stand for over three days towards the end of the trial, acknowledging some operational errors in managing FTX but denying any wrongdoing related to customer funds. He expressed his belief that Alameda's borrowing from FTX was legitimate and claimed he became aware of the substantial debts only shortly before both companies collapsed, describing the outcome as the opposite of their intentions.
Prosecutors, however, presented a different perspective, asserting that Bankman-Fried orchestrated the plan, driven by greed, to raid FTX's customer deposits, amassing billions of dollars for personal gain, power, and influence. They argued that he believed he could act with impunity and avoid consequences for his actions.
The trial featured fifteen days of testimony, with three former associates, including former Alameda CEO Caroline Ellison and former FTX executives Gary Wang and Nishad Singh, testifying against Bankman-Fried. All three had entered guilty pleas and claimed that he had directed them to engage in criminal activities, including helping Alameda loot FTX and providing false information to lenders and investors about the financial health of the companies.
Bankman-Fried's defense contended that these witnesses had falsely implicated him to secure leniency during their own sentencing. Prosecutors may seek consideration for their cooperation in determining their punishment, leaving this case with many more legal complexities ahead. Bankman-Fried has been in custody since August after his bail was revoked due to concerns of witness tampering.