FTX founder Sam-Bankman-Fried convicted of defrauding cryptocurrency customers

The Spectacular Rise and Fall of FTX Founder Sam Bankman-Fried in the Cryptocurrency Industry a journey that included his testimony before the U.S. Congress, a Super Bowl commercial and dreams of a future presidency hit a new low on Thursday when a New York jury convicted him. he was involved in a fraud scheme that defrauded customers and investors of at least $10 billion.

After a month-long trial, a jury rejected Bankman-Fried’s claim in three days on the witness stand in Manhattan federal court that he never committed fraud or intended to defraud customers until FTX, once the world’s second-largest crypto exchange, went bankrupt. years ago.

“His crimes caught up with him. His crimes are exposed,” Assistant US Attorney Daniel Sassoon told the one-time billionaire’s jury before Judge Lewis A. Just before Kaplan read the law and began the deliberations. Sassoon said Bankman-Fried turned its customers’ accounts into its “personal piggy bank” as up to US$14 billion disappeared.

He urged jurors to reject Bankman-Fried’s claim after she testified that she never committed fraud or planned to steal from customers, investors or creditors and did not realize that her companies owed at least $10 billion by 2022. October.

The judge set March 28 for sentencing on the seven counts of fraud and conspiracy.

FTX’s founder enjoyed “celebrity stalking,” prosecutors say

The trial generated a lot of interest, focusing on fraud on a scale unseen in 2009. Bernard Madoff, whose Ponzi scheme defrauded thousands of investors out of nearly $20 billion over decades. Madoff pleaded guilty and was sentenced to 150 years in prison, where he died in 2021.

The prosecution of Bankman-Fried, 31, focused on the burgeoning cryptocurrency industry and a group of young 20-something executives who lived together in a $30 million luxury condo in the Bahamas with dreams of becoming the world’s most powerful players. new financial field.

US Attorney Damian Williams stated that they participated in one of the biggest frauds in US history.

Prosecutors made sure jurors knew the short-haired, suit-wearing defendant was not the big, messy-haired, shorts-wearing man who became his trademark after he started his cryptocurrency hedge fund, Alameda Research, in 2017 and FTX : its cryptocurrency exchange, two years later.

They showed the jury pictures of Bankman-Fried sleeping on a private jet, sitting with a deck of cards and mingling with celebrities at the Super Bowl, including singer Katy Perry. Assistant U.S. Attorney Nicholas Roos called Bankman-Fried someone who likes to “go after celebrities.”

In closing arguments, defense attorney Mark Cohen said prosecutors were trying to “turn Sam into some kind of villain, some kind of monster.”

“It’s both wrong and unfair, and I hope and believe you’ve seen that it’s just not right,” he said. “According to the government, everything Sam ever touched or said was a fraud.”

His inner circle testified against him

The government relied heavily on the testimony of three former members of Bankman-Fried’s inner circle, his top executives, including ex-girlfriend Caroline Ellison, to explain how Bankman-Fried used Alameda Research from FTX client accounts. to raise billions of dollars.

With that money, prosecutors say, the MIT graduate gained influence and power through investments, investments, tens of millions of dollars in political contributions, congressional testimony and an advertising campaign that attracted celebrities such as comedian Larry David and football quarterback Tom Brady.

Ellison, 28, testified that Bankman-Fried directed him to commit fraud when he was CEO of Alameda Research as he sought to run huge companies, spend influential money and even finance presidential elections. He said he believed he had a five percent chance of one day becoming president of the United States.

Customers have demanded their money back

Breaking down in tears as she described the collapse of the cryptocurrency empire last November, Ellison said the revelations, which prompted customers to collectively claim their money after uncovering the fraud, “brought relief that I didn’t have to lie anymore.”

FTX co-founder Gary Wang, who was FTX’s chief technology officer, revealed in his deposition that Bankman-Fried instructed him to inject code into FTX’s operations so that Alameda Research could make unlimited withdrawals from FTX and have credit line of up to $65 billion. . Wang said the money came from customers.

Nishad Singh, the former head of engineering at FTX, has testified that he felt “blindsided and horrified” by the actions of a man he once admired when he saw the extent of the fraud, as the collapse forced him to take his own life last November.

Ellison, Wang and Singh all pleaded guilty to fraud charges and testified against Bankman-Fried in hopes of securing a conviction.

Bankman-Fried was arrested in the Bahamas last December and extradited to the United States, where he was released on a $250 million personal recognizance bond with electronic monitoring and a requirement that he remain at his parents’ home in Palo Alto, California.

His communications, including hundreds of phone calls to reporters and Internet influencers, along with emails and texts, eventually landed him in trouble when a judge concluded he was trying to influence potential trial witnesses and ordered him jailed in August.

During the trial, prosecutors used Bankman-Fried’s public statements, online statements and congressional testimony against him to show how the entrepreneur repeatedly promised customers their deposits were safe and secure until Nov. 7, when he tweeted: “FTX is good. “The assets are fine” as customers frantically tried to withdraw their money.

The next day, he deleted the tweet. FTX filed for bankruptcy four days later.

In closing, Ross mocked Bankman-Fried’s testimony, saying that during his attorney’s questioning, the defendant’s words were “smooth, as if it had been rehearsed several times.”

But as a result of the cross-examination, “he was a different person,” said the prosecutor. “Suddenly on cross-examination he couldn’t remember any details about his company or what he had said publicly. That was uncomfortable to hear. He never said he couldn’t remember on his direct examination, but it happened over 140 times during his time. cross-examination.”