Dethroned ‘King of Crypto,’ FTX Founder Sam Bankman-Fried, Convicted of Fraud

FTX founder Sam Bankman-Fried’s spectacular rise and fall in the cryptocurrency industry — a journey that included his testimony before Congress, a Super Bowl advertisement and dreams of a future run for president — hit rock bottom Thursday when a New York jury convicted him of fraud for stealing at least $10 billion from customers and investors.After the monthlong trial, jurors rejected Bankman-Fried’s claim during testimony in Manhattan federal court that he never committed fraud or meant to cheat customers before FTX, once the world’s second-largest crypto exchange, collapsed into bankruptcy a year ago.“Mr. Bankman-Fried. Please rise and face the jury,” Judge Lewis A. Kaplan commanded just before a jury forewoman responded “guilty” seven times to two counts of wire fraud, two counts of wire fraud conspiracy and three other conspiracy charges, which carry potential penalties adding up to 110 years in prison. Bankman-Fried is likely to face far less than the maximum at a sentencing set for March 28.As the verdict was read, Bankman-Fried seemed stunned, appearing stone-faced, his hands clasped before him, as his lawyers remained sitting beside him. When he sat down, he looked down for several minutes.His lawyer, Mark Cohen, later read a statement outside court to say they “respect the jury’s decision. But we are very disappointed with the result.”“Mr. Bankman Fried maintains his innocence and will continue to vigorously fight the charges against him,” Mr. Cohen said.United States Attorney Damian Williams, who sat in the front row of the spectator section during the verdict, stood before cameras outside the courthouse and said Bankman-Fried “perpetrated one of the biggest financial frauds in American history, a multibillion dollar scheme designed to make him the king of crypto.”“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,” he said.He said the case should serve as a warning to every other fraudster who “thinks they’re untouchable, that their crimes are too complex,” that they are too powerful to prosecute or can talk their way out of their crimes because “I promise we’ll have enough handcuffs for all of them.”The jury rejected Bankman-Fried’s insistence during three days of testimony that he never committed fraud or plotted to steal from customers, investors and lenders and didn’t realize his companies were at least $10 billion in debt until October 2022.After the jury left the room, Bankman-Fried’s parents, both Stanford University law professors, moved to the front row behind him. His father put his arm around his wife. As Bankman-Fried was led out of the courtroom, he looked back and nodded toward his mother, who nodded back and then became emotional, wiping her hand over her face after he left the room.The trial attracted intense interest with its focus on a fraud on a scale not seen since the 2009 prosecution of Bernard Madoff, whose Ponzi scheme over decades cheated thousands of investors out of about $20 billion. Madoff pleaded guilty and was sentenced to 150 years in prison, where he died in 2021.The prosecution of Bankman-Fried, 31, put a spotlight on the emerging industry of cryptocurrency and a group of young executives in their 20s who lived together in a $30 million luxury apartment in the Bahamas as they dreamed of becoming the most powerful player in a new financial field.Prosecutors made sure jurors knew that the defendant they saw in court with short hair and a suit was not the man with big messy hair and shorts that became his trademark appearance after he started his cryptocurrency hedge fund, Alameda Research, in 2017 and FTX, his 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 at the Super Bowl with celebrities including the singer Katy Perry. Assistant U.S. Attorney Nicolas Roos called Bankman-Fried someone who liked “celebrity chasing.”In a closing argument, Mr. Cohen said prosecutors were trying to turn “Sam into some sort of villain, some sort of monster.”“It’s both wrong and unfair, and I hope and believe that you have seen that it’s simply not true,” he said. “According to the government, everything Sam ever touched and said was fraudulent.”The government relied heavily on the testimony of three former members of Bankman-Fried’s inner circle, his top executives including his former girlfriend, Caroline Ellison, to explain how Bankman-Fried used Alameda Research to siphon billions of dollars from customer accounts at FTX.With that money, prosecutors said, the Massachusetts Institute of Technology graduate gained influence and power through investments, contributions, tens of millions of dollars in political contributions, Congressional testimony and a publicity campaign that enlisted celebrities like comedian Larry David and football quarterback Tom Brady.Ellison, 28, testified that Bankman-Fried directed her while she was chief executive of Alameda Research to commit fraud as he pursued ambitions to lead huge companies, spend money influentially and run for president someday. She said he thought he had a 5 percent chance to eventually be president.Becoming tearful as she described the collapse of the cryptocurrency empire last November, Ellison said the revelations that caused customers collectively to demand their money back, exposing the fraud, brought a “relief that I didn’t have to lie anymore.”FTX cofounder Gary Wang, who was FTX’s chief technology officer, revealed in his testimony that Bankman-Fried directed him to insert code into FTX’s operations so that Alameda Research could make unlimited withdrawals from FTX and have a credit line up to $65 billion. Wang said the money came from customers.The former head of engineering at FTX, Nishad Singh, testified that he felt “blindsided and horrified” at the result of the actions of a man he once admired when he saw the extent of the fraud. He said the collapse last November left him suicidal.Ellison, Wang and Singh all pleaded guilty to fraud charges and testified against Bankman-Fried in the hopes of leniency at sentencing.In his closing, Mr. Roos mocked Bankman-Fried’s testimony, saying that under questioning from his lawyer, the defendant’s words were “smooth, like it had been rehearsed a bunch of times?”But under cross examination, “he was a different person,” the prosecutor said. “Suddenly on cross-examination he couldn’t remember a single detail about his company or what he said publicly. It was uncomfortable to hear. He never said he couldn’t recall during his direct examination, but it happened over 140 times during his cross-examination.”Former federal prosecutors said the quick verdict — after only half a day of deliberation — showed how well the government tried the case.

Dethroned ‘King of Crypto,’ FTX Founder Sam Bankman-Fried, Convicted of Fraud

More from the New York Sun

Hungary’s New Government Takes Office Pledging To Clean Up EU’s ‘Most Corrupt’ Country

Fetterman Critiques Democratic Strategy, Cites ‘Anti-Men’ Sentiment and Overreliance on Anti-Trump Messaging

Trespasser on Runway Is Sucked Into Engine During Denver Takeoff

More from the New York Sun

Hungary’s New Government Takes Office Pledging To Clean Up EU’s ‘Most Corrupt’ Country

Fetterman Critiques Democratic Strategy, Cites ‘Anti-Men’ Sentiment and Overreliance on Anti-Trump Messaging

Trespasser on Runway Is Sucked Into Engine During Denver Takeoff

Trump Media Posts $400 Million First-Quarter Loss as Trump Sons Pivot to Billion-Dollar Tech Investments

Americans To Quarantine in Nebraska Following Deadly Hantavirus Outbreak on Cruise Ship

Weak Hotel Bookings Leave World Cup Financial Boom in Doubt

With Ukraine’s Assent, Russia’s Soldiers March Through Red Square in Subdued ‘Victory Day’ Parade

Nobel Committee Says It Has a Short List of Peace Prize Nominees but Won’t Say If Trump Is on the List