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Sam Bankman-Fried has been found guilty of fraud and conspiracy by a jury in a court in New York. The founder of bankrupt crypto exchange FTX was convicted on all of the seven counts on which he was tried. He awaits sentencing.
A sprawling and sometimes technical case was ultimately decided in a matter of hours, with the jury confirming it was ready to deliver its verdict at 7:33 pm ET.
Bankman-Fried stood to hear the jury's verdict and, once found guilty on all charges, sat back down without much sign of emotion. His parents, who attended court each day and had staunchly maintained their son’s innocence since he was charged, looked distraught.
As Bankman-Fried was escorted away he looked back at his parents, acknowledging them with a small, resigned nod. His mother pounded her hand against her heart once, producing a thump that could be heard around the emptying courtroom as Bankman-Fried was led out. Bankman-Fried faces up to 115 years in prison.
The US government had accused Bankman-Fried of overseeing a multibillion-dollar fraud, whereby money belonging to FTX customers was swept into a sibling company, Alameda Research, and used to fund high-risk trades, debt repayments, personal loans, political donations, and a life of luxury in the Bahamas. The exchange collapsed in November 2022 after it failed to meet customer withdrawals.
The defense attempted to argue that Bankman-Fried had acted as any rational businessperson would, among trying market conditions, and never intended to defraud anyone. Bankman-Fried even took the stand himself, against conventional legal wisdom, to appeal directly to the jury’s sympathies. But confronted with testimony from members of Bankman-Fried’s inner circle, who spoke of their own guilt, as well as customers and investors who lost money in the fall of FTX, the jury found against the defendant.
The testimony of Caroline Ellison, CEO of Alameda Research and Bankman-Fried’s former girlfriend, “stood out,” says Jordan Estes, a former US prosecutor and partner at law firm Kramer Levin. Ellison painted Bankman-Fried as reckless, forceful, and calculating; she described for the jury his various deceptions, the careful curation of his public image, and his miscalibrated moral compass. Ellison cried on the stand when she recalled her “state of dread,” being racked with guilt about the stolen funds, and the sense of relief when FTX began to crumble.
The US Department of Justice, says Estes, will consider Bankman-Fried’s conviction a “signature victory,” as its first high-profile crypto scalp. Cryptocurrency has been used for more than a decade to conceal payment for illicit products, enable extortion-based cyberattacks, and launder the proceeds of criminal activity. In 2021 the DOJ announced the formation of a specialist crypto enforcement team to “tackle complex investigations and prosecutions of criminal misuses of cryptocurrency,” it said. But until now, the agency had secured few landmark convictions.
Though he was charged with old-fashioned fraud, Bankman-Fried was crypto royalty, which lends his conviction a symbolic importance, says Estes. The DOJ, she says, has sent “a message to the crypto industry that fraud and wheeling-and-dealing is not to be tolerated.” An investigation into another member of crypto’s elite, Changpeng Zhao, CEO of Binance, the world’s largest crypto exchange, is reportedly ongoing.
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In crypto circles, the trial of Bankman-Fried was considered a “galactic embarrassment,” a sideshow whose outcome would have little effect on the prospects or trajectory of remaining crypto businesses, but cast a dark cloud over the industry and attracted a torrent of unflattering press.
Its conclusion marks an opportunity for the crypto sector to start anew. Bankman-Fried and FTX may be the story of the day, says Kurt Wuckert Jr., bitcoin expert at media company CoinGeek, but they will soon become artifacts of crypto history, like the closure of underground marketplace Silk Road or the bankruptcy of the Mt. Gox exchange. FTX will become just another “point of reference,” he says.
But that does not preclude another similar fraud taking place in future, says Wuckert Jr., particularly while there remains a lack of regulatory clarity with respect to crypto in jurisdictions like the US. Bankman-Fried’s conviction does not signal that “crypto is clean,” says Kyla Curley, a forensic investigator specializing in crypto and partner at compliance advisory firm StoneTurn. Until crypto businesses are held to a clear and industry-specific set of standards, she says, “buyer beware” remains the message.
The most immediately tangible benefit of the conviction may be in its cathartic effect for FTX customers, though it will have no bearing on the amount of money returned at the end of the bankruptcy process. “It’s more about justice—about feeling and emotion,” says Mike van Rossum, founder of trading firm Folkvang, an FTX creditor and equity holder. “We need a world where there is responsibility for the bad things you do. In Sam’s case, bad things were done.”
Now that the jury has returned its verdict, Judge Lewis Kaplan will decide on an appropriate sentence for Bankman-Fried. The maximum for the seven counts on which he has been convicted is greater than 100 years. But in practice, Estes says, the sentence is likely to fall far short of that mark. Kaplan is expected to make a decision within the next few months.
In the meantime, Bankman-Fried must prepare for a second trial. In March 2024 he will be tried on an additional five charges, brought by the Justice Department in the months after his initial arrest, including conspiracy to commit bank fraud, conspiracy to commit acts of bribery, and securities fraud.
The problem for Bankman-Fried, says Estes, was always that he had to defeat each and every of the 12 charges against him to walk free. That was made more difficult when his trial was split in two, leaving him with two sets of jurors to win over. Although the burden of proof sits with the US government, Bankman-Fried was facing an “uphill battle,” says Estes, because he needed to be convicted of only “one count in either of the trials” for the judge to be able to “sentence him to jail.”