- Author: Natalie Sherman and Peter Hoskins
- business reporter
Courtroom sketch of Sam Bankman-Freed reading the verdict in his fraud trial
Sam Bankman-Fried, who once ran one of the world’s largest cryptocurrency exchanges, has been found guilty of fraud and money laundering at the end of a month-long trial in New York.
The jury reached its verdict after just four hours of deliberations.
This ends a shocking fall from grace for the 31-year-old former billionaire and one of the cryptocurrency industry’s most public faces.
Bankman-Fried was arrested last year after his company FTX went bankrupt.
He now faces decades in prison. His sentencing is scheduled for March 28, 2024.
U.S. Attorney Damian Williams said in a statement after the verdict: “Sam Bankman-Fried committed one of the largest financial frauds in American history – a multi-billion-dollar fraud. Plan to make him the king of cryptocurrencies.”
“This case has always been about lying, deception and theft, and we have no patience for that,” he added.
Prosecutors accuse Bankman-Fried of lying to investors and lenders and stealing billions of dollars from cryptocurrency exchange FTX, hastening the exchange’s collapse. They charged him with seven counts of fraud and money laundering.
He has pleaded not guilty to all charges, insisting that while he made mistakes, he acted in good faith.
Bankman-Fried’s attorney, Mark Cohen, said after the verdict: “We respect the jury’s decision. But we are very disappointed with the outcome.”
“Mr. Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him,” he added.
A spokesman for Bankman-Fried did not immediately respond to a BBC request for comment on whether he planned to appeal the verdict.
Three of Bankman-Fried’s former close friends and associates, including his ex-girlfriend Carolyn Ellison, have pleaded guilty and agreed to testify in hopes of having their sentences reduced.
They will be sentenced later.
“The government won this case by putting a lot of pressure on the collaborators, getting deals with them early and trying the case in a very streamlined way,” said Renato Mariotti, a former federal prosecutor.
“Instead of overcomplicating the case and turning it into some complicated cryptocurrency case, they treated it as just plain fraud.”
Prosecutors presented evidence that Bankman-Fried’s cryptocurrency trading firm, Alameda Research, accepted deposits on behalf of FTX customers from the exchange’s inception, when traditional banks were reluctant to let them open accounts.
Rather than protecting the funds, as Bankman-Fried repeatedly promised in public, he used the money to pay off Alameda lenders, buy properties, make investments and make political donations.
Bankman-Fried’s parents seemed upset as the guilty verdict was read in court
Alameda owed FTX $8bn (£6.5bn) when it went bankrupt last November.
“He took the money. He knew it was wrong. He did it anyway because he thought he was smarter and better and that he could figure out a way out of the situation,” Assistant U.S. Attorney Nicholas Roos said in closing the case Said in the submission.
Bankman-Fried made the risky move to defend himself, hoping to convince jurors that prosecutors had failed to prove he acted with criminal intent.
“It was poor judgment,” said defense attorney Mark Cohen, who painted a picture of a nerdy mathematician who was overwhelmed by his company’s rapid growth.
“This does not constitute a crime.”
Bankman-Fried argued that the transfer of funds between his companies was “permissible” and testified that he was largely unaware of the financial holes described by deputies until weeks before FTX collapsed last year.
The failure left many customers unable to recover their funds.
Lawyers handling the bankruptcy case have since said they have recovered the vast majority of the missing funds.
Bankman-Fried’s trial is being closely watched for its impact on the entire crypto industry, which has failed to recover from last year’s market turmoil.
He is seen as the poster child for problems in the industry, which top U.S. regulators say is rife with crime.
Before his company collapsed, he was known for hobnobbing with celebrities and frequently appearing in Washington and in the media to discuss the industry.
FTX’s rapid growth and his trading earned him the nickname “King of Cryptocurrency” last year as the market downturn hit other cryptocurrency companies.
With Congress unlikely to pass new rules for cryptocurrencies anytime soon, Mariotti said he expects U.S. courts to continue to be a venue for debate in the industry.
“I do think that having specific cryptocurrency regulations in the U.S. will reduce the criminal behavior that occurs in this particular situation,” he said.
“Sadly, I don’t think we’re going to see regulation anytime soon… but it certainly means the fight will continue in the courts and in civil cases brought by the SEC. [Securities and Exchange Commission] and the U.S. Commodity Futures Trading Commission [Commodity Futures Trading Commission]” he added, referring to U.S. financial regulators.
Learn more (for UK readers)
Panorama explores the meteoric rise and sensational fall of Sam Bankman-Fried, a mathematical genius who set out to change the cryptocurrency world but ended up becoming its biggest loser.