FTX founder Sam Bankman-Fried was found guilty Thursday of stealing from customers of his now-bankrupt cryptocurrency exchange in one of the largest financial frauds in history, a verdict that cemented the 31-year-old former billionaire’s fall from grace.
A 12-member jury in Manhattan federal court convicted Bankman-Fried on all seven counts he faced after a month-long trial in which prosecutors argued he looted $8 billion from the exchange’s users out of sheer greed.
The verdict came just under a year after FTX filed for bankruptcy in a rapid corporate collapse that shocked financial markets and wiped out his estimated $26 billion personal fortune.
The jury reached the verdict after deliberating for just over four hours. Bankman-Fried, who had pleaded not guilty to two counts of fraud and five counts of conspiracy, stood facing the jury with his hands clasped in front of him as the verdict was read.
The conviction was a victory for the U.S. Department of Justice and Damian Williams, the top federal prosecutor in Manhattan, who has made rooting out corruption in the financial markets one of his top priorities.
“The crypto industry may be new, the players like Sam Bankman-Fried may be new, but this kind of fraud is as old as time and we have no patience for it,” Williams told reporters outside the courthouse.
Once the darling of the crypto world, Bankman-Fried – who was known for his mop of unkempt curly hair and for wearing shorts and T-shirts rather than business attire – joins the likes of admitted Ponzi schemer Bernie Madoff and “Wolf of Wall Street” fraudster Jordan Belfort as notable people convicted of major U.S. financial crimes.
U.S. District Judge Lewis Kaplan scheduled Bankman-Fried’s sentencing for March 28, 2024. The Massachusetts Institute of Technology graduate could face decades in prison.
His defense attorney, Mark Cohen, said in a statement that he was “disappointed” but respected the jury’s decision.
“Mr. Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him,” he said.
After Kaplan left the courtroom, Cohen put his arm around Bankman-Fried as they spoke at the defense table.
As Bankman-Fried was led away by members of the U.S. Marshals Service, he turned and nodded to his parents, Stanford Law School professors Joseph Bankman and Barbara Fried, who were sitting in the front row of the courtroom audience. Fried looked at him and folded her arms over her chest.
Bankman-Fried is scheduled to go on trial next March on a second set of charges filed by prosecutors earlier this year, including alleged foreign bribery and bank fraud conspiracies.
BANKMAN-FRIED TESTIFIES IN HIS OWN DEFENSE
Bankman-Fried’s was the first of several blockbuster cases Williams has brought against former high-flying cryptocurrency executives to go to trial. Several crypto companies went bankrupt last year after the price of bitcoin and other digital assets collapsed following a years-long boom.
Prosecutors argued during the trial that Bankman-Fried siphoned money from FTX to his crypto-focused hedge fund, Alameda Research, despite proclaiming on social media and in television ads that the exchange prioritized the safety of customer funds.
Alameda used the money to pay its lenders and make loans to Bankman-Fried and other executives – who in turn made speculative venture investments and donated more than $100 million to U.S. political campaigns to promote cryptocurrency legislation the defendant viewed as favorable to his business, according to prosecutors.
Bankman-Fried took the calculated risk of testifying in his own defense over three days near the end of the trial, after three former members of his inner circle had testified against him. He faced aggressive cross-examination by the prosecution, often avoiding direct answers to the most probing questions.
He testified that while he made mistakes in running FTX, such as failing to form a risk management team, he did not steal client funds. He said he thought Alameda’s borrowing from FTX was permissible and did not realize how large the debt had become until shortly before both firms collapsed.
“We thought we could build the best product on the market,” Bankman-Fried testified. “It turned out to be basically the opposite.”
HE THOUGHT THE RULES DIDN’T APPLY.
Prosecutors disagreed.
“He didn’t negotiate for his three loyal deputies to take that stand and tell you the truth: that he was the one with the plan, the motive and the greed to raid FTX customer deposits – billions and billions of dollars – to give himself money, power and influence. He thought the rules did not apply to him. He thought he could get away with it,” prosecutor Danielle Sassoon told jurors Thursday.
The jury heard 15 days of testimony. Former Alameda CEO Caroline Ellison and former FTX executives Gary Wang and Nishad Singh, who testified for the prosecution after pleading guilty, said he directed them to commit crimes, including helping Alameda loot FTX and lying to lenders and investors about the companies’ finances.
The defense argued that the three, who have not yet been sentenced, falsely implicated Bankman-Fried in an attempt to win leniency at sentencing. Prosecutors may ask Kaplan to consider their cooperation in determining their sentences.
Bankman-Fried has been jailed since August after Kaplan revoked his bail after concluding he likely tampered with witnesses.
