Sam Bankman-Fried Trial: Fallen Crypto Mogul Convicted in Collapse That Cost Users Billions

Sam Bankman-Fried, whose FTX cryptocurrency exchange collapsed last year, was found guilty on all seven charges of fraud and conspiracy. Prosecutors said he orchestrated a scheme to steal as much as…

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Nov 9, 2023 • 9 min read

Sam Bankman Fried, the tousle haired mogul, who founded the FTX crypto exchange, was convicted of all seven counts of fraud and conspiracy on Thursday, after a trial lasting a month that exposed the hubris of the crypto industry and its risk-taking. The maximum penalty for these charges is 110 years.

The sentencing of Mr. Bankman Fried is scheduled for the 28th March at 9:30 am.

FTX's founder was a symbol for crypto's excesses when his company failed last year. He was accused of stealing up to $10 billion in customer funds from them, which he used to fund political contributions, venture-capital investments, and other extravagant expenditures.

Bankman-Fried is expected to file an appeal.

Nine women and three male jurors began their deliberations Thursday afternoon after nearly two weeks' worth of testimony over the last month. Witnesses, including his former girlfriend Caroline Ellison who ran Alameda Research a crypto trading company he founded, blamed Mr. Bankman Fried for the sudden collapse of both companies in less than a calendar year.

Federal prosecutors accused Bankman-Fried that he treated FTX like his personal piggybank, saying he used customer money to bolster Alameda Research and his own ambitions.

The trial was faster than expected, with the prosecution calling fewer witnesses than planned. Defense called only three witnesses including Mr. Bankman Fried, whose testimony to the jury took up parts of three consecutive days.

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Three former top advisors of Mr. Bankman Fried, who had all pleaded guilty to the charges and agreed to co-operate with the prosecution, were called to testify by prosecutors. Prosecutors called as witnesses a total of six former employees of Bankman-Fried.

The decision of Mr. Bankman Fried to appear on the witness stand enabled him to argue that he did not intend to steal money or defraud anyone. It was a risky decision and Mr. Bankman Fried said he "couldn’t recall" more than 140 questions in response to cross-examination.

The defense described Mr. Bankman as a "math geek" who built a successful business, only to have it destroyed by forces that were largely beyond his control. In a closing argument, his lawyer stated that the three co-conspirators only cooperated against him in order to avoid long prison sentences.

The prosecution countered by saying that the former employees of Mr. Bankman Fried, in pleading guilt, accepted responsibility for their acts -- something Mr. Bankman Fried was unwilling to accept. In their closing argument, prosecutors told the jury Mr. Bankman Fried had built his crypto-empire on a foundation of 'lies and false promises'.

Judge Kaplan thanks the attorneys in the trial. He says, 'That's all I'll say for now.'

The sentencing of Bankman-Fried is scheduled for the 28th March at 9:30 am.

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Judge Kaplan is asking the government to inform him if Bankman-Fried's second trial on charges of campaign financing and foreign bribery, which was planned for February, will be conducted. He wants to know the outcome by February. Nicolas Roos said that the second trial may have an effect on Bankman Fried's sentencing.

The jury is leaving, but the judge wishes to speak with the lawyers and Bankman-Fried.

Bankman-Fried is sure to appeal, but obtaining a new trial can be a difficult legal process.

Bankman-Fried sits and looks down while the judge speaks to the jury.

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The jury's post-trial interviews will be very interesting. They are told by the judge that it is up to them whether they want to speak to the media or not.

Sam Bankman Fried was found guilty of seven criminal charges by a jury consisting of nine women, three men and three women.

The maximum jail time for each of the seven charges that the FTX founder was facing is listed below:

Wire fraud on FTX customers:

Maximum 20 years

Alameda Research lenders:

Maximum 20 years

Conspiracy to commit fraud against FTX customers

Maximum 20 years

Conspiracy to commit fraud against Alameda lenders

Maximum 20 years

Conspiracy to commit securities Fraud on FTX Investors:

Maximum 5 years

Committing commodities fraud against FTX clients:

Maximum 5 years

Conspiracy for money laundering

Maximum 20 years

The risky decision made by Bankman-Fried to testify did not seem to help him in any way.

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The verdict came very quickly for a trial that lasted a month. This is really a testament of how strong the case against the government was.

Judge Kaplan now thanks the jury for its service.

Bankman-Fried was asked to turn around and face the jury by Judge Kaplan as the verdict is read.

Bankman-Fried may be sentenced up to 110 years of federal prison

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Count Seven: Conspiracy for money laundering: Guilty.

Bankman-Fried has been found guilty of all seven charges.

Credit...

Karsten Moran, The New York Times

Count Four - conspiracy to commit fraud by wire on Alameda lending institutions: guilty.

Five: Conspiracy against investors to commit securities fraud: Guilty.

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Count Six: Conspiracy for commodities fraud: Guilty.

Count Three: Alameda Lenders are guilty of wire fraud.

Count Two: Conspiracy to commit wire fraud against FTX clients: Guilty.

Count One: Wire Fraud on FTX Customers: Guilty.

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The jury has entered court.

The jury, consisting of nine men and women, began to deliberate at 3:15 pm and was on the job for just over four hours.

Judge Lewis A. Kaplan who is preside over this case says that we will maintain decorum before the jury enters the courtroom.

The jurors did not request transcripts of Matt Huang's testimony, who is a venture capitalist at Paradigm. His testimony is related to the securities charge, the fifth of seven.

Credit...

Michael M. Santiago/Getty Images

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The jury just sent out a message that they reached a decision. We are waiting for jury members to arrive.

Last month, news cameras were set up outside the U.S. District Courthouse for the fraud trial Sam Bankman-Fried. He was the former owner and co-founder the Bahamas-based cryptocurrency Exchange FTX.

Credit...

Karsten Moran, The New York Times

Sam Bankman Fried's fate rests in the hands a group of diverse jurors that sat through weeks worth of brutal testimony against the ex-cryptocurrency mogul.

On the second day last month, Judge Lewis A. Kaplan seated a jury consisting of nine women (and three men) in Mr. Bankman Fried's case. Jurors were drawn from all walks. The youngest juror is 33 years old and the oldest 65. One is from Hong Kong, and another is from Ukraine.

One is a small business owner and the other works for U.S. Postal Service vehicle maintenance worker A retired correctional officer is another. Also selected were a high school librarian from the Bronx, and a Rockland County special education teacher. The other jurors included a former Salomon Brothers investment banker, a nonprofit fund-raiser, and an account executive from an advertising agency.

The New York Times doesn't print the names jurors to avoid interfering with a court trial.

Since the trial of Mr. Bankman Fried began on October 3, jurors were already at the Manhattan federal court before 9:30 am. In order to get a dozen people in a courtroom on a regular basis, Judge Kaplan had to make certain logistical arrangements.

The trial was wrapped up in its first week early so that one juror could fly to his daughter's school for a weekend with the parents. A juror mentioned recently that she had to get on a flight for her uncle's birthday, which was taking place on a Friday. Judge Kaplan suggested that the court contact the airline in the event of additional fees if the flight was changed.

On the day that Mr. Bankman Fried testified, an alternate juror reported feeling ill and vomiting. He told Judge Kaplan that he didn't want to be excused from the trial and missed the remainder of it. He was dismissed regardless.

Judge Kaplan stated at the time, "I am not going to risk him having something infectious which could affect others." "Of course, he deserves our gratitude."

Gary Wang, a cofounder of FTX and a witness, spoke about the computer code for the cryptocurrency exchange.

Credit...

Jeenah moon for The New York Times

Sam Bankman Fried's former employees and friends testified in his trial about his scheme to steal billions of dollars from customers through his FTX cryptocurrency trading exchange that collapsed last year.

Witnesses painted a picture of Mr. Bankman Fried, 31, as an abusive boss who ordered them to commit fraud. The witnesses said that the FTX founding had known that the exchange would not be able to pay back the money of at least $8 billion that had been used to purchase lavish real estate, to invest in other crypto-companies, to make campaign contributions and to repay lenders to a firm that Mr. Bankman Fried also controlled.

Caroline Ellison, Mr. Bankman Fried's former girlfriend and employee, is among the prosecution witnesses who testified.

Adam Yedidia was the first prosecution witness. He was a former FTX Developer who lived in The Bahamas with Mr. Bankman Fried and his associates.

Mr. Yedidia who is not charged with any crime and has testified under an immunity clause, stated that Mr. Bankman Fried knew FTX, and Alameda Research a sister crypto-trading firm, was on thin ice.

Mr. Yedidia recounted a conversation he held with Mr. Bankman Fried at their paddle-tennis court, the summer before FTX crashed. The crypto market was in a crash and Alameda's lenders were demanding their money back. Mr. Yedidia stated that Mr. Bankman Fried had told him FTX was bulletproof last, but we are not bulletproof this' and it would take between six months and three years for the company to be 'bulletproof' again.

The government's most important witness was Ms. Ellison. She ran Alameda, and was Mr. Bankman Fried's ex-girlfriend. She described the close relationship that existed between Alameda, FTX and several other instances where Mr. Bankman Fried directed or approved the use of FTX customer deposits.

Ms. Ellison who has pleaded to fraud charges, and is cooperating fully with prosecutors said that Mr. Bankman Fried was eager to buy back FTX from Binance, a crypto exchange rival. She said she was worried about the move because it would require borrowing $1 billion from FTX customers to complete the transaction.

According to Ms. Ellison's testimony, Mr. Bankman Fried told her: 'That's okay, I think it's really important. We have to do this.'

Ms. Ellison gave insight into the mind-set of Mr. Bankman Fried, describing their relationship and his unconventional view that rules like not stealing and not lying were less important than actions he viewed as serving a larger good.

Mr. Wang, a co-founder of FTX who pleaded guilty and has agreed to work with prosecutors in this case, testified to the jury that Bankman-Fried told him to add features to the exchange which would give Alameda a competitive advantage. He testified that 'in the end, Sam made the decision'.

The coder, who was soft-spoken, spent most of his time explaining the intricacies within FTX's code. This supported prosecutors' claim that Alameda had been given special privileges to use FTX deposits like a piggybank.

Mr. Wang and Mr. Bankman Fried met at a math camp in high school. They were then classmates at Massachusetts Institute of Technology, before they founded FTX in 2019.

Singh, a former FTX Executive who has pleaded guilty himself, described the extravagant spending of Mr. Bankman Fried, which included large real estate purchases as well as political donations. He said that FTX customers' deposits were used to fund the extravagant spending.

Mr. Singh testified that he gave other associates, including Mr. Bankman Fried's younger sister, Gabe, the access to his account to make donations to political causes under his name. Mr. Bankman Fried was also the head of the nonprofit organization Guarding Against Pandemics. When a credit line didn't go through, Gabe Bankman Fried sent his assistant to the Bahamas with a number of checks drawn from Mr. Singh's bank account.

The prosecutors also displayed an email exchange between Mr. Singh, and Barbara Fried, Mr. Bankman Fried's mother. Barbara Fried was receiving $1,000,000 from FTX to support her Mind the Gap nonprofit. Ms. Fried (a Stanford law professor) suggested that Mr. Singh donate under his name, "because we didn't want the impression that funding MTG was a family affair as opposed to the collective effort of many people, including some mystery guy Nishad Singh :)).'

Mr. Sun is a former FTX top lawyer who testified in court that Mr. Bankman Fried pushed him into finding a legal reason for the exchange misusing billions of dollars in customer funds, even though Mr. Sun had told his boss that there was no such justification.

Sun testified that at Mr. Bankman Fried's urging he went through a number of theoretical options in order to justify borrowing and spending FTX customers money. Sun testified that, after reaching an agreement with prosecutors that they would not press charges against him he told Bankman-Fried again that none of these options was supported by the facts. Mr. Bankman Fried replied by saying "something like, "Got it,"' Mr. Sun said.

The prosecutors then played a clip of an interview Mr. Bankman Fried gave to ABC's Good Morning America' just days before FTX declared bankruptcy in November. In the interview, Mr. Bankman Fried offered one of Mr. Sun's theoretical explanations for what happened to FTX customers' money.

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