Sam Bankman-Fried convicted of fraud over FTX’s collapse

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FTX founder Sam Bankman-Fried was convicted of fraud and money laundering by a New York jury in a landmark criminal verdict that is likely to condemn the former crypto tycoon to decades in prison and bolster US authorities’ attempts to bring an unruly financial sector to heel.

The decision in the highest-profile cryptocurrency-related trial to date was delivered just after 7:40pm on Thursday evening, following less than five hours of deliberation by the jury’s nine women and three men over seven charges including wire fraud on FTX customers and conspiracy to commit money laundering. He was convicted on all counts.

A solemn Bankman-Fried stood motionless and showed little emotion as the verdict was read out in the packed federal courtroom in Manhattan, while his parents Joe Bankman and Barbara Fried embraced each other in the gallery and lowered their heads, despondent.

The culmination of the trial comes almost exactly a year after FTX fell into bankruptcy after being unable to honour withdrawal requests from thousands of customers spooked by a market downturn and damaging revelations about the exchange’s opaque financial structures.

Bankman-Fried, known for his unruly hair and cargo shorts, courted celebrities, was once welcomed at the White House and on Capitol Hill and secured billions of dollars in investment during his brief tenure as the public face of the nascent cryptocurrency industry.

The 31-year-old was accused by prosecutors last December of orchestrating “one of the biggest financial frauds in American history” on the FTX exchange’s customers and investors, as well as lenders to his affiliated hedge fund Alameda Research.

Both businesses had collapsed weeks earlier, after an $8bn hole was uncovered in FTX’s balance sheet and millions of customers were prevented from withdrawing their funds.

John Ray, the insolvency expert who took over FTX when it filed for bankruptcy, said the “complete absence of trustworthy financial information” was worse than Enron, whose bankruptcy he previously oversaw. 

Bankman-Fried could still face further charges in a trial tentatively scheduled for March, on allegations including bribery of foreign officials and campaign finance violations.

The guilty verdict comes after Bankman-Fried took the rare decision to testify in his own defence during the month-long trial. He spent more than two days on the witness stand, during which he admitted to jurors that he made “mistakes” while running FTX but denied defrauding the exchange’s customers and investors.

The former paper billionaire said he first became aware of the hole in FTX’s balance sheet a month before its implosion, and that he had delegated responsibility for coding and risk management to subordinates such as Caroline Ellison, Gary Wang and Nishad Singh, all of whom pleaded guilty to fraud last year and testified against their former boss.

The jury, which included a social worker, a high school librarian and a retired corrections officer, heard from prosecutors on Wednesday that Bankman-Fried “schemed and lied to get money” from the early days of his entrepreneurship, and thought he was smart enough to avoid being caught. They argued Bankman-Fried’s tendency to set messages sent between FTX and Alameda executives to auto delete proved “he was guilty”, and urged jurors to “let the evidence prevail over his storytelling”. 

Lawyers for Bankman-Fried contested that their client was a “math nerd” painted as a villain by prosecutors who had not proven that he acted with criminal intent.

“No witness has come forward and said Sam told them . . . to commit crimes,” Mark Cohen said. “In the real world people misjudge things, they make mistakes.”

Bankman-Fried, who will appeal against the verdict, will be sentenced March 28. He would face more than 100 years in prison if he receives the maximum on all counts on which he was convicted.