Sam Bankman-Fried Found Guilty on All Fraud Charges in Collapse of FTX Crypto Exchange

Fallen crypto mogul Sam Bankman-Fried was convicted of all seven fraud charges stemming from the collapse last year of his digital currency exchange FTX, which left customers, investors and lenders with billions of dollars in losses.

A New York jury of three men and nine women delivered a swift verdict after just over four hours of deliberations. At the judge's instruction, Bankman-Fried, 31, rose and faced the jury forewoman as she read the verdicts. He showed no emotion.

Bankman-Fried's parents hugged and held each other up as they stood in the spectator row behind him after the verdict was read. He looked back at them as he was escorted out of the courtroom by U.S. Marshals; his mother burst into tears.

“Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history — a multi-billion dollar scheme designed to make him the king of crypto," U.S. Attorney for the Southern District of New York Damian Williams told reporters outside the courthouse minutes after Bankman-Fried was convicted. "The cryptocurrency industry may be new, and players like Sam Bankman-Fried may be new, but this kind of fraud, this kind of corruption, is as old as time.”

Of the seven counts of fraud Bankman-Fried was charged with, four of them carry prison terms of up to 20 years apiece. The ultimate length of his sentence will be determined by Judge Lewis Kaplan of Manhattan federal court.

Here are the charges against Bankman-Fried:
1. Wire fraud on FTX customers: Guilty
2. Conspiracy to commit wire fraud on FTX customers: Guilty
3.  Wire fraud on lenders to Alameda Research: Guilty
4. Conspiracy to commit wire fraud on lenders to Alameda Research: Guilty
5. Conspiracy to commit wire fraud on FTX investors: Guilty
6. Conspiracy to commit commodities fraud on customers of FTX in connection with purchases and sales of cryptocurrency and swaps: Guilty
7. Conspiracy to commit money laundering: Guilty

“We respect the jury’s decision. But we are very disappointed with the result," Bankman-Fried's defense attorney Mark Cohen said in a prepared statement. "Mr. Bankman Fried maintains his innocence and will continue to vigorously fight the charges against him."

FTX, which was once valued at $32 billion, and Bankman-Fried’s affiliated trading firm Alameda Research both filed for bankruptcy one year ago, leaving FTX customers with billions of dollars in losses on money they had deposited on the crypto exchange. No one was able to determine exactly how much money was lost, but evidence during the trial indicated anywhere from $8 billion to more than $13 billion in customer funds were diverted at various times.

Prosecutors alleged Bankman-Fried misappropriated the money to invest in other companies, line up celebrity endorsements and buy the naming rights to the basketball arena in Miami where the Heat plays. He also spent more than $200 million on real estate in the Bahamas, including more than $30 million on a party penthouse and $17 million on a beach home for his parents. Customer funds were also allegedly used to line the pockets of politicians in Washington, D.C.

Jurors heard testimony from five of Bankman-Fried’s top deputies at FTX and Alameda, three of whom pleaded guilty to their own charges and agreed to cooperate with the prosecution. They said Bankman-Fried orchestrated the diversion of customer funds. They also said he authorized a secret digital back door in FTX’s computer code that allowed Alameda to withdraw billions in customer funds from FTX, and enabled auto-delete features in messaging apps to destroy records of their messages.

The trial attracted intense interest from the cryptocurrency world, with people filling the courtroom every day. Bankman-Fried’s parents were a constant presence, seated in the spectator rows every day not far from their son at the defense table. And top officials from the Manhattan U.S. Attorney’s Office attended major moments in the case, including U.S. Attorney Williams.

One of the government’s top witnesses was Bankman-Fried’s on-again-off-again girlfriend Caroline Ellison, whom he appointed as chief executive of Alameda as he began devoting more attention to FTX. She testified that he directed her to take FTX customer funds that were then used to fund other investments.

The jury also heard testimony about outlandish gambits which, while not part of the charges in the case, had the potential to reflect poorly on Bankman-Fried. They included a plot by FTX executives to pay bribes to Chinese officials and create fake accounts in the names of Thai prostitutes to access funds frozen on a Chinese crypto exchange, and an effort to cozy up to Bahamian authorities after its collapse by allowing customers there to recover their funds after everyone else had been locked out.

Bankman-Fried, a California-born math whiz who graduated from MIT, launched his crypto trading firm Alameda with friends in 2017 from an Airbnb in Berkeley, after a brief stint with Wall Street quantitative trading firm Jane Street. He launched FTX two years later, initially as a means of attracting trading counterparties in crypto markets, moving its headquarters to Hong Kong and then the Bahamas as it blossomed.   

Alameda and FTX thrived in tandem with an explosion in cryptocurrency markets during those years. Fueled with borrowed capital from crypto lending firms, Alameda’s assets eclipsed $40 billion in U.S. dollar value in 2021, according to trial testimony. It made Bankman-Fried and several of his deputies billionaires on paper. FTX at its peak generated $1 billion in annual revenue, with the equivalent of $15 billion in daily trading volume.

But cracks began to appear after a sharp downturn in crypto markets in May and June of 2022. As digital asset prices plummeted, investors began redeeming holdings – and FTX began struggling to meet customer’s demands for the return of their cash. By late October and early November, FTX was billions short of the money it needed on hand to meet redemption requests, despite public promises that customer money was safeguarded. FTX and Alameda filed for bankruptcy protection in early November.

After Bankman-Fried was arrested in the Bahamas in December and charged in the United States, he was allowed to remain under house arrest at his parents’ home in California. But since August he has been held in custody at a federal lockup in Brooklyn, after Judge Kaplan concluded Bankman-Fried’s leak of Ellison’s personal diary to The New York Times was an effort to impede her testimony and revoked his bail.

The jury also saw evidence that Bankman-Fried reviewed spreadsheets at various times documenting the scale of Alameda’s borrowing from FTX customers, and in one instance even proceeded with a transaction — a $2 billion buyback of an equity stake in FTX from rival exchange Binance — after being warned they didn’t have enough capital and would have to tap funds on the exchange.

Bankman-Fried took the witness stand to testify in his own defense, acknowledging he authorized expenditure of billions of dollars on various ventures, but said he believed the funds were coming from legitimate sources — including FTX’s own corporate revenue, Alameda’s trading profits or customer funds on the exchange that had been authorized for lending.

He denied engaging in fraud or willfully taking customer funds, and acknowledged mistakes in his stewardship of FTX and Alameda. He blamed their failure on poor oversight and a lack of risk management.

But his senior deputies testified that they grew increasingly dismayed as they discovered the outsized spending and the growing inability to redeem customer funds. Nishad Singh, FTX’s chief engineer, testified he objected to many of the expenditues — particularly the commitment of $1 billion in company capital to stadium naming rights, celebrity endorsements and an investment in Kendall Jenner’s 818 tequila brand – to no avail.

Williams said the case and swift verdict should send a message to other fraudsters who think "they are untouchable or that their crimes are too complex for us to catch."

"I promise we'll have enough handcuffs for all of them," Williams said.