Former head of collapsed cryptocurrency exchange FTX Sam Bankman-Fried has been found guilty of seven counts relating to fraud, conspiracy, and money laundering which together carry a maximum sentence of 110 years in prison.
After a month-long trial, the jury deliberated for just over four hours before producing a guilty verdict on Friday.
Bankman-Fried has a sentencing date scheduled for March next year. He is expected to appeal the verdict.
Following the jury’s verdict, US attorney Damian Williams said Bankman-Fried perpetrated a “multi-billion-dollar scheme” to crown himself “the king of crypto”.
“But here’s the thing, the cryptocurrency industry might be new, the players like Sam Bankman-Fried might be new, but this kind of fraud, this kind of corruption, is as old as time,” Williams told a press conference.
FTX collapsed last November following a run on the exchange triggered by leaked financial documents which showed an intermingling of funds with FTX’s sister company Alameda Research.
Customers raced to withdraw over US$7.4 billion from FTX in a single day.
A month after FTX’s spectacular downfall, authorities arrested Bankman-Fried in the Bahamas and promptly extradited him to the US.
Bankman-Fried maintained his innocence throughout the ordeal, continuing to make public appearances right up until his arrest.
Lawyers for Bankman-Fried argued it was incompetence, not malice, that led to the disappearance of US$10 billion in funds from the FTX balance sheet.
Prosecutors struck deals with Bankman-Fried’s former employees and partners who testified to his direct involvement in the movement of customers’ money into Alameda.
FTX co-founder Gary Wang told the jury that Bankman-Fried had asked him to create a way of allowing accounts to hold a negative balance.
Wang complied, adding a database field called ‘allow_negative’ that was switched on for Alameda’s account and ultimately led to billions of customer dollars flying out the back door.
Bankman-Fried funnelled money from Alameda into a lavish lifestyle of luxury apartments, private planes, and A-list events.
He was also a major donor to US political groups and a proponent of effective altruism, a philosophy that claims people can make more of a difference in world by striving to earn high wages – even in problematic industries – and make direct contributions to charitable causes than through political activism and charity work.
A shared interest in effective altruism helped create the on-again-off-again relationship between Bankman-Fried and Caroline Ellison, who was CEO of Alameda from 2021.
She said during the trial that Bankman-Fried was controlling and exerted his power as her boss.
“He was the person I reported to,” she said. “He owned the company, and he set my compensation and had the ability to fire me.”
Ellison testified that she felt uncomfortable about Alameda spending money from FTX customers but that Bankman-Fried had directed her to commit the crimes for which she pled guilty.
The FTX fraud remained undetected until a crypto downturn last year was sparked by investors walking away from speculative assets as central banks tightened monetary policy in response to higher-than-expected inflation.
While Bankman-Fried remains a poster child for the reckless arrogance of this latest crypto bubble, he isn’t the only one to have found himself in legal trouble.
Last week, while the FTX co-founder’s trial was wrapping up, US authorities arrested the CEO and CTO of crypto project SafeMoon.
SafeMoon was a token that emerged in 2021 during a speculative frenzy that saw people buy coins with an in-built liquidity-locking mechanism that was supposedly designed to create scarcity over time, driving the asset’s price up, and keeping it safe from founders cashing out when the price was high.
SafeMoon’s executives promised investors they didn’t have access to the supposedly ‘locked’ tokens and then proceeded to withdraw over US$200 million which they spent on luxury cars and real estate.