FTX founder Sam Bankman-Fried is about to be sentenced for committing fraud
Photo illustration by Cath Virgina / The VergeThe former crypto billionaire’s punishment could have huge implications for the industry. Continue reading…
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Sam Bankman-Fried, the founder of failed cryptocurrency exchange FTX, has been found guilty of seven counts, including wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering.
Bankman-Fried founded FTX because he was frustrated with other exchanges used by his crypto trading firm Alameda Research, according to a profile from FTX investors Sequoia Capital. But FTX was a fraud “from the start,” the Securities and Exchange Commission wrote, as SBF and other executives misused customer funds to make billions of dollars of investments, buy $200 million of real estate, and repay Alameda’s lenders while representing the business as a safe place to invest.
On March 28th, he returned to the courtroom for sentencing.
The scheme started to fall apart rapidly after CoinDesk published a blockbuster article about Alameda’s balance sheet. It showed that FTX and Alameda were very closely linked and that a lot of the balance sheet consisted of the FTT token, which was issued by FTX. That article led to Binance CEO Changpeng “CZ” Zhao — a former investor in FTX — saying he would sell his holdings of FTT. FTX’s bankruptcy and Bankman-Fried’s resignation from the company followed.
One year to the day after CoinDesk reported on the balance sheet, a New York jury returned a guilty verdict against Bankman-Fried on all of the charges he faced.
You can follow along below for all the latest updates and regular updates from the trial and sentencing.
Now SBF is talking.
Paraphrased courtroom updates from Inner City Press on X capture SBF’s reflections on working with Gary Wang, Nishad Singh, and Caroline Ellison.
These former friends are now felons who testified against Bankman-Fried during his trial.
These arguments didn’t work on the jury.
Sam Bankman-Fried is being represented by new lawyers during today’s hearing, but their statements on his behalf sound familiar. The jury heard those and reached a guilty verdict in just a few hours; now, we’ll see how the judge responds.
Sam Bankman-Fried is about to find out how much prison time he’s facing.
The FTX founder is in court now, waiting to see whether Judge Kaplan hands the 40 to 50 years in prison prosecutors recommend — or if his decision is closer to the more lenient five- to six-year sentence that Bankman-Fried’s lawyers are pushing for.
Prosecutors recommend a 40- to 50-year sentence for Sam Bankman-Fried.
The former crypto billionaire was found guilty on all seven charges he faced in November, and the judge is scheduled to deliver a sentence on March 28th. Bankman-Fried’s lawyers suggested a 5- to 6-year prison sentence but a filing submitted by the prosecution on Friday disagrees:
While a Guidelines sentence – which would exceed 100 years, effectively a life sentence – is not necessary, the Government urges the Court to impose a sentence that underscores the remarkably serious nature of the harm to thousands of victims; prevents the defendant from ever again committing fraud; and sends a powerful signal to others who might be tempted to engage in financial misconduct that the consequences will be severe.
A sentence of 40 to 50 years is necessary to serve such purposes.
FTX says it will pay back customers
Illustration: The Verge
FTX says it will repay investors after the cryptocurrency exchange’s collapse led to the loss of billions of dollars. During a court hearing on Wednesday, FTX lawyer Andrew Dietderich said the company expects to “have sufficient funds to pay all allowed customer and creditor claims in full.”
The company will recompense customers based on the price of the cryptocurrency they purchased as of November 2022 — when the exchange filed for bankruptcy. There are still some challenges associated with getting the lost funds back to customers, though, as Dietderich notes the company will need to comb through all the claims to determine whether they’re legitimate.
Is Bitcoin Wall Street’s next big thing?
It seems like Bitcoin ETFs may be a new trend for the financiers among us:
The companies getting involved here are, in many cases, household names (and not just for people who have their own pet theories about what happened to Satoshi Nakamoto). Industry giants BlackRock and Fidelity are among those positioned to make the first offerings, which could trade on exchanges like NASDAQ. Expectations around the new ETFs have led to a boom not just of bitcoin’s price but also boosted other digital currencies, including ones that were all but left for dead after their close association with convicted fraudster Sam Bankman-Fried.
Sam Bankman-Fried won’t face a second trial.
The Wall Street Journal writes that federal prosecutors won’t pursue the five leftover charges that District Court Judge Lewis Kaplan previously split off to avoid delaying the trial that resulted in a guilty verdict for Bankman-Fried last month.
The prosecutors justified the decision in a letter to Kaplan yesterday:
... Much of the evidence that would be offered in a second trial was already offered in the first trial and can be considered by the Court at the defendant’s March 2024 sentencing. Given ... the strong public interest in a prompt resolution of this matter, the Government intends to proceed to sentencing on the counts for which the defendant was convicted at trial.
The guy who designed Sam Bankman-Fried’s defense says that SBF was “at the very top of the list as the worst person I’ve ever seen do a cross examination.”
David Mills, the Stanford Law prof who also defended ‘80s bond villain Michael Milken, flew to the Bahamas in his own jet when Bankman-Fried was first jailed. His friendship with Bankman-Fried’s parents may not survive the case.
Forbes publishes 30 Under 30 “Hall of Shame.”
Several dubious characters have made it onto Forbes’ lists in the 13 years it’s been putting them out. Here are ten it regrets:
• Sam Bankman-Fried, CEO of FTX
• Caroline Ellison, Co-CEO of Alameda Research
• Charlie Javice, Founder of Frank
• Nate Paul, Founder of World Class Capital Group
• Martin Shkreli, Founder of MSMB Capital
• Cody Wilson, Founder of Defense Distributed
• James O’Keefe, Founder of Project Veritas
• Phadria Prendergast, Editor-in-Chief of Women Of the City Magazine
• Steph Korey, Co-founder of Away
• Lucas Duplan, Founder of Clinkle
What could possibly go wrong, again?
Following a jury's conviction of former FTX boss Sam Bankman-Fried on fraud charges, the Wall Street Journal reports that several former FTX employees, including former general counsel Can Sun, are involved in launching a new cryptocurrency exchange based on Dubai.
Sun and Ferrante said they wanted to use the lessons they learned from FTX’s failure to protect user funds. Backpack Exchange, the name under which Trek Labs will do business, will use Backpack’s technology to allow users to hold funds in their own “self-custody” crypto wallets that the exchange itself wouldn’t be able to unilaterally access, they said.
That defense amounted to SBF saying, “I’m innocent because my customers were dumb enough to believe me.”
Kevin Dugan’s overview really sums it up: stripped of the affectations, we discovered there wasn’t much to Sam Bankman-Fried at all.
Sam Bankman-Fried might not be the last crypto criminal
Photo Illustration by Cath Virginia / The Verge | Photo by Bloomberg, Getty Images
During Sam Bankman-Fried’s monthlong fraud trial, prosecutors presented damning evidence that the fallen crypto founder knew full well what he was doing from the beginning. He knew that Alameda Research borrowed billions in customer funds from FTX. He knew his fellow executives fabricated balance sheets to send to lenders. He knew FTX wasn’t fine when he told customers it was.
In cryptoland, the response to these revelations was largely to condemn Bankman-Fried and FTX as an aberration. When the truth about FTX came out, Binance CEO Changpeng “CZ” Zhao slammed Bankman-Fried, saying he “lied to everyone.” Similarly, Coinbase CEO Brian Armstrong wrote on X (formerly Twitter) that “even the most gullible person should not believe Sam’s claim” that the missing funds stemmed from an accounting error.
Sam Bankman-Fried gambled on a trial and his parents lost
The jury took a little over four hours to reach a verdict. When Joseph Bankman and Barbara Fried, the defendant’s parents, came into the courtroom, they looked frightened. Bankman put his arm around Fried as they sat down on the wooden benches. Fried put her head in her hands.
Sam Bankman-Fried stood to hear the jury’s verdict. After the first “guilty” was read aloud — for wire fraud — his father doubled over. His mother’s hands rose to cover much of her face, either to stifle tears or to hide them. As the judge thanked the jury for their service, Barbara Fried recovered herself enough to gently rub Joseph Bankman’s back.
Sam Bankman-Fried found guilty of fraud
Photo Illustration by Cath Virginia / The Verge
Former cryptocurrency kingpin Sam Bankman-Fried has been found guilty of fraud. A New York jury delivered the verdict on November 2nd, concluding a trial that has seen Bankman-Fried defend himself against claims that he criminally mismanaged his crypto exchange FTX and trading firm Alameda Research.
After more than a month in trial, the jury took four and a half hours to decide Bankman-Fried’s fate, declaring him guilty on all seven charges, including wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. He is set to be sentenced by Judge Lewis Kaplan on March 28th of next year and faces decades in prison.
Jurors have begun deliberating Bankman-Fried’s fate.
The 12-person jury will decide whether Bankman-Fried is guilty of seven criminal charges, including two counts of wire fraud. If convicted, Bankman-Fried faces over 100 years in prison.
The Verge’s Elizabeth Lopatto has been tracking the case from the courtroom, and from what she’s seen so far, it doesn’t look like Bankman-Fried’s defense has brought too many convincing arguments to the table:
The closing arguments made clear was how lopsided the case was. Bankman-Fried’s defense appears to be that he is a nice boy who would never do anything to hurt anyone on purpose... Bankman-Fried is right to be frightened. He brought excuses. The prosecution brought receipts.
Closing time for Sam Bankman-Fried
Photo Illustration by Cath Virginia / The Verge | Photos by Michael M. Santiago, Bloomberg, Klmax, Whyframestudio, Yevgen Romanenko, Pixhook, Peter Dazeley, Jimkruger, Getty Images
Let’s be honest: The facts are bad for Sam Bankman-Fried. The prosecution, in the closing statement delivered by Nicolas Roos (pronounced “Rose”, though he won’t correct you if you get it wrong, as Judge Lewis Kaplan did for most of the trial) today, went through a lot of contemporaneous written evidence that suggested that Bankman-Fried was very, very guilty of wire fraud and conspiracy charges at FTX. Roos gave a confident, restrained argument, relying heavily on that evidence to argue Bankman-Fried had used FTX customer deposits as his own private piggy bank, funneling them through his trading firm, Alameda Research.
He also pointed to why Bankman-Fried had done it: “The defendant was greedy.”
“...getting caught in a lie by a judge is very bad.”
That’s what experienced litigator Mitchell Epner wrote about this incident during the cross-examination of Sam Bankman-Fried. Elizabeth Lopatto’s summary of SBF’s final day of testimony captures it as part of being “vivisected” on the stand.
It was not until Judge Lewis Kaplan intervened to ask if Bankman-Fried had ever been told by Yedidia about that money, in words or in substance, that Bankman-Fried admitted he’d been told.
Trying to worm his way past tough questions by answering a slightly different question doesn’t seem to work as well for SBF in court as it did with investors and interviewers.
Sam Bankman-Fried didn’t ask where the $8 billion went
Photo Illustration by Cath Virginia / The Verge | Photo by Bloomberg, Getty Images
Let’s say I am the owner of a hedge fund, and one fine June day, my employees come to me and say, “Hey, Liz, we have an accounting problem. We are missing several billion dollars.” How would I react?
I have been wondering this since Danielle Sassoon walked Sam Bankman-Fried through his reaction to the FTX software bug fixed by Adam Yedidia. In my case, there would probably be shouting? Like, a lot of shouting. I would also probably have my assistant figure out which law enforcement agency to call immediately. Misplacing $900 million is a five-alarm fire even for Citibank; misplacing several billion is kicking over a lantern in Chicago in 1871.
This review of two Sam Bankman-Fried books is absolutely worth your time.
One of the books, Zeke Faux’s Number Go Up, was given to Bankman-Fried on the witness stand yesterday (He did not recall anything he was quoted as saying, naturally). The author of the other, Michael Lewis, was sitting in the gallery.
As an avowed John Lanchester fangirl, you can imagine the delighted, high-pitched noise I made when I saw he’d reviewed both books.
Sam Bankman-Fried doesn’t recall
Photo Illustration by Cath Virginia / The Verge | Photo by Bloomberg, Getty Images
Midway through Sam Bankman-Fried’s cross examination, as prosecutor Danielle Sassoon went through a brutal line of questioning like a hot buzzsaw through a butter cow, I found myself reflecting on how smart the average person is. Maybe they don’t know calculus. Maybe they’ll never read Ulysses. Maybe they can’t code. But they definitely know how to identify bullshit when they see it.
So if you, like Bankman-Fried, have moved into the Clintonian territory of “it depends on how you define ‘trading’’” you done fucked up, son. Make whatever “sophisticated” argument you like; even the stupid will see through it.
