Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime

Convicted: 'King of Crypto' Bankman-Fried Now King of Fraud

Jury Convicts Sam Bankman-Fried of All 7 Fraud and Money Laundering Charges
Convicted: 'King of Crypto' Bankman-Fried Now King of Fraud
Former FTX CEO Sam Bankman-Fried leaves federal court in New York on Jan. 3 after pleading not guilty on charges related to the collapse of his company. (Image: Shutterstock)

The guilty verdicts returned by a jury against Sam Bankman-Fried confirmed that the one-time cryptocurrency wunderkind now stands as one of the biggest fraudsters in American history.

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On Thursday, after deliberating for just four hours following a five-week trial, a federal jury found Bankman-Fried, 31, guilty of all seven counts of fraud and money laundering that he faced.

While the judge will determine sentencing, the statutory maximum sentences for his crimes collectively total over 100 years in federal prison. His sentencing date is scheduled for March 28, 2024.

The jury found Bankman-Fried guilty of two counts of wire fraud conspiracy, two counts of wire fraud, and one count of conspiracy to commit money laundering. Each of those charges carries a maximum sentence of 20 years in federal prison. He was also convicted of conspiracy to commit commodities fraud and conspiracy to commit securities fraud, each of which carries a maximum sentence of five years in federal prison.

"Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history - a multibillion-dollar scheme designed to make him the King of Crypto," said U.S. Attorney Damian Williams.

Bankman-Fried seems likely to appeal the verdicts. His lead defense attorney, Mark Cohen, said in a short statement that while "we respect the jury's decision" his client "maintains his innocence and will continue to vigorously fight the charges against him."

FTX, once valued at $32 billion, was a mainstay of American cryptocurrency trading. In a 2022 Super Bowl advertisement, FTX's U.S. operation claimed it was the "safest and easiest way to buy and sell crypto."

Bankman-Fried, who founded and led the FTX cryptocurrency exchange and the Alameda Research cryptocurrency hedge fund, was accused of stealing $9 billion in customer funds. The reputation of FTX, which was once the poster child for crypto, came crashing down, along with many people's savings, when the exchange fell into bankruptcy in November 2022.

Bankman-Fried also faces five charges filed against him after he was extradited to the U.S. from the Bahamas last December. They include foreign bribery conspiracy charges and bank fraud, and they are the focus of a separate trial scheduled to begin in March.

FBI Probed FTX

This case against Bankman-Fried was investigated by the FBI and prosecuted by the U.S. Attorney's Office for the Southern District of New York.

"This case should send a clear message to anyone who tries to hide their crimes behind a shiny new thing they claim no one else is smart enough to understand: The Justice Department will hold you accountable," said U.S. Attorney General Merrick B. Garland.

Despite the next-generation veneer that cryptocurrency brought to Bankman-Fried's carefully cultivated image of sophistication, prosecutors said blockchains or digital currency were merely tools he used to dress up his crimes.

"While the cryptocurrency industry might be new and the players like Sam Bankman-Fried might be new, this kind of corruption is as old as time," Williams said. "This case has always been about lying, cheating and stealing, and we have no patience for it."

Case Moved Quickly

The case has been notable in part for the rapidity with which prosecutors filed charges and faced the suspect in court.

"This case moved at lightning speed - that was not a coincidence; that was a choice," Williams said. "This case is also a warning to every fraudster who thinks they're untouchable, that their crimes are too complex for us to catch, that they are too powerful to prosecute, or that they are clever enough to talk their way out of it if caught."

The jury's verdict arrived exactly one year to the day that FTX began its 10-day collapse in November 2022, after questions arose over the firm's assets and customers moved to withdraw their money, creating the equivalent of a bank run. Two weeks post-collapse, prosecutors filed their first charges against Bankman-Fried, seeking his extradition from the Bahamas.

Prosecutors accused Bankman-Fried of misappropriating billions of dollars for his personal use, to make investments as well as support "millions of dollars of political contributions to federal political candidates and committees." They also accused him of using the money to prop up the cryptocurrency hedge fund he founded, Alameda Research, repaying billions of dollars in loans, while actively concealing these activities in financial information he published.

Insider Testimony

Prosecutors were aided by insider testimony provided by former FTX executives who pleaded guilty to federal charges and agreed to assist the government's case. These included Nishad Singh and Gary Wang, who co-founded FTX with Bankman-Fried and led the company's software engineering efforts, as well as Caroline Ellison, CEO of FTX-affiliated Alameda Research, a cryptocurrency hedge fund owned by Bankman-Fried and Wang.

At the trial, the defense attempted to portray Bankman-Fried as having attempted to do the right thing, only to be overwhelmed. The defendant also took the stand, testifying that he had no hand in the collapse of either FTX or Alameda.

"I made a number of small and large mistakes," including not having a risk management team and lacking oversight, Bankman-Fried testified, according to The Block. He blamed Wang and Singh for having failed to put in place proper controls.

Prosecutors in their closing arguments Wednesday told the jury that despite the defendant's confident demeanor on the stand, he had repeatedly lied under oath. Assistant U.S. Attorney Nicolas Roos said the defendant had replied "I can't recall" 140 times while he was being cross-examined, reported NBC News.

Roos further characterized FTX as being no more than a "pyramid of deceit built on a foundation of lies and false promises - all to get money," reported CNN.

Cohen, in his closing remarks Wednesday, pushed back on the prosecution, telling the jury that U.S. attorneys had turned Bankman-Fried's role "into a movie villain," CNN reported.

"Poor risk management is not a crime," Cohen said.


About the Author

Mathew J. Schwartz

Mathew J. Schwartz

Executive Editor, DataBreachToday & Europe, ISMG

Schwartz is an award-winning journalist with two decades of experience in magazines, newspapers and electronic media. He has covered the information security and privacy sector throughout his career. Before joining Information Security Media Group in 2014, where he now serves as the executive editor, DataBreachToday and for European news coverage, Schwartz was the information security beat reporter for InformationWeek and a frequent contributor to DarkReading, among other publications. He lives in Scotland.




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