One of the most-watched fraud trials in years has reached its dramatic conclusion.
Sam Bankman-Fried was once a very successful person who owned a big business in the cryptocurrency world, worth $32 billion. He was well-known and had famous people supporting his company. He even appeared in fancy TV commercials with celebrities like Larry David, Gisele Bündchen, and Tom Brady.
He was friends with important political figures like Tony Blair and Bill Clinton. He gave away a lot of money to help good causes and said he wanted to give away most of his wealth.
But everything changed. His business collapsed, and people who invested in it lost a lot of money. He was found guilty of doing dishonest things and breaking the law. He could now spend a very long time in prison, possibly up to 110 years. He built his fortune by lying and deceiving people.
Who is Sam Bankman-Fried?
Sam Bankman-Fried grew up in a family of smart and well-known people who believed in liberal ideas. He lived near a place called Silicon Valley, which is famous for technology companies. Even as a kid, he was really good at solving math problems.
When he finished his studies and got a degree in physics from MIT, he got a job at a company that does trading called Jane Street. At that job, he started giving away half of the money he earned to help others. He also got involved in a movement called effective altruism. This means he believed in using facts and evidence to decide how to help people in the best way possible.
Sam Bankman-Fried’s parents are important professors at Stanford University who care a lot about fairness in society. A writer named Michael Lewis, who wrote a book about Bankman-Fried, thinks that Sam wanted to use cryptocurrency to make money so he could help make the world a better place.
In 2017, Sam started a company called Alameda Research, which dealt with cryptocurrency investments. At one point, it was making him a million dollars every day. A few years later, he started another company called FTX in Hong Kong.
There are videos of Sam on social media where he might seem a bit awkward, but in a BBC interview from last year in the Bahamas, he looked comfortable. He was wearing his usual T-shirt and shorts, even though his business was falling apart.
What was FTX?
FTX is a place that started in 2019. It was created by Sam Bankman-Fried and his friend from MIT, Gary Wang. FTX worked like a bank, but it wasn’t regulated by the government. People could exchange regular money for cryptocurrencies like Bitcoin, and they could also keep their money safe there.
At its busiest time, FTX was helping people trade between $10 billion and $15 billion every day. That’s a lot of money changing hands!
In the early part of 2022, FTX, the company owned by Sam Bankman-Fried, was worth a huge $32 billion and was becoming very well-known. They even had their name on an NBA stadium.
But things took a bad turn when a big investigation by a news site called Coindesk said that FTX and its related companies were in a risky financial situation. More reports came out saying that FTX was using its customers’ money in the wrong way.
People got scared and started taking out billions of dollars from the FTX platform. This rush to withdraw money caused FTX to collapse, and they had to declare that they couldn’t pay their debts on November 11, 2022. This means they filed for bankruptcy, which is like saying they couldn’t afford to keep running.
What was Sam Bankman-Fried accused of?
According to US Attorney Damian Williams of the Southern District of New York, he committed one of the biggest financial frauds in US history.
The central allegation was that Mr Bankman-Fried used customer funds to prop up his own risky investments in Alameda Research.
Prosecutors say he also spent millions, taken from deposits, on a luxury lifestyle and political donations – some of which are considered illegal.
When FTX collapsed, more than a million people were left out of pocket because they were unable to get their money out in time.
Several of Bankman-Fried’s colleagues had already pleaded guilty, including his former girlfriend, Caroline Ellison.
What was Caroline Ellison accused of?
Ellison was the former chief executive of Alameda Research and she joined the firm in 2018, reportedly because she wanted a high-paying job in order to give more money to good causes.
She pleaded guilty to wire fraud and money laundering in December last year and testified against her former boyfriend at the trial in the hope of receiving a reduced sentence.
In a recording made in November 2022, at a time when it was clear that Alameda was going to collapse, she is heard telling staff that it was Bankman-Fried’s idea to use FTX customers’ money.
How did the trial play out?
Bankman-Fried has been found guilty of all seven federal changes against him, including wire fraud, securities fraud and money laundering.
Over the course of the trial, jurors heard from several former FTX staff members and executives, including former chief technology officer Gary Wang, former head of engineering Nishad Singh and Caroline Ellison.
The testimonies from the prosecution’s witnesses were damning for Bankman-Fried.
Ellison, for example, testified that he “directed” her to take customers’ money to repay loans, adding that she would regularly “defer” to Bankman-Fried in decisions despite her concerns.
Bankman-Fried also took the stand in his own defence, where he was subjected to withering cross-examination from prosecutors.
In his testimony, he sought to defend himself and claimed he acted in good faith, despite having made mistakes and only having called “some” of the shots as chief executive.
He also had to defend previous comments and social media posts, including some in which he said that protecting customers was a “priority” for FTX.
After a month-long trial, the jury took less than five hours to deliver their verdict.
He could spend 110 years in prison – five of the charges carry a statutory maximum sentence of 20 years each and the remaining two have a maximum of five years each.
Although it is unlikely that the judge in the case will sentence him that severely.