Sam Bankman-Fried convicted over collapse of crypto exchange FTX

The former crypto tycoon and FTX founder has been found guilty by a New York jury on all seven counts of fraud, embezzlement and criminal conspiracy.

In a courtroom sketch, Judge Lewis Kaplan watches as FTX founder Sam Bankman-Fried testifies earlier in his fraud trial. Picture: Jane Rosenberg/ Reuters.

FTX founder Sam Bankman-Fried was convicted of stealing billions of dollars from customers of the doomed crypto exchange, in what prosecutors called one of the biggest financial frauds in US history.

The verdict, delivered by a New York federal jury, capped the stunning fall of the one-time crypto king, whose shaggy-haired boy-genius persona helped catapult FTX into a powerhouse trading platform that sponsored sports teams and ran glitzy ads featuring celebrities.

The crypto exchange abruptly crashed a year ago, with customers losing billions of dollars. Bankman-Fried, 31, was indicted in December 2022 and agreed to leave his home in the Bahamas to face an array of fraud charges. Near the end of the month-long trial, Bankman-Fried took the risky move of testifying in his own defence.

For federal prosecutors, the verdict was an expected victory after putting forward what many observers saw as a powerful case that included 18 witnesses.

The US attorney’s office in Manhattan had accused Bankman-Fried of being a greedy billionaire who lied to customers, investors and lenders while flying on private jets and hobnobbing with heads of state. Prosecutors presented evidence showing Bankman-Fried was the architect of a scheme to siphon FTX money to repay the debts of its sister hedge fund, Alameda Research, bankroll risky investments, buy luxury real estate and cover hundreds of millions of dollars in political donations.

His closest former allies took the stand as government witnesses and testified that Bankman-Fried directed them to commit crimes, including secretly changing FTX’s code to allow Alameda to borrow virtually unlimited amounts from the exchange. Caroline Ellison, the government’s star witness and Bankman-Fried’s ex-girlfriend, told jurors that while she was the chief executive of Alameda, he instructed her to doctor balance sheets to fool the hedge fund’s lenders. The lying and stealing left her in “a constant state of dread,” she said.

Bankman-Fried’s lawyers argued that he wasn’t the movie villain prosecutors described him as but a math nerd and entrepreneur trying his best to build a business in an emerging industry. “In the real world, unlike the movie world, things can get messy,” his lawyer Mark Cohen told the jury.

Bankman-Fried’s decision to take the stand appeared perhaps his only shot at changing the momentum of the case.

On his first day of testimony, Bankman-Fried told jurors that he was a good actor in the Wild West of crypto and that he frequently met with lawmakers in Washington in hopes of building a regulatory framework for the industry. He said he never defrauded customers, but regretted not instituting better risk management at FTX before its collapse in November 2022. “We sure should have,” he said.

Under cross-examination, Bankman-Fried floundered as a prosecutor contrasted his many public statements with his private ones in an attempt to show he was a liar. Bankman-Fried gave evasive answers and said he had little recollection of past comments prosecutors cited. During closing arguments, Assistant US Attorney Nicolas Roos told jurors that Bankman-Fried said he didn’t recall at least 140 times. “He approached every question like up was down and down was up,” Roos said.

Bankman-Fried founded FTX in 2019. By 2021, the exchange had millions of customers and roughly $US1bn in annual revenue, Bankman-Fried testified. It imploded after the crypto website CoinDesk published in early November 2022 what purported to be a leaked Alameda balance sheet, causing a run on FTX customer funds.

Presiding over the trial was US District Judge Lewis Kaplan, who kept the case moving by scolding prosecutors and defence lawyers for asking unnecessary questions while providing moments of levity with quips about the Brooklyn Dodgers and recollections of working in his father’s deli as a child.

The jury, composed of nine women and three men, ranged in age from 33 to 68. The jurors include a former investment banker, a high school librarian and an unemployed social worker.

Prosecutors built their case around the testimony of Ellison and two other members of Bankman-Fried’s inner circle, all of whom agreed to co-operate with prosecutors after pleading guilty to fraud and other offences. The trio corroborated each other’s accounts, which were bolstered by contemporaneous documents and Signal chats that prosecutors showed the jury. All three pointed to Bankman-Fried as the mastermind of the fraud and accused him of covering his tracks, including by using an auto-delete function on messaging apps.

Nishad Singh, Bankman-Fried’s childhood friend and FTX’s former director of engineering, testified about learning in September 2022 that Alameda had used $US13bn in FTX customer funds and was unable to pay it back. Singh said he was distressed at the time and spoke to Bankman-Fried about the financial hole in a meeting on the balcony of the Bahamas penthouse apartment they shared. Bankman-Fried was unconcerned and thought the money could eventually be paid back, Singh recalled.

“I’m not sure what there is to worry about,” Bankman-Fried said, according to Singh.

Ellison testified that Bankman-Fried was a risk-taker who was comfortable with lying and stealing as long as it benefited the greater good. To attract FTX customers, he cultivated an appearance “as a smart, competent, somewhat eccentric founder,” she said. He regularly posted on social media, spoke to journalists and testified before Congress to promote FTX as a safe place to trade.

Even when he knew FTX was on the brink of collapse, Bankman-Fried posted on Twitter (the social-media platform now known as X) to falsely reassure customers, Ellison testified. Prosecutors backed up her testimony by showing jurors a Nov. 7, 2022, post in which he wrote, “FTX is fine. Assets are fine.”

Bankman-Fried pushed back during his testimony, telling jurors he wasn’t involved in Alameda’s operation after appointing Ellison and another employee as co-CEOs in the summer of 2021. He only learned of Alameda’s rampant spending of customer funds in the fall of 2022, he told jurors. At FTX, he said, he was involved in decision-making at a high level, but his deputies were largely self-directed.

Assistant US Attorney Danielle Sassoon drilled into his testimony on cross-examination, casting doubt on his assertion of being a hands-off boss and highlighting even relatively innocuous statements — like why he didn’t cut his hair — to show his equivocations. The tense exchanges between Sassoon and Bankman-Fried gripped jurors.

“You think of yourself as a smart guy?” she asked.

“In many ways. Not in all ways,” he replied.

The Wall Street Journal