FTX founder Sam Bankman-Fried, who just over a year ago was the king of the crypto world and a multi-billionaire before turning 30, was convicted of siphoning off billions of dollars in customer money and using it to build his own empire of enormous wealth and power.
The conviction of seven counts related to fraud and money laundering marked the end of a stunning reversal of fortune for Bankman-Fried from a mop-topped crypto wunderkind hobnobbing with A-list celebrities and politicians, to a convicted felon responsible for plundering the accounts of over a million customers of his crypto exchange.
Despite Bankman-Fried’s claims that he had been uninvolved in day-to-day management of a related investment fund that helped rip a gigantic hole in FTX’s books, the jury agreed with federal prosecutors’ argument that Bankman-Fried had operated a “pyramid of deceit.”
His lawyer had countered that his client, now 31, was simply a “math nerd,” who made many mistakes but had never had any criminal intent.
Prosecutors had alleged that Bankman-Fried had consistently lied to the public that their money would be safe in his exchange, which he claimed had the highest-level risk management protocols.
The case largely centered around the relationship between FTX and its sister company, Alameda Research, which Bankman-Fried had created as an investment arm and hedge fund, but whose risky bets ultimately caused both companies to collapse.
Federal prosecutors alleged that Alameda was effectively granted carte blanche to use FTX customer money to make risky investments. One key element was that certain risk-management systems that FTX used to liquidate customer accounts that had entered into negative territory were disabled for Alameda, allowing it to borrow money without limit.
Prosecutors had alleged that Bankman-Fried used the money not only to make bad investments, but to buy tens of millions of dollars worth of luxury real estate in the Bahamas, hire top-level celebrity endorsements and make millions in campaign contributions in the U.S.
All the while, Bankman-Fried had presented himself as the face of crypto and a key player for the industry in working out a regulatory infrastructure with the government for the rapidly-growing investment area.
But prosecutors said that the whole thing was a sham from the beginning, with Bankman-Fried building secret backdoors in FTX’s programming to allow Alameda to sidestep all the rules and borrow money without any restrictions. At one point in the trial, Bankman-Friend testified that Alameda had a theoretical borrowing cap of $65 billion.
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