After being convicted on seven criminal counts, it looks like FTX founder Sam Bankman-Fried might avoid a second trial – for now.
These have not been the best of times for Sam Bankman-Fried. In 2021, the founder of the FTX cryptocurrency exchange was on the Forbes 30 Under 30 list; two years later, Bankman-Fried was enshrined in the Forbes Hall of Shame, joining the likes of Martin Shkreli and James O’Keefe as he awaits what will almost certainly be a long stay in prison.
March 28 is the day we’ll find out how long. Last November, Bankman-Fried was found guilty on all seven counts he faced, including wire fraud. The original plan was for Bankman-Fried to face an additional set of charges at a second trial, but prosecutors decided they’d done enough at the first trial to send him up the river – maybe not for the maximum 115 years, but at least for the next 20 or so.
What Happened With FTX?
If you were one of the unfortunate FTX users who saw the popular cryptocurrency exchange go belly-up, you’re already at least partly familiar with this story. Or maybe you invested in Alameda Research, the crypto trading firm/hedge fund that Bankman-Fried co-founded with Tara Mac Aulay in 2017, two years before FTX was launched.
Either way, you got hosed. Both companies entered Chapter 11 bankruptcy on November 11, 2022, alongside more than 100 related legal entities; the following day, Bankman-Fried was interviewed by police in the Bahamas, then arrested one month later and extradited to the United States to stand trial.
Even if you didn’t use the FTX exchange – or even any crypto betting site, for that matter – you probably recognized the FTX brand before the scandal hit. The NBA’s Miami Heat played their home games at FTX Arena, and MLB umpires wore the FTX patch behind the plate. Tom Brady and Giselle Bundchen starred in one of their Super Bowl ads; Larry David did another.
Ironically enough, David’s ad proved to be spot-on. He plays a Luddite character who scoffs at all the great inventions of history, from the wheel to democracy, then writes off FTX as well. “And I’m never wrong about this stuff – never.”
The crypto hit the fan after a November 2022 CoinDesk article from Ian Allison showed how Alameda’s balance sheet – both assets and liabilities – was chock full of FTX tokens. This isn’t a crime in and of itself, but FTX customers were none too pleased when they discovered that most of Alameda’s net equity ($14.6 billion in June 2022) turned out to be tokens created by FTX.
Having smelled the rat, FTX users went on the crypto equivalent of a bank run, trying en masse to secure their funds. Some $6 billion worth was withdrawn in the first 72 hours alone. But of course, the money wasn’t there.
What Did Sam Bankman-Fried Do?
The problems with FTX started right at the top. Bankman-Fried was accused of funneling billions of dollars from the exchange to Alameda; by the time this house of cards collapsed, at least $8 billion in customer assets had disappeared.
Which brings us back to the Bahamas. That’s where Bankman-Fried was living the life, at one point sharing a $35-million penthouse condo with his tech bros and his on/off girlfriend, Alameda CEO Caroline Ellison. That’s just one of an estimated 19 properties purchased in the Bahamas by Bankman-Fried, his family, and his friends between 2020 and 2022.
Ah, yes: his family. Father Joseph Bankman and mother Barbara Fried refuse to believe their son has done anything wrong, pointing at the causes Sam donated large sums of money, including pandemic protection. On a related note, Bankman was hired full-time in December 2021 to work for FTX at $200,000 per annum, plus expenses. He and his wife also received $10 million in gift money from their son in 2022.
As of last September, Bankman and Fried were still traveling between California and Bankman-Fried’s jail cell in Brooklyn, taking turns to visit him every Tuesday.
Ellison has some hard time ahead of her as well; she pled guilty to fraud, money laundering, and conspiracy charges in 2022, and was one of three top FTX executives (alongside Gary Wang and Nishad Singh) who put the finger on Bankman-Fried during their testimony on October 23, 2023.
Caroline Ellison has pleaded guilty to fraud and conspiracy, and is widely considered to be the star witness for the prosecution.
“He directed me to commit these crimes,” she said while on the stand, facing Sam Bankman-Fried https://t.co/tnsEkZ2SCz
— TIME (@TIME) October 12, 2023
The next chapter in this tale will be written in March when Bankman-Fried is sentenced. According to prosecutors, those other six counts he was going to face wouldn’t have had much impact on the overall proceedings; they’ll still be taken into consideration when Judge Lewis A. Kaplan brings down the gavel on the Crypto King. Stay tuned.
