NEW YORK — Sam Bankman-Fried, once known as a cryptocurrency whiz kid, was found guilty on Thursday for his role in the collapse of the cryptocurrency exchange FTX. If given the maximum sentence, the 31-year-old former billionaire will go to prison for the rest of his life.
Bankman-Fried’s spectacular fall from grace began nearly a year ago when FTX filed for bankruptcy, fueling a panic in the cryptocurrency industry.
Here’s what you need to know about the former crypto king.
He knew nothing about crypto
Bankman-Fried, known as SBF, began his career as a trader at Jane Street Capital after studying math and physics at MIT. In 2017, he left Jane Street to strike out on his own, starting a cryptocurrency hedge fund he called Alameda Research. The firm’s first office was a two-bedroom Airbnb in North Berkeley, California.
“There were three of us, but it had an attic. So that seemed like a third bedroom to us,” he testified last week.
His entrepreneurial drive didn’t stop there: In 2019, Bankman-Fried co-founded cryptocurrency exchange FTX and became its CEO.
But Bankman-Fried testified Friday that he knew “basically nothing” about crypto.
“I had absolutely no idea how they worked…I just knew they were things you could trade,” he said.
Bankman-Fried said he initially envisioned quickly selling FTX to cryptocurrency exchange Binance, since he “had no idea how we would get customers.”
“I thought there was maybe a 20% chance of success” and an 80% chance it would shut down after a few months, he testified. “Even that 20% chance was a huge opportunity, given that the biggest exchanges at the time were multibillion-dollar companies.”
He later hired his former Jane Street colleague Caroline Ellison as a trader at Alameda. She later became the firm’s CEO and, at times, Bankman-Fried’s girlfriend. She also became the prosecution’s star witness, testifying that she and others carried out financial crimes under Bankman-Fried’s direction.
In January 2022, as cryptocurrency prices were still hovering near all-time highs, FTX was valued at $32 billion, with high-profile investors like SoftBank and BlackRock.
Bankman-Fried moved the headquarters of both companies from Hong Kong to the Bahamas, which has a lower corporate tax rate than the United States and a more friendly regulatory environment.
At the time, Bankman-Fried hailed the Bahamas as “one of the few places to set up a comprehensive framework for crypto.”
He was found guilty on seven counts of fraud and conspiracy
In November 2022, the company filed for bankruptcy after experiencing billions of dollars worth of net withdrawals. The panic was fueled in part by a tweet from the CEO of FTX rival Binance, who said his company would liquidate its position in FTT, FTX’s digital currency, “due to recent revelations that have come to light.”
“I was concerned,” Bankman-Fried testified on Monday. “It signaled a potential run on the bank and a risk of a liquidity crisis.”
In response, Bankman-Fried sent a tweet assuring customers that FTX assets were “fine,” which he later deleted.
In December 2022, Bankman-Fried was arrested in the Bahamas after US prosecutors filed criminal charges against him.
Bankman-Fried was found guilty of stealing billions of dollars from accounts belonging to customers of his once-high-flying crypto exchange FTX. He was also found guilty of defrauding lenders to FTX’s sister company, the hedge fund Alameda Research, which held FTX customer funds in a bank account.
During his trial, Bankman-Fried said he learned in 2020 that FTX customer funds were held by Alameda but he did not take action to safeguard them.
When he later discovered in the fall of 2022 that Alameda owed $8 billion to FTX, no one was fired.
Other charges Bankman-Fried was found guilty of include defrauding investors in FTX and a money-laundering charge.
He could face 110 years in prison if given the maximum sentence, but his time on trial may not be finished. A second trial on five additional charges is scheduled for March, though the judge asked prosecutors to decide by February 1 whether that will proceed.
He lost more money in one day than anyone, ever
Before FTX’s implosion, Bankman-Fried’s net worth was estimated above $15 billion, according to the Bloomberg Billionaire Index.
As the value of FTX’s assets disintegrated in November 2022, so did his net worth. In a single day, amid the run on FTX assets, Bankman-Fried saw his net worth collapse by 94% — the biggest one-day loss by any person tracked by the Billionaire Index.
His parents are caught up in FTX’s legal woes
Sam Bankman-Fried’s parents, Joe Bankman and Barbara Fried, are both tenured Stanford law professors.
Bankman specializes in tax law, while Fried is an expert in legal ethics.
Bankman-Fried has asserted that his parents were not involved in “any of the relevant parts” of FTX’s operations, but a September lawsuit has put them in the spotlight. The filing claims that Bankman and Fried discussed with their son transferring a $10 million cash gift and a $16.4 million property in the Bahamas to them.
Bankman and Fried either knew “or ignored bright red flags” that indicated their son and his business partners were “orchestrating a vast fraudulent scheme,” according to the lawsuit.
The filing also states that Bankman repeatedly described FTX as a “family business” and that he initially served as an unofficial adviser to the company but later became a paid employee.
In addition, Fried also allegedly played the role of an adviser to her son, especially when it came to political donations, the lawsuit claims.
Both parents were spotted at their son’s Manhattan trial.
Before his arrest, he courted politicians and celebrities
As FTX’s valuation and popularity soared in 2021 and 2022, Bankman-Fried became a fixture in DC politics. He lobbied for regulation of the crypto industry and became one of the largest contributors to the Democratic Party. He gave about $40 million to campaigns and political action committees in 2022, according to the Federal Election Commission records.
But Bankman-Fried didn’t solely donate to Democrats. Federal prosecutors have alleged that Bankman-Fried sought to conceal donations to Republican candidates, as well.
Bankman-Fried also ingratiated himself in the sports and entertainment world. FTX reportedly shelled out $135 million to rename the Miami Heat arena to “FTX Arena” in 2021. After FTX’s bankruptcy, Miami Heat terminated the relationship.
FTX also paid millions of dollars to former athletes like Tom Brady, Stephen Curry and Naomi Osaka to star in FTX commercials and promote the cryptocurrency exchange. In 2022, “Curb Your Enthusiasm” creator Larry David starred in a Super Bowl commercial for the crypto platform.
FTX’s downfall created a damaging ripple effect for crypto
Bankman-Fried’s crypto trading firm’s bankruptcy unleashed a financial contagion in the cryptocurrency world. Immediately following FTX’s crash, crypto exchange Gemini, which was founded by Cameron and Tyler Winklevoss, froze customer redemptions in its lending unit, citing market turmoil. Its lending unit later filed for bankruptcy. This month, the New York attorney general filed lawsuit against three of the Winklevoss’ companies, accusing them of covering up more than $1 billion in losses.
Just a few weeks after FTX’s bankruptcy, another crypto lender, BlockFi, also went bust. The company said it had “significant exposure” to FTX and Alameda.
Other cryptocurrency firms like Coinbase and Binance conducted significant layoffs after FTX’s downfall and the decline of the value of bitcoin and other digital currencies.
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