Crypto CEO Sam Bankman-Fried Faces Major Fraud Trial
Eleven months ago, Sam Bankman-Fried was living in the Bahamas as a crypto superstar, running a celebrity-backed startup, surrounded by fans and friends who believed he was the real deal: An MIT math whiz. A visionary who ditched the Wall Street track to chart his own course. A philanthropist building a fortune which, he repeatedly said, he intended to give away entirely.
This week, he will stand trial in what federal prosecutors have called one of the biggest frauds in US history.
The 31-year-old Bankman-Fried, known as SBF, has pleaded not guilty to seven counts of fraud and conspiracy in connection with the collapse of FTX, his crypto-trading platform. If convicted and sentenced to the maximum punishment, he could spend the rest of his life in prison.
Charges and FTX’s Collapse
SBF faces seven counts, including wire fraud and securities fraud.
Prosecutors alleged that SBF stole billions of dollars from FTX customer funds for his own personal use and to cover huge losses incurred by Alameda Research, a crypto hedge fund he also controlled. They also say SBF defrauded investors in FTX by covering up the scheme.
FTX marketed itself as an easy, safe portal into cryptocurrency trading. It made money by collecting fees on customers’ trades, much like a typical brokerage.
As digital asset valuations shot up in 2021, so did FTX’s profile. At its peak, the company fetched a private valuation of more than $30 billion. But crypto market turmoil took root in the spring of 2022, gutting the entire industry’s value down to $1 trillion from $3 trillion. By November, cracks in FTX’s foundation were beginning to show, and it took just over a week for it all to come crashing down.
Investors and customers began to panic in response to a report from crypto news site Coindesk that raised serious questions about the financial links between FTX and Alameda, two ostensibly separate businesses founded by Bankman-Fried. Based on a document obtained by Coindesk, it appeared that much of Alameda’s assets consisted of FTT, a digital token created by FTX that was rapidly losing value, putting Alameda on shaky financial footing.
Customers rushed to withdraw their funds from FTX, exposing an $8 billion shortfall.
FTX filed for bankruptcy on November 11, and Bankman-Fried resigned as CEO.
Defense and Trial Length
Since his arrest, Sam Bankman-Fried has repeatedly spoken and written about his view of the case: He was an inexperienced businessman who got out over his skis, and he never knowingly committed fraud.
His lawyers have hinted in court documents that they will invoke an “advice of counsel” defense. In other words, SBF didn’t know that his actions were illegal and he was following guidance from FTX’s lawyers.
The trial is expected to last up to six weeks, with jury selection beginning on Tuesday, October 3. SBF remains in the Metropolitan Detention Center in Brooklyn during this time.
Potential Conviction
If he’s found guilty of all seven criminal counts and is given the maximum sentence, Sam Bankman-Fried would face the prospect of 110 years in prison.
