Sam Bankman-Fried, the founder and former CEO of FTX, has been found guilty on all counts in his fraud trial related to the collapse of the bankrupt cryptocurrency exchange. The jury deliberated for only a few hours before reaching their verdict. While the charges carry a potential sentence of over 100 years, it is still uncertain how much time Bankman-Fried will serve.
Last month, author Michael Lewis, who wrote “Going Infinite: The Rise and Fall of New Tycoon,” discussed Bankman-Fried’s state of mind ahead of the trial during an interview on CBS’ “60 Minutes.” Lewis, who had met with Bankman-Fried numerous times for his book, revealed that Bankman-Fried’s biggest fear about prison is not having access to the internet. Lewis believes that without a constant stream of information to react to, Bankman-Fried may struggle to cope and possibly go mad.
Bankman-Fried’s cryptocurrency exchange FTX experienced a significant downfall last year, going from being the second-largest crypto exchange valued at $32 billion to filing for bankruptcy in November 2022. The collapse was partly attributed to the “crypto winter” following a drop in Bitcoin’s value. FTX faced a wave of withdrawals as reports emerged about commingling funds with its sister hedge fund, Alameda Research, to cover losses.
Caroline Ellison, Bankman-Fried’s former girlfriend and top deputy at Alameda Research, pleaded guilty to wire fraud and conspiracy last year. She testified against Bankman-Fried, claiming that he instructed her to commit fraud. Prosecutors also alleged that Bankman-Fried attempted to intimidate Ellison by sharing her writings with journalists.
FTX customers suffered significant losses as a result of the collapse, and the current CEO, John Ray III, has been working to recover those funds. However, it remains uncertain if retail investors will be able to recover their investments as the bankruptcy process continues. The collapse of FTX also left creditors, including Amazon Web Services and Margaritaville Resort in the Bahamas, in a precarious position.
Bankman-Fried’s management of the firm was heavily criticized by Ray, who described a complete failure of corporate controls and a lack of trustworthy financial information. Examples of mismanagement included the use of emoji approvals for employee payments, the absence of a comprehensive list of bank accounts and employees, and the use of corporate funds for personal purchases.
Bankman-Fried has admitted to not stress-testing rigorously enough but denies mishandling or stealing funds. He was initially arrested in the Bahamas, where FTX International was based, and was later extradited to the US. Bankman-Fried was released on $250 million bail but had his bond revoked in August after prosecutors claimed he attempted to tamper with a witness.
Bankman-Fried pleaded not guilty to all charges, but four former FTX and Alameda executives who were part of his inner circle have pleaded guilty and testified against him as part of their cooperation with the government. The sentencing for Bankman-Fried is yet to be determined.
