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Sam Bankman-Fried Found Guilty and Crypto Industry May Never Recover | Science and technology news
Sam Bankman-Fried has caused irrevocable damage to this industry, reinforcing the narrative of a Wild West where consumers have no protection. It will take years for the cryptocurrency world to rehabilitate its image, if it ever does.
By Connor Sephton, news reporter @ConnorSephton
Friday 3 November 2023 07:14, UK
It took just four hours for a jury to find “cryptocurrency king” Sam Bankman-Fried guilty of fraud.
The 31 year old was convicted of stealing billions of dollars from customers of FTX, which was the world’s second largest cryptocurrency exchange before its dramatic collapse last year.
To date, FTX users – at least 80,000 in the UK – remain out of pocket as the company’s new management scrambles to figure out where the money has gone.
Image: A court sketch by Sam Bankman-Fried
During the trial, three members of Bankman-Fried’s inner circle testified: executives with firsthand insight into how the doomed company was run.
Caroline Ellison, his on-off girlfriend and CEO of sister trading firm Alameda Research, which helped bring down FTX, said it was a “relief” when the company went bust.
FTX co-founder Gary Wang said Alameda Research was allowed to withdraw unlimited funds belonging to the exchange’s customers without their knowledge, funding risky bets and extravagant purchases.
And Nishad Singh, who was FTX’s head of engineering, revealed that Bankman-Fried had splashed out almost £1 billion on celebrity endorsements, high-profile partnerships and lavish real estate, further fueling the illusion of success.
All three entered into plea deals before the trial began, but Bankman-Fried does not have that luxury and faces up to 115 years behind bars when he is sentenced in March.
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The verdict marks a huge fall from grace for a young entrepreneur once considered the white knight of the cryptocurrency industry, a man who swooped in and rescued struggling companies on the brink of bankruptcy.
And the consequences of FTX’s dramatic implosion have been felt far beyond the cryptocurrency sector.
US President Joe Biden has come under pressure to return millions of dollars donated by Bankman-Fried to his presidential campaign.
A group of A-list celebrities – including Larry David and Naomi Osaka – are facing lawsuits after supporting FTX in high profile advertisements. Taylor Swift almost got caught up in the debacle, but luckily for her, a $100 million endorsement deal was signed at the last minute.
Bankman-Fried has also advised policymakers in Washington on how to regulate the cryptocurrency industry, advocating for rules that her own company would have found impossible to follow.
And rather embarrassingly, just months before FTX’s collapse, he met Tony Blair and Bill Clinton at an exclusive event in the Bahamas.
Molly Jane Zuckerman, opinion editor at Blockworks, said: “With his conviction, Bankman-Fried and cryptocurrencies will unfortunately be synonymous for the rest of eternity.
“It’s inevitable: the brilliant young founder who promised to change the financial world, convicted on seven charges… exactly one year to the day the original article that brought down his empire was published.”
For years, cryptocurrencies have been viewed cynically by politicians, regulators and the public, ignored as a form of Monopoly money because they are notoriously volatile.
But digital assets had begun to gain traction thanks to the way they reduced the costs of international transactions and offered protection to consumers in nations suffering from hyperinflation.
To know more:
Who is Sam Bankman-Fried?
What is the main purpose of cryptocurrency?
Sam Bankman-Fried has caused irrevocable damage to this industry, reinforcing the narrative of a Wild West where consumers have no protection.
It will take years for the cryptocurrency world to rehabilitate its image, if it ever does.
Why? Because the millions of people who were early adopters – true believers in what this new asset class could achieve – have been badly burned by FTX.
And if you can’t rely on the second largest cryptocurrency exchange in the world, who can you trust?