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Sam Bankman-Fried found guilty – and the cryptocurrency industry may never recover | Science & Technology News
It took a jury just four hours to find “crypto king” Sam Bankman-Fried guilty of fraud.
The 31 year old he was sentenced of stealing billions of dollars from customers of FTX, which was the world’s second-largest cryptocurrency exchange before its dramatic collapse last year.
Even today, FTX users (at least 80,000 in the UK) continue to lose their savings, while the company’s new management scrambles to figure out where the money has gone.
Image: A courtroom sketch by Sam Bankman-Fried
During the trial, three members of Bankman-Fried’s inner circle gave evidence: executives with firsthand knowledge of how the failed company was run.
Caroline Ellison, his on-and-off girlfriend and CEO of affiliated trading firm Alameda Research, which helped drive FTX into bankruptcy, said it was a “relief” when the company went bust.
Gary Wang, co-founder of FTX, claimed that Alameda Research was allowed to withdraw unlimited funds belonging to the exchange’s customers without their knowledge, funding risky bets and excessive purchases.
And Nishad Singh, FTX’s head of engineering, revealed that Bankman-Fried had spent nearly £1bn on celebrity endorsements, high-profile partnerships and luxury real estate, further fuelling the illusion of success.
All three had agreed to plea deals before the trial began, but Bankman-Fried cannot afford that luxury and faces up to 115 years in prison when he is sentenced in March.
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The verdict marks a fall from grace for a young entrepreneur once considered the white knight of the cryptocurrency industry, a man who stepped in and saved struggling companies on the brink of bankruptcy.
And the consequences of FTX’s dramatic implosion have been felt far beyond the cryptocurrency industry.
US President Joe Biden has come under pressure to return millions of dollars donated by Bankman-Fried to his presidential campaign.
A coterie of high-level celebrities, including Larry David and Naomi Osaka, are facing lawsuits after endorsing FTX in high-profile commercials. Taylor Swift was almost caught up in the debacle, but luckily for her, a $100 million endorsement deal was pulled at the last minute.
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Bankman-Fried had also advised Washington policymakers on how to regulate the cryptocurrency industry, advocating for rules that his own firm would find impossible to follow.
And, embarrassingly enough, just a few months before the FTX collapse, he met Tony Blair and Bill Clinton at an exclusive event in the Bahamas.
Blockworks columnist Molly Jane Zuckerman said: “With this belief, Bankman-Fried and cryptocurrency will sadly be synonymous for the rest of eternity.
“It’s inevitable: the brilliant young founder who promised to change the world of finance, convicted on seven counts… exactly one year after the original news story that brought down his empire.”
For years, cryptocurrencies have been viewed cynically by politicians, regulators, and the public, dismissed as a form of Monopoly money because they are notoriously volatile.
But digital assets had begun to gain traction because they reduced international transaction costs and offered protection to consumers in countries suffering from hyperinflation.
To know more:
Who is Sam Bankman-Fried?
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What is the main purpose of cryptocurrency?
Sam Bankman-Fried has caused irreparable damage to this sector, reinforcing the narrative of a Wild West where consumers are not protected.
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 of this new asset class, who truly believed in what this new asset class could do, have been hit hard by FTX.
And if you can’t count on the second largest cryptocurrency exchange in the world, who can you trust?