Sam Bankman-Fried, the tousle-haired mogul who founded the FTX cryptocurrency exchange, was convicted on Thursday of seven charges of fraud and conspiracy after a monthlong trial that laid bare the rampant hubris and risk-taking across the crypto industry.
Mr. Bankman-Fried became a symbol of crypto’s excesses last year when FTX collapsed and he was charged with stealing as much as $10 billion from customers to finance political contributions, venture capital investments and other extravagant spending. A jury of nine women and three men took more than four hours of deliberation on Thursday to reach a verdict, convicting Mr. Bankman-Fried of wire fraud and conspiracy.
Together the counts carry a maximum sentence of 110 years. Mr. Bankman-Fried, 31, is expected to appeal. He’s scheduled to be sentenced on March 28
The verdict capped one of the fastest and most spectacular falls from grace in modern corporate history. Just a year ago, Mr. Bankman-Fried was worth more than $20 billion and hailed as a rare good guy in the freewheeling crypto industry, his face plastered on billboards and magazine covers. FTX, valued at $32 billion at its peak, was one of the world’s biggest marketplaces for people to buy and sell digital coins like Bitcoin and Ether.
Crypto enthusiasts, many of whom openly rooted for Mr. Bankman-Fried to be found guilty, hope that his conviction will provide a moment of catharsis that will allow the industry to move on from a scandal-plagued year. But critics cast the verdict as a sign that the industry may face more legal consequences as it struggles to regain public trust.
“Perpetrators of scams will have to face the law and suffer the consequences of their crimes, even in crypto,” said Cory Klippsten, the founder of the Swan Bitcoin financial services firm and a frequent critic of the industry. “The ‘Wild West’ days are over.”
Mr. Bankman-Fried was always expected to face an uphill battle in court. After FTX imploded, three of his top deputies pleaded guilty to fraud and agreed to cooperate with prosecutors in return for leniency. During the trial, they testified that Mr. Bankman-Fried had repeatedly directed them to pilfer FTX customer funds and lie to the public that billions in customer money had been routed to its sister trading firm, Alameda Research.
Mr. Bankman-Fried’s lawyers argued that he had operated his businesses in good faith and never intended to break the law. But they struggled to poke significant holes in the cooperators’ stories, interrupted by wave after wave of government objections. And when Mr. Bankman-Fried took the stand to defend himself, he often seemed flustered, claiming numerous times that he couldn’t remember potentially incriminating conversations.
Mr. Bankman-Fried rose to prominence by marketing himself as an unusual sort of billionaire — a force for good who accumulated wealth in the hopes of eventually giving it all away. He founded FTX in 2019, and raised billions of dollars from investors to turn it into one of the world’s leading crypto companies.
On trips to Washington and Los Angeles, he hobnobbed with politicians and movie stars, and made tens of millions of dollars in campaign contributions to both Democrats and Republicans. During his ascent, business partners likened him to John Pierpont Morgan, the pioneering banker who once dominated the finance industry.
Then Mr. Bankman-Fried’s business empire collapsed over a matter of days last November, when a run on deposits exposed an $8 billion hole in FTX’s accounts. By the end of the week, FTX had filed for bankruptcy and Mr. Bankman-Fried had stepped down as chief executive. In December, he was arrested at his home in the Bahamas, where FTX was headquartered.
Mr. Bankman-Fried tried to dismiss FTX’s collapse as the unfortunate result of a monumental accounting error, rather than a deliberate fraud. But at his trial, prosecutors argued that he had repeatedly lied to customers, lenders and investors, using their funds to build himself up into a crypto titan.
“This was a fraud that occurred on a massive scale,” Nicolas Roos, one of the federal prosecutors, said in the government’s closing statement. “Thousands of people lost billions of dollars.”
Over the course of the trial, the government called more than a dozen witnesses, including the three cooperators, who had lived with Mr. Bankman-Fried in a palatial, five-bedroom penthouse in the Bahamas that the government claimed was purchased using FTX customer money.
Gary Wang, a co-founder of FTX, testified that Mr. Bankman-Fried instructed him to create a secret backdoor in the exchange’s code that allowed Alameda to borrow a virtually limitless amount of customer funds. Nishad Singh, another top FTX executive, said Mr. Bankman-Fried spent lavishly on investments and endorsement deals, even after he knew that customer accounts were in peril.
The most emotional moment of the prosecution’s case arrived during the testimony of Caroline Ellison, the chief executive of Alameda and Mr. Bankman-Fried’s on-and-off girlfriend. Over three days on the witness stand, Ms. Ellison said she had conspired with Mr. Bankman-Fried to mislead the public and doctor balance sheets that she sent to lenders.
Fighting back tears, Ms. Ellison said the collapse of FTX was strangely cathartic. “I felt this sense of relief that I didn’t have to lie anymore,” she said, “and that I could start taking responsibility even though I felt indescribably bad.”
Ms. Ellison, Mr. Wang and Mr. Singh, who all pleaded guilty to fraud, are scheduled to be sentenced in late 2024.
The trial reached a climax late last month when Mr. Bankman-Fried took the stand. He insisted that he had never intended to commit crimes and had just wanted to build a successful company. But on cross-examination, Danielle Sassoon, a lead prosecutor, exposed cracks in his story, showing the contradictions between his public statements and how he behaved in private.
Even after the verdict, Mr. Bankman-Fried’s legal battle is likely to continue. He is tentatively scheduled for a second trial on campaign finance and other charges early next year, though it’s unclear whether it will take place. And some restrictions Mr. Bankman-Fried and his lawyers have faced in court could become fodder for an appeal.
Before the trial, the judge overseeing the case, Lewis A. Kaplan, issued a series of rulings that limited what Mr. Bankman-Fried’s lawyers could argue in front of the jury. They were prevented from calling several expert witnesses, and blocked from claiming that FTX’s lawyers reviewed many of Mr. Bankman-Fried’s actions as chief executive.
Mr. Bankman-Fried also spent the final weeks before his trial in jail after Judge Kaplan revoked his bail, ruling that he had tried to intimidate witnesses.