Sam Bankman-Fried, the founder of FTX, is not a crook or anything special: An SEC charge of wire fraud in a cryptocurrency exchange
Sam Bankman-Fried, the founder of failed cryptocurrency exchange FTX, has been found guilty on seven counts including charges of wire fraud. The SEC said that FTX was a fraud from the start due to his own misappropriation of customer funds.
As a boy coming of age in the most rarefied quarters of the achievement class, he grew up in a family that viewed the celebration of birthdays and holidays as an inefficiency easily forgone. Michael Lewis writes in his book that from his childhood, an adult who worked 22 hours a day submitted the prospect of any interaction with another person to a cost-benefit calculation that frequently left him canceling meetings and other obligations at the last minute.
The defense attempted to argue that Bankman-Fried acted as any rational businessperson would, amongst trying market conditions, and never intended to defraud anyone. Bankman-Fried even took the stand himself, against conventional legal wisdom, to appeal directly to the jury’s sympathies. The jury found Bankman-Fried guilty after listening to testimony from members of his inner circle, who spoke of their own guilt.
A lot of things can and could go wrong, thanks to witness testimonies and a lot of evidence. What would have happened if there was no article about the hole in FTXs balance sheet? Would Bankman-Fried continue to go about his business — doling out billions in stolen funds to save sinking crypto companies, donating to politicians, and sponsoring sports teams? Was he going to keep spending FTX customers money until it crashed for some other reason, or until one of his bets hit huge enough to clear the books? It feels like a possibility because of Alameda’s unlimited amount of credit.
“Over the past year, our industry took a reputational hit in Washington, but Sam Bankman-Fried’s crimes had nothing to do with the technology underpinning digital assets,” Kristin Smith, the CEO of the Blockchain Association, tells The Verge. The trial was about a crook. The trial has not been very positive for the industry, but it has focused minds on the promise of decentralization.
Though the conviction won’t have much of an effect on how much funds are recovered in FTX, the people whose money was stolen are still very happy. Pat Rabbitte was previously a customer of FTX. “The US justice system has worked.”
Deliberations at the end of a trial take hours to days, depending on the case. Here, it took the jury fewer than five hours to find Bankman-Fried guilty on all counts. The prosecution had convinced the jury that Bankman-Fried oversaw a multi-billion dollar fraud.
Sam Bankman-Fried and the Crypto Industry: Where Do We Stand? How Did FTX Flaws Fails and Who Has Been Affected Its Deals?
Bankman- Fried can get a fast pass into the kind of esteem which they were held by some of the most powerful entities in the country. The people who were supposed to be watching for warning signs at FTX were, he says, “at best sleeping at the wheel and at worst empowering its activities.” He believes that there will be another Sam Bankman-Fried.
The one bad apple may be good for the rest of the industry. In a statement provided to CoinDesk, Paul Brody, the head of blockchain at financial consulting firm EY, calls the outcome of Bankman-Fried’s trial a “wonderful moment for crypto,” and Yat Siu, the chairman of blockchain gaming company Animoca Brands, says it marks a “new beginning” for the industry.
But much of this appears to have been possible because there was so little meaningful oversight of the crypto industry and so much acceptance of companies playing fast and loose. It is hard to say whether the companies left standing are free from all of FTX’s flaws or how closely they have looked over their partners. There is a simple fact that so many of them are under scrutiny.
There’s also the crypto influencer Richard Heart, who the SEC accused of spending at least $12 million in customer funds to purchase sports cars, luxury watches, and a 555-carat black diamond. Other major firms, including Coinbase, Binance, Genesis, and Gemini, also face lawsuits from the SEC.