Sam Bankman-Fried, once known as the cryptocurrency whiz kid, was found guilty on Thursday (3) of a series of frauds and conspiracy that ultimately led to the collapse of the cryptocurrency exchange FTX. If he receives the maximum sentence, the 31-year-old former billionaire will spend the rest of his life in prison.
Sam Bankman-Fried, known as SBF, began his career as a trader at Jane Street Capital after studying mathematics and physics at MIT. In 2017, he left Jane Street to work independently, starting a cryptocurrency hedge fund, which he called Alameda Research.
His entrepreneurial drive didn’t stop there: in 2019, Bankman-Fried co-founded the cryptocurrency exchange FTX and became its CEO.
Later, he hired his former colleague at Jane Street, Caroline Ellison, as a trader at Alameda. She became the CEO of the company and, at times, Bankman-Fried’s girlfriend. She also became the prosecution’s key witness, admitting that she and other employees committed financial crimes under Bankman-Fried’s direction.
In January 2022, while cryptocurrency prices were still hitting records, FTX was valued at $32 billion, with high-profile investors like SoftBank and BlackRock.
Bankman-Fried moved the headquarters of both companies from Hong Kong to the Bahamas, which has a lower corporate tax rate than the United States and a more business-friendly regulatory environment.
In November 2022, the company filed for bankruptcy after suffering net withdrawals amounting to billions of dollars. In December 2022, Bankman-Fried was arrested in the Bahamas after U.S. prosecutors filed criminal charges against him.
The Crime
Bankman-Fried was found guilty of stealing billions of dollars from accounts belonging to FTX customers. He was also found guilty of defrauding creditors of FTX’s sister company, Alameda Research, which held FTX customer funds in a bank account.
Prosecutors alleged that Bankman-Fried used the stolen billions to enrich himself, make speculative investments, and finance illegal contributions to political campaigns in hopes of influencing lawmakers regarding the cryptocurrency market.
He could face 110 years in prison if he receives the maximum sentence for each of the seven convictions he received on Thursday (2). Sentencing is scheduled for March of next year.
Family Involvement
Sam Bankman-Fried’s parents, Joe Bankman and Barbara Fried, are tenured law professors at Stanford. Bankman specializes in tax law, while Fried specializes in legal ethics.
Bankman-Fried stated that his parents were not involved in “any of the relevant parts” of FTX’s operations, but a lawsuit filed in September placed them in the spotlight. The lawsuit claims that Bankman and Fried discussed with their son the transfer of a $10 million donation and a $16.4 million property in the Bahamas to them.
Bankman and Fried “knew or ignored warning signs” indicating that their son and his business partners were “orchestrating a vast fraudulent scheme,” the lawsuit says.
Political Involvement
Bankman-Fried became a reference in Washington D.C. politics. He lobbied for regulation of the cryptocurrency industry and became one of the largest contributors to the Democratic Party. He donated about $40 million to campaigns and political action committees in 2022, according to Federal Election Commission records.
He did not only donate to Democrats. Federal prosecutors alleged that Bankman-Fried attempted to conceal donations to Republican candidates.
Source: CNN