A Manhattan federal jury found FTX co-founder Sam Bankman-Fried guilty of defrauding his customers, investors and lenders, ending the dramatic downfall of the 31-year-old entrepreneur who presided over the biggest crypto crash in history.
As Bankman-Fried’s criminal trial concluded Thursday, jurors deliberated for hours. They found him guilty of all seven criminal charges, ranging from wire fraud to money laundering.
His sentencing is scheduled for March 28; The count carries a maximum sentence of 110 years in prison.
When Bankman-Fried was read her verdict in court, she didn’t look back at her parents. His father bowed his head and his mother took off her glasses and rubbed her eyes.
“We respect the jury’s decision, but we are very disappointed in the outcome,” said Mark Cohen, Bankman-Fried’s attorney. “Mr. Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him.”
Bankman-Fried faces even more potential legal risk in the coming year. He is scheduled to face separate criminal charges of bank fraud and bribery of Chinese officials in another trial set to begin in March.
Over the past five weeks, prosecutors have argued that Bankman-Fried intentionally stole up to $14 billion in customer deposits from his cryptocurrency exchange: Alameda CEO Carolyn Ellison, FTX co-founder Gary Wang. , and Nishad Singh, Director of FTX Engineering.
All three pleaded guilty to fraud charges after FTX’s collapse and testified against Bankman-Fried under plea deals with the government.
The group allowed “secret” backdoor access to client deposits at Bankman-Fried’s sister crypto trading firm, Alameda Research FTX, and then spent the money on investments, loan repayments, political donations and real estate.
“He spent his clients’ money and he lied to them about it,” attorney Nicholas Roos said in the government’s closing argument.
“Where did the money go? It went to pay for investments, pay off debt, cover expenses, buy property, make political donations.”
Bankman-Fried testified that poor business decisions and managerial theft — not fraud — were the reasons for the undoing of his cryptocurrency exchange.
“Did you cheat on anyone?” Bankman-Fried’s attorney, Cohen, asked her to take the stand during the final days of the trial during the defendant’s risky gambling.
“No, I didn’t,” Bankman-Fried replied.
“Did you take customer funds?” Cohen clarified.
“No” he said.
‘debt’
At the heart of the allegations against Bankman-Fried, he and FTX misrepresented that customer deposits were safe in the custody of the exchange. Prosecutors said this happened in public tweets, on FTX’s website and in private communications with customers, lenders and investors.
In FTX’s terms of service, the government pointed out, account holders were told their funds belonged to them and were available for withdrawal.
Bankman-Fried argued for the same terms of service, instead supporting her position that Alameda, as a customer at the exchange, could borrow from FTX deposits as long as the funds were held in accounts that chose FTX’s margin-trading program.
“In FTX, the way it was set up, margin customers could use funds borrowed from the exchange for any purpose,” Bankman-Fried’s attorney Mark Cohen said in his closing argument.
“At the time, no one thought this was a problem because customers who borrowed on margin had to post collateral to support their loan. And if a customer’s position lost money, meaning it was at risk of going down, the collateral could be used. Liquidate their position before it goes underwater.”
But prosecutors said what Bankman-Fried and her representatives did undercover were FTX’s computer code that allowed Alameda to access billions in customer funds classified as “loans” or loans from FTX.
They said Alamelu was also allowed special privileges not available to other accounts. Loans made to Alameda are exempt from any collateral requirements and liquidation and may carry negative balances in exchange.
Bankman-Fried testified that her representatives created this computer code. And Alameda’s offerings told the jury that Alameda had legitimate purposes to act as a market maker, payment processor, and backstop liquidity provider for FTX.
He added that he did not know until October 2022 that FTX was facing what he called a liquidity crisis. FTX filed for bankruptcy a month later, in November 2022.
Prosecutors contested that timeline, saying Bankman-Fried and her three executives knew as early as June of that year. It was only when they all worked on a project that Alameda revealed that FTX had an $8 billion shortfall.
In one of the most dramatic moments of the trial, Assistant U.S. Attorney Danielle Sassoon asked Bankman-Fried to explain what she had done in 2022 after it became clear that FTX customer funds were used to pay off Alameda loans and business debts.
“Fired someone for spending $8 billion in customer deposits?” Sassoon asked.
“No,” Bankman-Fried said.
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