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Guilty – in one of the biggest fraud cases in history. Sam Bankman-Fried faces up to 110 years in prison.
It’s the stuff that crime novels are made of: It’s about billions, about greed and about an ex-lover as the main witness. A cinematic court case came to an end in the USA. It is one of the largest fraud cases in US history.
Cryptocurrency hype helped cheating
The jury agrees that Sam Bankman-Fried embezzled $8 billion from customers. He diverted the money from his crypto exchange FTX to his hedge fund Alameda in order to speculate and finance a lavish lifestyle. For example, a penthouse in the Bahamas for $30 million. The sentence will not be announced until the end of March; he faces up to 110 years in prison.
The actual scam has nothing to do with cryptocurrencies. It’s like if we give our money to a bank, and then that bank, without our knowledge, gives the money to another company and then does whatever it wants with it. The fact that the money was moved from a crypto exchange did play a role. When Sam Bankman-Fried became big with FTX, the hype about cryptocurrencies was in full swing. Sam Bankman-Fried took advantage of this to convince many people to invest in his new crypto exchange FTX.
Don’t listen to the lawyers
His lawyers have advised him against testifying in court himself. Sam Bankman-Fried did it anyway: He simply made bad business decisions, failed as an entrepreneur, but didn’t cheat.
He only partially understood the financial situation in his own company. He acted naive and clueless, but in doing so contradicted his own statements from earlier, which the public prosecutor’s office confronted him with in cross-examination. In total, he always answered the same thing to around 140 questions: He couldn’t remember his own statements from before.
It wasn’t difficult for the jury to be convinced by the arguments of the main witness: Caroline Ellison, who was the boss of Alameda and his ex-lover. Bankman-Fried not only knew about the stolen funds, but also commissioned the fraud himself. For example, he commissioned them to falsify balance sheets for investors.
In addition to his ex-lover, two other co-founders and former friends also weighed heavily on him. All three have admitted their guilt and are now cooperating with authorities.
Credible as a do-gooder in Silicon Valley
It is always surprising why investors fall for such scammers. Blind greed is one explanation. When a lot of money suddenly flowed into the crypto industry, many investors also wanted a piece of the pie and were afraid of jumping on a lucrative bandwagon too late.
But Sam Bankman-Fried also marketed himself: as a nerd with a fuzzy head and a mathematics degree from the elite MIT university. He is considered extremely clever and his curious manner made an authentic impression on investors.
He is also a supporter of effective altruism, a movement that wants to earn as much money as possible and as quickly as possible in order to then help the public. The flights in a private jet and an expensive penthouse in the Bahamas, also for his parents, did not contribute to this image.