Sam Bankman-Fried was the face of cryptocurrencies, and he was young, too: a media darling seemingly destined to unite the industry. But the surprising rise of “SBF” and its FTX platform was accompanied by an equally spectacular fall when it was revealed that billions of dollars of client funds had been moved and spent without his consent.
After a jury found him guilty of seven charges in 2023, A federal judge in New York sentenced Bankman-Fried to 25 years for leading the fraudulent scheme. Before everything fell apart, the California native had amassed a fortune at one point estimated at $26 billion. “Except for Mark Zuckerberg, no one in history has become so rich so young“said a headline Forbeswhich put Bankman-Fried on its cover in October 2021.
Former cryptocurrency mogul Sam Bankman-Fried sentenced to 25 years in prison
The cryptocurrency wunderkind had a fortune of US$26 billion
Before everything fell apart, the California native had amassed a fortune at one point estimated at $26 billion. “Except Mark Zuckerberg, no one in history has become so rich so young,” read a Forbes headline.
Bankman-Fried’s story seems scripted in Hollywood and her meteoric rise is only compared to her sudden fall. Son of two Stanford University professors, in 2019, two years after launching the hedge fund of crypto assets Alameda Research, former Massachusetts Institute of Technology (MIT) graduate student founded the already collapsed cryptocurrency exchange company FTX.
FTX became the second largest cryptocurrency exchange in the world, amassing a huge fortune in the process, and followed an aggressive marketing campaign associating itself with the names of stars such as Brazilian supermodel Gisele Bundchen or the famous athletes Stephen Curry and Tom Brady, who were generously rewarded.
“SBF” became more than a young entrepreneur, he became an ambassador for cryptocurrencies and made his first appearance in the US Congress in December 2021, testifying before legislators about the then-new form of currency. The young man charmed American legislators with his direct speech and his vision of the future of cryptocurrencies, including an extensive regulatory regime, a position that does not coincide with that of many in the sector.
In the span of a few months, the Massachusetts Institute of Technology graduate with a bachelor’s degree in physics took the FTX startup he co-founded in 2019 and built it into the world‘s second-largest crypto exchange platform.
With dozens of projects and always in shorts, Sam Bankman-Fried embodied the world of cryptocurrencies in himself. The FTX boss had appeared on the covers of finance and technology magazines, and Fortune compared him to Warren Buffett, and attracted huge investments from prominent fund managers and venture capitalists.
The Californian prodigy came up with project after project, from a platform for people to make cryptocurrency donations to Ukraine to a financial derivatives products market that stepped on the toes of Wall Street. He amassed a fortune estimated at $26 billion: “Except Mark Zuckerberg, no one in history became so rich so young,” read a headline in Forbeswhich put Bankman-Fried on its cover in October 2021.
When the cryptocurrency world went into crisis in early 2022, Bankman-Fried presented himself as a savior and bought the troubled platform BlockFi and shares of another company that was in trouble, Voyager. SBF said it believed in the concept of effective altruism: Finding the best way to help other people, particularly by donating all or part of your wealth to charity rather than volunteering at a soup kitchen.
When the run of cryptocurrencies on the market ended in 2022, Bankman-Fried claimed that his business was in good health, but in reality, his company had also been hit hard by the drop in the value of cryptocurrencies. Behind its assurances, SBF was walking a financial tightrope and taking colossal risks, as later revealed in court documents.
Sam Bankman-Fried became a cryptocurrency ambassador and made his first appearance in Congress in December 2021, testifying before lawmakers about the then-new form of currency.
“I am one of the most hated people in the world”
SBF’s empire began to crumble in November 2022when a news report alleged that Bankman-Fried ordered former FTX chief technology officer Gary Wang to make changes to the exchange’s computer code to allow Alameda to borrow unlimited sums of money to invest in bankrupt digital asset companies, a privilege not granted to other users.
The accusations indicated that the funds of some FTX clients were used, without your knowledge, to finance Alameda and make risky investments. Panic spread and individual investors and business partners rushed to recover their money, to the point that the business, which at one point had been valued at $32 billion, collapsed and declared bankruptcy.
When the dust cleared, about 8.7 billion dollars were missing, according to the administrator who managed the liquidation. The vast majority of Bankman-Fried’s personal fortune evaporated overnight and today his company is bankrupt. Days later he admitted that he “messed up,” but denied accepting other people’s money and blamed the huge mess on former colleagues.
Without their knowledge, Bankman -Fried’s team used FTX clients’ money to cover risky operations for an affiliated trading company called Alameda Research, as well as to purchase luxury real estate properties and make political donations.
He fiscal federal de Manhattan, Damian Williams, accused Bankman-Fried of diverting funds from FTX clients and injecting them into Alameda, as well as purchasing real estate in the Bahamas for several hundred million dollars and make donations to political candidates in the United States. It was estimated that the number of victims could be “greater than a million.”
Charged with fraud and criminal conspiracy, SBF was extradited in late December from the Bahamas, where FTX was headquartered, and was released on $250 million bail upon arrival in New York. But in early August he was arrested again by order of federal judge Lewis Kaplan, suspected of trying to tamper with witnesses.
According to the prosecutor, Bankman-Fried passed documents to the American newspaper The New York Times in an attempt to influence Caroline Ellison’s testimony, his ex-girlfriend and former ‘Alameda’ executive. The woman was accused in this case and agreed to cooperate with justice, like three other former executives of the group, while SBF admitted management errors but no irregularities.
“I’m broke and I wear an ankle bracelet and I’m one of the most hated people in the world,” he wrote in a document published by The New York Times.
FTX founder’s financial acrobatics came to light at his trial
At the hearing in which his sentence was announced this March 28, in the southern court of New York, Judge Lewis Kaplan noted that the young man “had never had a word of remorse for having committed a terrible crime.” He claimed, with examples, that “SBF” – the acronym of his name – had committed at least three acts of perjury when testifying during his trial, as well as witness tampering.
In addition to the 25 years in prison, “SBF” has been fined $11 billion – which can be used to compensate for any loss of clients – and will be on probation for three years, the Ministry of Justice announced. The sentence is much lower than that requested by New York prosecutor Damian Williams, who requested between 40 and 50 years in prison for the founder and president of the cryptocurrency exchange platform FTX.
Zixiao “Gary” Wang
The trial began on October 3 last year in New York and was in the hands of US District Judge Lewis A. Kaplan, who previously handled defamation lawsuits against former US President Donald Trump and a sexual abuse lawsuit against Prince Andrew of Britain.
SBF “had wealth and power” but it was all “built on lies”, prosecutor Thane Rehn said in his opening speech at the trial, where he accused him of having committed “massive fraud” by stealing money from the accounts of clients of his FTX exchange platform and using it for his own account.
Prosecutors claimed throughout the process that the actions of Bankman-Fried and her close colleagues jeopardized the availability of funds to their users, leading to the collapse of FTX as cryptocurrency prices fell.
In November, a jury found him guilty of seven counts, including fraud, conspiracy and money laundering.
“He understood the rules, but decided they did not apply to him,” the prosecutor’s office insisted in a document sent to the judge, citing a “pernicious megalomania” and a “superiority complex.”
Caroline Ellison
He admitted that he carried out inadequate risk management, but denied stealing funds. His defense argued that Bankman-Fried believed his treatment of client funds was consistent with FTX’s terms of service and the law, emphasizing a “good faith” belief.
“Sam didn’t let anyone down”says Mark Cohen, one of the defendant’s lawyers. “There was no theft.” His lawyer acknowledged that Alameda had used FTX funds, but assured that it was simply a matter of investing the money, not embezzling it.
Zixiao “Gary” Wang, who was the company’s technical director and had an estimated fortune of US$4.6 billion when it went bankrupt in November 2022, was the first witness in the trial and described SBF as a character who was willing to break the law and lie to allow FTX and Alameda to record profits and growth sustained.
Wng, who pleaded guilty to four charges, explained to the judge that in 2019, a few months after the creation of FTX, SBF changed the operating software to allow Alameda to request loans on the platform, which was only authorized for a handful of customers, in limited quantities.
This change was not communicated to the general public, customers or investors, Wang said. “The clients had not given us permission to use it (the money) for other purposes,” he declared.
The line of credit granted to Alameda was gradually expanded until reaching the astronomical sum of US$ 65 billionsaid Wang, who explained that at the time of FTX’s bankruptcy, About US$8.7 billion of the funds were missing of the clients, provided by Alameda, which could not reimburse them.
He added that SBF had requested several times that client losses be recorded in Alameda’s books, to hide the transactions from the general public and not damage FTX’s image.
SBF’s ex-girlfriend, Caroline Ellison, who was also tried, stated before Judge Kaplan that the former executive ordered her to commit crimes and claimed that they stole “around 14 billion” of dollars from customers of the cryptocurrency exchange platform before it collapsed.
“He was the boss of Alameda and the owner of Alameda and he gave me instructions to commit crimes,” Ellison testified about her ex-boyfriend.
Bankman-Fried “was the one who set up the system” by which Alameda took FTX customer money and used it “for investments and to pay off debts,” said Ellison, a Stanford University mathematician who developed mathematical models for finance. of market.
“For important decisions, Sam consulted him. He was the person he officially reported to. He was the owner of Alameda. I could have said goodbye if I wanted to.“, said.
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