Former crypto mogul Sam Bankman-Fried was convicted on seven charges of fraud and conspiracy on Thursday, after a trial that lasted roughly a month.
The proceedings in a Manhattan courtroom revealed in detail how a multibillion-dollar cryptocurrency empire could implode overnight and put on vivid display the idiosyncratic personalities that left thousands of customers in financial calamity.
Bankman-Fried, the founder and former CEO of cryptocurrency exchange FTX, was charged with seven counts of wire fraud and conspiracy to launder money for his role in the collapse of FTX, once valued at $32bn.
Prosecutors said Bankman-Fried “misappropriated and embezzled” billions of dollars of his customers’ money for himself via Alameda Research, the hedge fund closely associated with FTX.
During the trial, his closest confidants gave damning testimony. Jurors also heard a deconstruction of Bankman-Fried’s public persona and the ad nauseam repetition of the answer: “I don’t recall.”
Here are five key takeaways:
Everyone close to Bankman-Fried said they committed crimes … except Bankman-Fried
Three of Bankman-Fried’s closest confidants confessed to financial crimes for their involvement in FTX’s downfall. Gary Wang and Nishad Singh, both FTX co-founders, and Caroline Ellison, Bankman-Fried’s ex-girlfriend and the former CEO of Alameda Research, all pleaded guilty to wire fraud and conspiracy, cooperating with the prosecution to testify against Bankman-Fried.
Wang said he himself was the architect of the infamous back door that allowed Alameda, the hedge fund closely associated with FTX, to borrow an unlimited amount from FTX, siphoning funds from the exchange’s customers and putting the money under Bankman-Fried’s control.
Molly White, a software engineer and the creator of the crypto-skeptic site Web3 Is Going Just Great, put it succinctly: “The fraud was in the code.” Wang testified he committed fraud at Bankman-Fried’s direction.
According to the indictment, Bankman-Fried used the crypto and cash for $100m in political contributions, a $40m Bahamas penthouse where he and other FTX executives lived, and A-list celebrity endorsements.
On the stand, Bankman-Fried admitted to “large mistakes” and “significant oversights” in his management of FTX – chief among them the failure to put a risk management team into place – but he denied committing fraud. He said he did not know FTX customers’ funds were being misused until just before the exchange folded.
By contrast, Wang testified that his former boss was not surprised to discover that, as the crypto market cratered in 2022, Alameda faced an $8bn budget shortfall, created in part by Bankman-Fried’s investments, according to Wang. Bankman-Fried allegedly covered the hole in the balance sheet using FTX customers’ funds. Wang said that deposits from FTX customers had gone to bank accounts controlled by Alameda since 2019.
Bankman-Fried’s defense blamed Ellison for the bankruptcy of both companies, emphasizing her failure to hedge Alameda’s financial positions.
Caroline Ellison was expected to be the prosecution’s star witness – she delivered
Ellison served as the CEO of Alameda Research. She was also Bankman-Fried’s on-again, off-again girlfriend. There was no one better-positioned, no one closer to Bankman-Fried, to shed light on his actions.
Where Bankman-Fried denied committing fraud and blamed her, Ellison said directly and simply that he had. Moments after she took the stand, prosecutor Danielle Sassoon asked: “When you were working at Alameda, did you commit any crimes?” Ellison replied: “Yes, we did.” Sassoon continued: “When you say ‘we’, who do you mean by ‘we’?”
“I mean Sam and I and others,” Ellison said. She testified that the crimes she committed with Bankman-Fried included “fraud, conspiracy to commit fraud and money laundering” and that they defrauded FTX customers and investors, as well as Alameda’s lenders.
“And just to be clear, did you commit these crimes alone?” Sassoon asked. Ellison replied: “No. They were committed with Sam.”
Ellison later said that the decision to use FTX customer funds to cover Alameda’s shortfall, the heart of the alleged fraud, was “Sam’s decision”. When Bankman-Fried repeatedly directed her to repay loans, Ellison explained: “I understood that he was telling me to use FTX customer funds to repay our loans.”
Bankman-Fried’s ‘math nerd’ look was extremely important to him, to FTX and to the prosecution
Bankman-Fried affected an anti-style personal style: a wild black cloud of hair, a T-shirt and cargo shorts. Ellison testified that he carefully curated his appearance as a personal brand and as ambassador for FTX. She said he opted not for a luxury car owned by the company but for a simple sedan: “It was better for his image to be driving a Toyota Corolla,” she said. He felt the same way about his unkempt hair, she said.
“He said he thought his hair had been very valuable. He said ever since Jane Street, he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX’s narrative and image,” she testified. Bankman-Fried and Ellison met at the trading firm Jane Street.
Sassoon questioned Bankman-Fried repeatedly about his persona and appearance, painting them as yet another way he duped his investors and customers.
“You testified, didn’t you, that you didn’t cut your hair because you were busy and lazy?” the prosecutor asked.
“That sounds about right,” he replied.
Did he tell a colleague, Sassoon asked, as the New York Times reported: “‘I honestly think it’s negative EV [estimated value] for me to cut my hair. I think it’s important for people to think I look crazy.”
“I don’t think I said that in that way,” Bankman-Fried responded.
“Mr Bankman-Fried, do you recall this article from the New York Times?” Sassoon asked, bringing up the article with the comment.
“Vaguely,” Bankman-Fried said.
Bankman-Fried cut his hair for the proceedings, and replaced his trademark T-shirt and cargo shorts with a gray suit and purple tie in the courtroom.
When Bankman-Fried’s lawyer, Mark Cohen, presented his closing, he argued that the prosecutor’s case hinged too heavily on Bankman-Fried’s scruffiness rather than the substance of his actions.
“We’ll agree that there was a time when Sam was probably the worst-dressed CEO in the world and had the worst haircut,” his attorney said in his closing argument. “But that’s not a crime.”
The trial shattered Bankman-Fried’s wunderkind image and brought down his allies
Before his trial, Bankman-Fried was seen as the most responsible man in crypto. FTX was the safest exchange in the industry. He was poised to write the US rulebook for crypto via repeated testimony before Congress and close connections to lawmakers, lubricated by $100m in political contributions.
Hangers-on flocked to that glowing reputation for their own financial and reputational gain.
Bankman-Fried’s parents, both professors of legal ethics at Stanford, were his close advisers. The former CEO called FTX a “family business”. Both attended nearly every day of his trial, and both are now being sued by FTX to claw back the money they had made from the failed exchange. As a result of that lawsuit and the case against their son, their emails – petty, money-grubbing and embarrassing – have been made public. For example, Joseph Bankman was paid a $200,000 salary for his work advising FTX, which he reportedly didn’t think was enough.
“Gee, Sam I don’t know what to say here. This is the first [I] have heard of the 200K a year salary! Putting Barbara on this,” he wrote to his son in January 2022, cc-ing Barbara Fried, according to a September 2023 court filing. Less than two weeks later, he and his wife received $10m from Alameda Research and a $10m Bahamas property.
Michael Lewis, author of The Big Short and Moneyball, wrote a book about Bankman-Fried, Going Infinite. After being given all-encompassing access to Bankman-Fried’s day-to-day life as the CEO, Lewis wrote a hagiography. The Guardian’s Emma Brockes wrote in her review that Lewis “develops a misguided soft spot for the fallen crypto king”.
Bankman-Fried subscribed to a philosophy known as “effective altruism”, which posits that getting rich with an eye toward donating money in the most efficient way possible is a moral good. Ellison said on the stand that her ex-boyfriend’s particular brand of ethics made it easier for her to justify lying and cheating their customers. Public perception of the movement has declined in the wake of the accusations against the one-time mogul, and its biggest boosters have backed off.
When your lawyers tell you not to do interviews after you’ve been accused of a crime, it’s best to listen to them
Testifying in your own defense is a risky bet in the best of circumstances. It becomes extremely perilous when the prosecution has dozens of hours of recorded interviews and hundreds of on-the-record statements from you. Answering “I don’t recall” – as Bankman-Fried did more than 100 times in response to the prosecution’s questioning – may fail to endear you to jurors when there are records of times you did recall.
Bankman-Fried went on a media blitz, speaking to more than 50 journalists before he was arrested and extradited (and several more after). The prosecution made extensive use of those interviews during cross-examination, repeating Bankman-Fried’s statements back to him when he attempted to deflect a line of questioning.
In one notable and testy exchange, Sassoon also asked Bankman-Fried whether his congressional testimony in support of regulation was “just for PR”, which Bankman-Fried denied.
“In private you said things like: ‘Fuck regulators’?” Sassoon asked.
“I said that once,” Bankman-Fried admitted.
During his first interview after the collapse of FTX with the New York Times in November 2022, Bankman-Fried was asked whether his lawyers were “suggesting this is a good idea for you to be speaking”. The entrepreneur replied: “No, they’re very much not.”
