Sam Bankman-Fried's failed empire after collapse of Crypto King's web of lies

03 November 2023 , 00:33

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Former FTX chief Sam Bankman-Fried had a spectacular fall from grace after the company was plunged into bankruptcy (Image: AFP via Getty Images)

FTX founder Sam Bankman-Fried's crypto exchange empire hit the ultimate low after he was convicted him of fraud in a scheme that cheated customers and investors of at least $10 billion.

After the monthlong trial, jurors rejected Bankman-Fried's claim during four days on the witness stand in Manhattan federal court that he never committed fraud or meant to cheat customers before FTX, once the world's second-largest crypto exchange, collapsed into bankruptcy a year ago.

Bankman-Fried was formerly nicknamed "The King of Crypto," but now, "his crimes caught up to him," said Assistant U.S. Attorney Danielle Sassoon told the jury. "His crimes have been exposed."

Sassoon said Bankman-Fried turned his customers' accounts into his "personal piggy bank" as up to $14 billion disappeared.

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In this courtroom sketch, Sam Bankman Fried's parents Barbara Fried, left, and Joseph Bankman react to the jury verdict in Manhattan federal court (AP)

She urged jurors to reject Bankman-Fried's insistence when he testified over three days that he never committed fraud or plotted to steal from customers, investors, and lenders and didn't realize his companies were at least $10 billion in debt until October 2022.

The 30-year-old lived in a $40 million (£34.7 million) Bahamian penthouse and was reportedly in a 10-person polyamorous relationship when he was first arrested and charged, as FTX went under. More than one million customers worldwide were using his platform to buy cryptocurrency such as Bitcoin.

The prosecution of Bankman-Fried, 31, put a spotlight on the emerging industry of cryptocurrency and a group of young executives in their 20s who lived together in a $30 million luxury apartment in the Bahamas as they dreamed of becoming the most powerful player in a new financial field.

U.S. Attorney Damian Williams said they engaged in one of the biggest frauds in U.S. history. Prosecutors made sure jurors knew that the defendant they saw in court with short hair and a suit was not the man with big messy hair and shorts that became his trademark appearance after he started his cryptocurrency hedge fund, Alameda Research, in 2017 and FTX, his cryptocurrency exchange, two years later.

Model Gisele Bundchen on stage with Sam Bankman-Fried at the Crypto Bahamas event (Youtube)

They showed the jury pictures of Bankman-Fried sleeping on a private jet, sitting with a deck of cards and mingling at the Super Bowl with celebrities, including the singer Katy Perry. Assistant U.S. Attorney Nicolas Roos called Bankman-Fried someone who liked "celebrity chasing." In a closing argument, defense lawyer Mark Cohen said prosecutors were trying to turn "Sam into some sort of villain, some sort of monster."

"It's both wrong and unfair, and I hope and believe that you have seen that it's simply not true," he said. "According to the government, everything Sam ever touched and said was fraudulent." The government relied heavily on the testimony of three former members of Bankman-Fried's inner circle, his top executives including his former girlfriend, Caroline Ellison, to explain how Bankman-Fried used Alameda Research to siphon billions of dollars from customer accounts at FTX.

Tom Brady and now ex-wife Gisele Bundchen appeared in an FTX commercial last year (FTX Crypto/Youtube)

With that money, prosecutors said, the Massachusetts Institute of Technology graduate gained influence and power through investments, contributions, tens of millions of dollars in political contributions, Congressional testimony and a publicity campaign that enlisted celebrities like comedian Larry David and football quarterback Tom Brady.

Ellison, 28, testified that Bankman-Fried directed her while she was chief executive of Alameda Research to commit fraud as he pursued ambitions to lead huge companies, spend money influentially and run for U.S. president someday. She said he thought he had a 5 percent chance to be U.S. president someday.

Joseph Bankman and Barbara Fried, parents of Sam Bankman-Fried, founder of the collapsed cryptocurrency exchange FTX, arrive at Manhattan Federal Court to support their son (AFP via Getty Images)

Becoming tearful as she described the collapse of the cryptocurrency empire last November, Ellison said the revelations that caused customers collectively to demand their money back, exposing the fraud, brought a "relief that I didn't have to lie anymore."
FTX cofounder Gary Wang, who was FTX's chief technology officer, revealed in his testimony that Bankman-Fried directed him to insert code into FTX's operations so that Alameda Research could make unlimited withdrawals from FTX and have a credit line up to $65 billion. Wang said the money came from customers.

Nishad Singh, the former head of engineering at FTX, testified that he felt "blindsided and horrified" at the result of the actions of a man he once admired when he saw the extent of the fraud as the collapse last November left him suicidal.

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In this courtroom sketch, FTX founder Sam Bankman-Fried, right, is cross examined by Assistant US Attorney Danielle Sassoon, left, while Judge Lewis Kaplan listens, center, in Manhattan federal court (AP)

The founder of the failed crypto currency exchange FTX, though, threw his ex-girlfriend under the bus last month when he said his company failed because of her. Court documents show that Sam Bankman-Fried bad-mouthed his partner, Caroline Ellison, to male colleague behind closed doors, saying she "is not a natural leader, and probably never will be."

The documents, which are dated from September 2022, also display that the crypto banker was angry with Ellison for failing to ratify a risky investment known as a hedge at his suggestion, calling the decision a "critical error." "These kinds of errors happen when I'm not actually running the show there," Bankman-Fried wrote.

Bankman-Fried continued his barrage of insults behind Ellison's back. Alameda Research, the FTX sister company, wasn't performing well according to Bankman-Fried who said it was because Ellison was running it. He claimed the company was "mediocre at best" and said his ex wasn't "good enough to be able to trust" with running it.

Bankman-Fried mingles with celebrities, including Katy Perry, at the Super Bowl (SDNY US Attorney's Office)

In a seemingly strategic move by prosecutors, the documents surfaced a day before Ellison was set to testify against her ex-boyfriend. llison has already pleaded guilty to fraud charges for her hand in FTX and Alameda research. Prosecutors assert that FTX was once thought to be a successful business worth about $32billion.

However, it collapsed last November after reports made investors question the company's finances. Ellison was accused of fraud because Alameda worked directly with FTX to commit crimes.

Abigail O'Leary