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The creator of FTX has been found guilty of deceiving customers in the cryptocurrency market.

The creator of FTX has been found guilty of deceiving customers in the cryptocurrency market.

Sam Bankman-Fried, founder of FTX, experienced a remarkable journey in the cryptocurrency world that involved testifying before Congress, a Super Bowl ad, and aspirations of a potential presidential campaign. However, his journey took a dark turn on Thursday as a New York jury found him guilty of fraud in a scheme that defrauded customers and investors of at least $10 billion.

Following a month-long trial, jurors in Manhattan federal court dismissed Bankman-Fried’s testimony in which he denied any involvement in fraud or intention to deceive customers before the collapse of FTX. FTX was previously the world’s second-largest cryptocurrency exchange and declared bankruptcy one year ago.

“The consequences of his actions have caught up with him,” stated Assistant U.S. Attorney Danielle Sassoon to the jury as they prepared to receive instructions from Judge Lewis A. Kaplan and commence their deliberations. Sassoon alleged that Bankman-Fried misused his customers’ accounts, siphoning off as much as $14 billion for his own gain.

She implored the jury to disregard Bankman-Fried’s claims during his three-day testimony that he never engaged in fraud or orchestrated schemes to swindle customers, investors, and lenders. He also stated that he was unaware of his companies’ debt of at least $10 billion until October 2022.

As the jury announced guilty verdicts on all seven counts, Bankman-Fried stood and faced them, clenching his hands in front of him. After sitting back down, he kept his head lowered for a few moments.

Following the judge’s decision to schedule a sentencing date for March 28, Bankman-Fried’s parents took seats in the front row behind him. His father comforted his wife by putting his arm around her. As Bankman-Fried was escorted out of the courtroom, he made eye contact with his mother and nodded, causing her to become emotional and wipe her tears after he exited the room.

The verdict was followed by a statement from U.S. Attorney Damian Williams, who stated that Bankman-Fried had committed a large-scale financial fraud, worth billions of dollars, in an attempt to become the leader in the world of cryptocurrency.

“However, the cryptocurrency sector and individuals like Sam Bankman-Fried may be relatively recent, the presence of fraud and corruption is not a new concept. We will not tolerate such behavior.” stated the speaker.

Mark Cohen, the attorney for Bankman-Fried, stated that they “acknowledge the jury’s verdict. However, we are extremely disappointed with the outcome.”

Cohen stated that Mr. Bankman Fried maintains his innocence and will strongly defend himself against the accusations.

The trial garnered significant attention due to its examination of fraud on a level not witnessed since the 2009 case against Bernard Madoff, whose Ponzi scheme defrauded thousands of investors of around $20 billion over many years. Madoff admitted guilt and received a 150-year prison sentence, passing away in 2021.

The legal proceedings against Bankman-Fried, who is 31 years old, brought attention to the growing world of cryptocurrency and a cohort of executives in their 20s who resided in a lavish $30 million apartment in the Bahamas while aiming to dominate the emerging financial market.

Prosecutors made sure jurors knew that the defendant they saw in court with short hair and a suit was also 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.

In this courtroom sketch, Sam Bankman Fried's parents Barbara Fried and Joseph Bankman react to the jury verdict in Manhattan federal court, Nov. 2, 2023, in New York.

In this illustration from the courtroom, Barbara Fried and Joseph Bankman, the parents of Sam Bankman Fried, respond to the decision made by the jury in New York’s federal court in Manhattan on November 2nd, 2023.

The jury was presented with photographs of Bankman-Fried sleeping on a private jet, sitting with a deck of cards, and socializing with celebrities at the Super Bowl, including singer Katy Perry. Assistant U.S. Attorney Nicolas Roos described Bankman-Fried as someone who enjoyed chasing after fame.

During the closing statement, Mark Cohen, the defense attorney, accused the prosecutors of attempting to portray Sam as a villain or a monster.

He stated, “The accusation is incorrect and unjust, and I trust you have observed that it is completely false.” The government claims that anything Sam was associated with or stated was deceitful.

The government heavily relied on testimony from three former individuals close to Bankman-Fried, including his former partner Caroline Ellison, to detail how he used Alameda Research to divert billions of dollars from customer accounts at FTX.

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, who is 28 years old, stated under oath that Bankman-Fried instructed her to engage in fraudulent activities while she served as the chief executive of Alameda Research. This was in pursuit of his goals to lead major corporations, wield significant financial power, and potentially run for the office of U.S. president in the future. She also revealed that he believed he had a 5% chance of becoming president one day.

Ellison became emotional as she recounted the downfall of her cryptocurrency empire in November. She admitted that the truth about the scam being exposed and customers demanding refunds was a relief because she no longer had to deceive anyone.

In his testimony, FTX’s chief technology officer and cofounder, Gary Wang, stated that Bankman-Fried instructed him to insert code into FTX’s operations. This code allowed Alameda Research to make unlimited withdrawals and have a credit line of up to $65 billion. According to Wang, the source of this money was from customers.

Nishad Singh, who used to lead the engineering team at FTX, stated that he was caught off guard and deeply disturbed by the consequences of the actions of someone he used to admire. Witnessing the extent of the fraud during the collapse in November led him to contemplate suicide.

Ellison, Wang, and Singh all admitted to committing fraud and provided testimony against Bankman-Fried in hopes of receiving a more lenient sentence.

In December, Bankman-Fried was detained in the Bahamas and brought back to the United States. He was released on a personal recognizance bond of $250 million, with electronic monitoring. He was also ordered to stay at his parents’ home in Palo Alto, California.

The individual’s interactions, which consisted of numerous conversations with reporters and online personalities, as well as electronic mail and text messages, ultimately resulted in legal repercussions when a judge determined that they were attempting to sway potential witnesses and incarcerated them in August.

Throughout the legal proceedings, the prosecution presented evidence from Bankman-Fried’s public remarks, online declarations, and congressional testimony to incriminate him. These sources demonstrated how the business owner continuously assured customers that their deposits were completely secure, as recently as November 7th when he tweeted, “FTX is stable. Assets are secure.” This tweet was posted as customers desperately attempted to withdraw their funds. However, the tweet was removed the following day and FTX declared bankruptcy just four days later.

During his closing statement, Roos ridiculed Bankman-Fried’s testimony, suggesting that the defendant’s responses to his lawyer’s questions were rehearsed and too polished.

During the cross-examination, the prosecutor noted a notable change in the defendant’s demeanor. The defendant suddenly had trouble recalling any details about his company or public statements. This was concerning to hear, especially since he had not expressed any difficulty remembering during his initial testimony. However, during the cross-examination, he claimed to not remember over 140 times.

The speedy decision made by the jury, after just half a day of deliberation, demonstrated the government’s effective handling of the case according to former federal prosecutors.

Joshua A. Naftalis, a former Manhattan prosecutor and current partner at Pallas Partners LLP, stated that the government followed our expectations in trying the case. He believes that while it was a large-scale fraud, it did not necessarily have to be complex and the jury recognized this argument.