{"id":9729,"date":"2023-11-05T00:42:27","date_gmt":"2023-11-05T00:42:27","guid":{"rendered":"https:\/\/infundpros.com\/business\/downfall-of-a-crypto-billionaire-the-conviction-of-sam-bankman-fried\/"},"modified":"2023-11-05T00:42:27","modified_gmt":"2023-11-05T00:42:27","slug":"downfall-of-a-crypto-billionaire-the-conviction-of-sam-bankman-fried","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=9729","title":{"rendered":"Downfall of a crypto billionaire: the conviction of Sam Bankman-Fried"},"content":{"rendered":"
\n

Sam Bankman-Fried\u2019s fate was sealed in a matter of hours by 12 ordinary New Yorkers and their gut instincts, fortified by government-sponsored pizza in an almost deserted courthouse, nearly a year to the day after FTX\u2019s collapse into bankruptcy shook the crypto world.<\/p>\n

An 18-day fraud trial in which the jury was bombarded with talk of \u201comnibus wallets\u201d and \u201cSQL servers\u201d \u2014 and treated to detailed examinations of gremlins in the crypto exchange\u2019s code \u2014 came down to a far simpler question.<\/p>\n

\u201cOnce SBF took the stand it basically became: \u2018do I believe him or not\u2019,\u201d said Widge Devaney, a former federal prosecutor now at Baker McKenzie in New York. \u201cI think the jury just looked at him and said: \u2018OK, I don\u2019t believe him\u2019.\u201d<\/p>\n

The decision by the 31-year-old FTX founder to testify in his own defence, a gamble lawyers tend to advise clients against, was perhaps unsurprising from Bankman-Fried, described by his former colleague and girlfriend Caroline Ellison as \u201ctruly risk-neutral\u201d as long as there was some potential upside.<\/p>\n

But as prosecutor Nick Roos argued in his closing remarks, the version of events proffered by the former tycoon \u2014 that he was caught unawares in October last year by a multibillion-dollar hole in FTX\u2019s balance sheet \u2014 required jurors to believe that an MIT physics graduate \u201cwho ran two billion-dollar companies and who was testifying before Congress, was actually clueless\u201d. <\/p>\n

To find Bankman-Fried not guilty, Roos told jurors on Wednesday, they would have to conclude \u201che had no idea what was happening at his own company, and he had no idea what he was doing was wrong\u201d.<\/p>\n

Claiming not to recall crucial details of FTX\u2019s collapse under cross-examination also did little to help Bankman-Fried\u2019s cause. <\/p>\n

But the odds were stacked against the one-time billionaire ever since the US government indicted him in December and proceeded immediately to secure the co-operation of two of his closest consiglieri, Ellison and Gary Wang, while he was in the air being extradited from the Bahamas.<\/p>\n

A further plea deal with former FTX coder Nishad Singh swiftly followed and prosecutors were fortunate to have the case assigned to Lewis Kaplan, a veteran judge known for his impatience with delaying tactics.<\/p>\n

\u201cThis case moved at lightning speed \u2014 that was not a coincidence, that was a choice,\u201d said Damian Williams, US attorney for the Southern District of New York, soon after the verdict.<\/p>\n

The conviction in what could have been a case mired in complexity was a \u201cwarning to every fraudster who thinks they\u2019re untouchable\u201d, he added.<\/p>\n

While the unanimous decision by a jury including a librarian and a former Salomon Brothers investment banker could now close the prosecutor\u2019s book on FTX, it leaves the rest of the crypto industry reeling from its association with one of the largest financial frauds in US history.<\/p>\n

\u201cThe guilty verdict has a huge impact on the broader crypto sector,\u201d said Neama Rahmani, president of West Coast Trial Lawyers. \u201cMany people have the belief, correct or not, that crypto is a scam, and this case reinforces that belief.\u201d<\/p>\n

At the height of his power, as FTX achieved a $40bn valuation and was embraced by lawmakers and celebrities alike, Bankman-Fried rose to a level of mainstream popularity no other crypto executive has achieved, championing new US crypto regulation and testifying three times before congressional committees, once with his shoelaces untied.<\/p>\n

The collapse of FTX in November 2022 spurred a blitz of enforcement cases from US regulators \u2014 led by Gary Gensler\u2019s Securities and Exchange Commission \u2014 against the biggest names that survived last year\u2019s crisis in crypto markets, including US-listed Coinbase and Binance, the world\u2019s largest digital assets exchange.<\/p>\n

More recently politicians including Democratic senator Elizabeth Warren have renewed calls for a crackdown on the sector over its links to illicit finance and terrorist financing, particularly following Hamas\u2019s attack on Israel last month.<\/p>\n

Bankman-Fried\u2019s conviction could now supercharge such efforts. <\/p>\n

\u201cSBF is the poster child for all the negative assumptions about crypto,\u201d said Charley Cooper, a former chief of staff at the Commodity Futures Trading Commission. \u201cGary Gensler, Elizabeth Warren and other proponents of increased crypto regulation will seize upon this as a stark \u2018I told you so\u2019 moment.\u201d<\/p>\n

After the verdict, Cooper added: \u201cThe scrutiny being heaped upon the industry over the past several years will only increase and crypto\u2019s defenders will have their work cut out for them in keeping government stakeholders at bay.\u201d <\/p>\n

Leading Silicon Valley and Wall Street investors, which backed FTX with nearly $2bn and lent Bankman-Fried their credibility, will also be under scrutiny after the trial underlined how some were duped by fabricated, amateur balance sheets and were all too keen to believe a \u201cmade-up story\u201d.<\/p>\n

Sequoia Capital, SoftBank, Lightspeed Venture Partners and crypto specialists Paradigm and Pantera Capital poured hundreds of millions of dollars into the company, only to be tarnished as FTX was revealed as a historic fraud.<\/p>\n

After the verdict was announced, Sequoia partner Alfred Lin, who oversaw the firm\u2019s FTX investment, wrote: \u201cImmediately after FTX collapsed, we extensively reviewed our due diligence process and evaluated our 18-month working relationship with [Sam Bankman-Fried]\u2009.\u2009.\u2009.\u2009We concluded that we had been deliberately misled and lied to.\u201d<\/p>\n

A slew of cryptocurrencies including bitcoin have rallied in recent weeks, suggesting that even a high-profile criminal trial cannot damp enthusiasm for the nascent technology. But in the wake of Bankman-Fried\u2019s conviction, investors, lawmakers and prosecutors are unlikely ever to be convinced again by the crypto industry\u2019s appeal for special treatment.<\/p>\n

\u201cYou\u2019ve heard it before, whether it was with mortgage-backed securities or other things: \u2018You just don\u2019t understand, this is the new paradigm\u2019,\u201d said Devaney of Baker McKenzie. \u201cIf you don\u2019t understand, that is a red flag.\u201d<\/p>\n

Or, as the Southern District\u2019s Williams put it on Thursday evening, \u201cthis case has always been about lying, cheating and stealing\u201d.<\/p>\n

\n
Video: FTX: the legend of Sam Bankman-Fried | FT Film<\/span><\/div>\n<\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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