ECONOMY & WORK
MONEY 101
NEWS
PERSONAL FINANCE
NET WORTH
About Us Contact Us Privacy Policy Terms of Use DMCA Opt-out of personalized ads
© Copyright 2023 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
MARKETREALIST.COM / NEWS

FTX Scam: The Rise and Fall of Former 'Crypto King' Sam Bankman-Fried

Bankman-Fried was found guilty on all seven charges and now he could spend decades behind bars
PUBLISHED NOV 6, 2023
 FTX founder Sam Bankman-Fried leaves Manhattan Federal Court | Getty Images | Photo by David Dee Delgado
FTX founder Sam Bankman-Fried leaves Manhattan Federal Court | Getty Images | Photo by David Dee Delgado

Sam Bankman-Fried, the founder of the crypto exchange FTX that caused the crypto industry’s “Lehman moment”, has been found guilty of seven criminal charges. Bankman-Fried recently went on trial for fraud and conspiracy in a court in the Southern District of New York. The verdict has now deemed him guilty of the charges and he is due to face sentencing early next year. Here’s all you need to know about the collapse of FTX and Sam Bankman-Fried's trial.

Photo illustration of the FTX logo | Getty Images | Photo Illustration by Michael M. Santiago
Photo illustration of the FTX logo | Getty Images | Photo Illustration by Michael M. Santiago

FTX was formerly a digital currency exchange platform where people bought and sold digital assets like Bitcoin, ether, etc. The exchange platform founded in 2019, rose to international popularity in recent years as investment in cryptocurrencies skyrocketed. It went on a series of high-profile acquisitions, aggressive marketing strategies, and low trading fees as it raised almost $2 billion in investments, according to NBC News. The company’s 30-year-old founder, Sam Bankman-Fried, soon became the face of the organization and the crypto exchange at large. It was followed by expensive celebrity endorsements from actors to NBA players along with major sports sponsorships that made FTX hard to miss.

Photo illustration the FTX logo and mobile app adverts with NBA player Stephen Curry and NFL leged Tom Brady displayed on screens | Getty Images | Photo Illustration by Leon Neal
Photo illustration the FTX logo and mobile app adverts with NBA player Stephen Curry and NFL leged Tom Brady displayed on screens | Getty Images | Photo Illustration by Leon Neal

The cryptocurrencies faced a decline in 2021, causing several platforms to shut down. However, FTX seemed immune, even investing in struggling competitors to help them survive. Then things quickly changed when Coindesk, a crypto-focused digital media website, released a report on the crypto investing firm Alameda Research, which was also owned by Bankman-Fried.

The report published its balance sheet showing that Alameda held a large amount of a digital currency created and owned by FTX called FTT. The FTT and its customers held a certain market value, but in case its price dropped, Alameda would be at risk of insolvency.

After the report was released, Changpeng Zhao, CEO of the rival crypto platform Binance, announced that it would sell off all its FTT tokens. Soon the price of FTT crashed forcing many FTX customers to withdraw their assets from the platform.

Founder and CEO of Binance Changpeng Zhao | Getty Images | Photo by Antonio Masiello
Founder and CEO of Binance Changpeng Zhao | Getty Images | Photo by Antonio Masiello

The withdrawals were similar to a classic bank run, and FTX started losing billions of dollars.

FTX then stopped customers from making withdrawals to prevent its collapse. After this, Bankman-Fried made a desperate move to save his companies and approached Binance for a bailout.



 

Binance announced that it would purchase FTX for an undisclosed amount, but it quickly backed out citing reports that FTX had mismanaged user funds and sharing information gathered during its standard due diligence process, as per The Guardian

Following the reports, The Securities and Exchange Commission and the US Justice Department launched an investigation into FTX. Bankman-Fried then resigned as the CEO of FTX, and the exchange filed for bankruptcy in the US. Customers of FTX who failed to withdraw their funds ended up losing all their investments.

Reports indicate upwards of $10 billion in FTX customer assets are missing. Bankman-Fried was arrested in the Bahamas and later indicted by a US federal grand jury. After an initial appearance in the federal court, Bankman-Fried got out on a $250 million bond but was sent back in custody for witness tampering. The trial for the FTX founder started on October 3 as he pleaded not guilty.

The Department of Justice filed a total of 13 criminal charges against Bankman-Fried and seven out of the 13 were heard in the initial trial. The charges were two counts of wire fraud, two counts of conspiracy to commit fraud, one count of conspiracy to commit commodities fraud, and two conspiracy counts over misrepresentations to investors and lenders.

On November 2, the New York federal court jury found Bankman-Fried guilty on all seven charges and he could spend decades behind bars. While the penalties of his charges could add up to 110 years, the exact duration will be determined at the sentencing hearing, as per Al Jazeera.

Sam Bankman-Fried arrives for a bail hearing at Manhattan Federal Court  | Getty Images | Photo by Michael M. Santiago
Sam Bankman-Fried arrives for a bail hearing at Manhattan Federal Court | Getty Images | Photo by Michael M. Santiago

The sentencing hearing is tentatively scheduled for March 28, 2024. Till then Bankman-Fried is expected to remain in a Brooklyn jail where he was imprisoned in August after being accused of witness tampering. He will also face a second trial in March 2024 on five additional charges.

MORE ON MARKET REALIST
Carey suffered a similar snafu a few months ago while playing the same game of 'Bullseye'.
9 hours ago
Fans also share some tips that could've helped Bain win the bonus round but it was too late.
10 hours ago
Emily Croke coincidentally got the question related to her great-great aunt, Emily Folger.
11 hours ago
Luckily for the veteran host, no one in the studio caught the mistake on time.
12 hours ago
The executive producer of the show, Michael Davies later apologized for the spoiled show.
13 hours ago
Even the seasoned expert was stumped by the unusual subject of the painting.
14 hours ago
In the end, Mr Wonderful cut off Greiner with a deal that the founder of Wad Free couldn't refuse.
1 day ago
Seacrest got geniunely spooked as he couldn't figure out who played a prank on him.
1 day ago
The seller brought some "Secret Service" memorabilia of former Attorney General J. Howard McGrath.
1 day ago
The guest was already emotional because of the backstory involving native Alaskans.
2 days ago
The player once again fumbled a puzzle despite moving forward in the game.
2 days ago
The host didn't want to get more of the weird answers on the show anymore.
2 days ago
The founder of Beyond Sushi impressed the Sharks with 100% plant based flavors.
2 days ago
The Shark jumped back in to the deal as he thought his wife would love the product.
3 days ago
The guest who bought the item at a charity store had no idea that it was over 3,000 years old.
3 days ago
When the rare coin showed up on Harrison's table, he had to take his old man's approval for the deal.
4 days ago
Fans said that such behavior was unnecessary and slammed the antics as self-congratulatory.
4 days ago
Several customers took to social media to complain about spoilt milk that they purchased from the store.
4 days ago
Despite the massive appraisal, the brothers shared that they would never sell their collection.
4 days ago
Harrison is often impressed by suits belonging to legendary musicians or actors.
4 days ago