Sam Bankman-Fried Found Guilty Of Multibillion-Dollar Fraud, Marking Chapter In Crypto History

The jury did not take long to convict Sam Bankman-Fried on all seven criminal charges he faced, including two counts of fraud and five counts of conspiracy.

The jury in Manhattan took just over four hours on Thursday to decide the disgraced FTX founder stole about $8 billion from customers on his cryptocurrency exchange.

The verdict came just about a year after FTX’s epic fall from grace rattled the markets and took Bankman-Fried from the wunderkind white knight that was crypto’s savior to a poster child for greed and hubris.

In total, the seven charges could bring a 115-year prison term, although legal experts have said Bankman-Fried, commonly known by his initials SBF, is unlikely to receive a sentence that long.

The big fall

FTX’s collapse is the greatest startup and investor failure of all time. 

For perspective, Theranos had raised about $1.3 billion in funding and had a $10 billion valuation at its peak before the walls came tumbling down on Elizabeth Holmes and Sunny Balwani. 

Bankman-Fried’s FTX crypto exchange and its U.S. counterpart — FTX US — had raised a combined $2.2 billion at a $32 billion valuation and $8 billion valuation, respectively, before everything fell apart.

FTX’s issues came into the public eye on Nov. 6, 2022, when Binance CEO Changpeng Zhao tweeted that Binance would sell its holdings of FTX’s native token, FTT. Zhao said the decision was due to “recent revelations that have came to light” about the token.

Earlier this month, reports came out that Bankman-Fried’s trading firm Alameda Research had a large portion of FTT on its balance sheet, possibly helping prop up its value.

FTT prices dropped like a rock amid the controversy and FTX was thrown into disarray as withdrawals mounted.

Bankman-Fried then wound down his Alameda trading platform and was seeking investors for emergency funding to FTX as it faced an $8 billion shortfall.

When none arrived, Bankman-Fried was exposed for the game he was playing with his customers and their money. FTX declared bankruptcy on Nov. 11, 2022.

Effects on venture investing

Investors in FTX include the likes of the SoftBank Vision Fund, Sequoia Capital, Singapore’s Temasek Holdings, Paradigm and Lightspeed Venture Partners. 

The exchange’s downfall has seemingly affected the crypto funding market.

From the start of 2022 to the day FTX declared bankruptcy, crypto startups had raised $14.7 billion in 1,382 different funding deals — which includes both FTX’s and FTX.US’s $400 million raises earlier in 2022 — per Crunchbase data.

Since Nov. 11, crypto startups have raised about $3.8 billion in only 767 deals, according to Crunchbase data.

The Bankman-Fried verdict may actually help the crypto sector. The saga, while not over, has recorded another important chapter. Also, the verdict shows there are consequences to malfeasances in an industry some saw as lawless.

While the FTX ordeal is a sad tale of  arrogance and greed, it may be an important turning point for the industry.

Related Crunchbase Pro query:

Related reading:

Illustration: Dom Guzman