Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (2024)

From CNN's Allison Morrow

Updated 9:55 PM EDT, Thu November 2, 2023

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (1)

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On GPS: Michael Lewis on the weird world of crypto

07:40 - Source: CNN

What we covered here

  • Jurors in Sam Bankman-Fried’s criminal fraud trial have found the former billionaire guilty on all counts.
  • Bankman-Fried, 31, was accused of mismanaging customer funds stored in his crypto exchange, FTX, to enrich himself and his family
  • He was found guilty of seven counts of fraud and conspiracy and could spend the rest of his life in jail.
  • The verdict caps a yearlong saga that took Bankman-Fried from a penthouse apartment in the Bahamas to a shared cell in one of New York’s most notorious detention centers.
  • The trial has been closely watched by regulators, investors and the crypto community for signs of a potential larger crackdown on the largely unregulated crypto market.
  • Sentencing has been set for March 28, 2024.

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A shot across the bow for the crypto industry

For the past year, the crypto industry has been working overtime to try to crawl out from the shadow of FTX’s implosion.

Its bankruptcy became a financial and PR nightmare for an industry that has struggled to shake its association with fraud.

Outwardly, many crypto advocates say they wanted to see Sam Bankman-Fried prosecuted, arguing his firm was the bad apple sullying the industry.

But the headlines are hardly a PR win for crypto firms. While the industry has had some recent regulatory wins in court, it remains a largely unknown and haphazardly regulated space that mainstream investors are wary of.

Now, add Bankman-Fried to a growing list of people who made a lot of money in crypto before losing it (or at least be indicted for it) in dramatic fashion: Heather Morgan, aka Razzlekhan, and Ilya Lichtenstein; Celsius’s Alex Mashinsky; or Karl Greenwood, one of the founders of the OneCoin scheme who was sentenced to 20 years in prison.

What’snext for SBF

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (2)

FTX founderSamBankman-Friedstands as the jury foreperson reads the verdict in his fraud trial over the collapse of the bankrupt cryptocurrency exchange at federal court in New York City, on November 2, in this courtroom sketch.

Judge Lewis Kaplan set Sam Bankman-Fried’s sentencing hearing for March 28. He is expected to remain in a federal jail in Brooklyn while he awaits sentencing.

His legal headaches are far from over.

A statement from his lawyer said “Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him.”

Meanwhile, a second trial on five additional charges that were severed from these proceedings is scheduled for March, though Judge Kaplan asked prosecutors to decide by February 1 whether that will proceed.

What charges was Sam Bankman-Fried found guilty of?

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (3)

FTX founderSamBankman-Friedlooks on during his fraud trial over the collapse of the bankrupt cryptocurrency exchange as U.S. District Judge Lewis Kaplan gives instructions to the jury and sends them out to deliberate, at federal court in New York City, on November 2, in this courtroom sketch.

Former billionaire Sam Bankman-Fried was found guilty of seven counts of fraud and conspiracy. Here’s what that means.

Each count pertains to a specific kind of crime committed against a specific group of alleged victims.

In this case, there are charges related to alleged crimes committed against FTX’s customers and others related to sister company Alameda Research’s lenders, plus a money-laundering charge that refers to an alleged cover-up.

Here’s what the seven counts mean:

Crimes against FTX customers: Counts one, two and six

Count one: Wire fraud on customers of FTX

Wire fraud is a kind of arcane-sounding name for whensomeone uses electronic communications — email, texts, tweets — to further a criminal act. The government says Bankman-Fried knowingly and willfullyparticipated in a scheme to steal from customers.

Fraud is a broad term but in general refers to a plan to deprive another person of money or property through false or deceptive means.

Count Two: Conspiracy to commit wire fraud on customers of FTX

This is the same as the above, but it involves at least one other person as a co-conspirator.In this case, three of the government’s cooperating witnesses have pleaded guilty to being co-conspirators with SBF in the hopes of securing a lighter sentence.

Count Six: Conspiracy to commit commodities fraud on customers of FTX

This count refers toknowingly participating in a scheme involving the sale of commodities (or crypto swaps)under the purview of the US derivatives regulator, the CommodityFuturesTrading Commission, or CFTC.

In this case, cryptocurrencies likebitcoin and ethereum arebeing treated as commodities subject to CFTC oversight.

Fraud against lenders: Counts three, four and five

Counts three and four:Wire fraud andconspiracy to commit wire fraud on lenders to Alameda Research

These are similar to counts one and two (fraud against customers), but refers to the companies that gave loans to Alameda.

Count Five: Conspiracy to commit securities fraud on investors in FTX

This charge refers to a scheme to defraud or make false statements about a security. In this case, the security is FTX stock. (While not a publicly traded firm, FTX raised capital by selling equity in the company to investors.)

The government contends that Bankman-Fred lied toinvestors about the financial ties between FTX and Alameda.

Cover-up: Count seven

Count Seven: Conspiracy to commit money laundering

Money laundering, broadly, isconcealing the source of money that’s obtained from illicit activities — such as embezzlement or gambling.

US Attorney says SBF conviction is a "warning to every single fraudster"

From CNN's Samantha Delouya
Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (4)

US Attorney Damian Williams, for the Southern District of New York, listens during a news conference at the Department of Justice in Washington, on January 27.

In remarks made outside the Manhattan courthouse Thursday, US Attorney Damian Williams lauded the jury’s decision to convict Sam Bankman-Fried, saying the government has “no patience” for fraud and corruption.

“These players like Sam Bankman-Fried might be new, but this kind of fraud, this kind of corruption, is as old as time,” he said.

Williams added that the case should serve as a warning “to every single fraudster out there who thinks that they’re untouchable, or that their crimes are too complex for us to catch.”

“Those folks should think again and cut it out. And if they don’t, I promise we’ll have enough handcuffs for all of them,” he said.

Sam Bankman-Fried's lawyer: Our client will "vigorously fight the charges"

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (5)

Mark Cohen, attorney for Sam Bankman-Fried, arrives to the federal court on October 10, in New York.

Convicted former FTX CEO Sam Bankman-Fried is not giving up the fight after being found guilty of seven counts of fraud.

An emotional response to the guilty verdict

From CNN's Sabrina Souza
Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (6)

Joseph Bankman and Barbara Fried, parents of FTX founder Sam Bankman-Fried, arrive to Manhattan federal court in New York, on October 30.

Sam Bankman-Fried’sparents, Joseph Bankman and Barbara Fried, sat in the second row of the galley Thursday and tightly hugged each other through the reading of each of the counts.

As each, “guilty,” was read out loud, Bankman sank his head deeper and deeper into his lap, his face barely visible.

Fried had her arm around her husband and kept squeezing his shoulder, as did he to her.

Her jaw quivered and she pressed the palms of her hands to her cheeks as she listened to the verdict, staring directly at her son, eyes cast downward and frowning.

When Bankman-Fried initially got up to face the jury, both parents sank their heads down, with Bankman keeping his head down nearly the entire time.

After the verdict was read, Bankman-Fried appeared shell-shocked. He did not turn around to see his parents until he was close to the exit door and gave them a somber smile as his mother pounded her hand into her chest on her heart, and then sank her face into her husband’s shoulder.

When will Sam Bankman-Fried be sentenced?

US District Court Judge Lewis Kaplan announced that convicted former FTX CEO Sam Bankman will be sentenced on March 28, 2024.

Meanwhile, Bankman-Fried will return to the Metropolitan Detention Center in Brooklyn, where he’s been held since August.

The MDC is a far cry from Bankman-Fried’s Bahamas compound and from his parents’ leafy Palo Alto neighborhood where he’d been under house arrest since his arrest in December.

Located on the industrial waterfront of Brooklyn’s Sunset Park neighborhood, the MDC has earned a reputation asone of the worst jails in America.Politicians and activists have held the facility up as a testament to a crumbling criminal justice system.

Bankman-Fried shares his space with some other high-profile detainees, including the former president of Honduras, who was indicted on cocaine trafficking charges last year, a person familiar with the matter told CNN.

Bankman-Fried is also “friendly” withGenaro GarcíaLuna, the former head of Mexico’s FBI, who is awaiting sentencing for drug trafficking, this person said.

When his trial began, observers quickly noted changes to Bankman-Fried’s appearance. He seemed to have lost weight and, most surprising, his trademark wild locks were gone, shorn into a tight crew haircut.

The haircut, the person confirmed, was courtesy of a fellow MDC resident.

Sam Bankman-Fried's Hail Mary defense strategyfailed to pay off

Faced with a coterie of high-level witnesses aligned against him, former FTX CEO Sam Bankman-Fried’s defense was challenged from the start.

During the trial, his defense counsel appeared to stumble in cross-examining those witnesses.

Lawyers typically advise their clients in criminal cases not to testify, as it opens them up to potentially damning cross-examination from prosecutors. But multiple legal experts said that Bankman-Fried’s case was an exception. He had no allies left to counter the business partners who’d turned on him. Taking the stand was a Hail Mary – the kind of high-stakes risk that Bankman-Fried had built his career on.

“Bankman-Fried has an outsized appetite and tolerance for risk,” said Howard Fischer, a partner at the law firm Moses Singer and a former SEC attorney.

“Testifying is hard work. It is not just getting the details of the story right, but learning how to present yourself under questioning, and dealing with the stress of cross-examination,” Fischer said. “Optimally, one would want to engage in months of practice before mock juries before taking the stand.”

But Bankman-Fried’s trial prep was complicated significantly after Judge Lewis Kaplan revoked his bail in August, after prosecutors said the defendant leaked documents about ex-girlfriend Caroline Ellison to the New York Times. That was a final straw, following other instances of alleged witness tampering, for Kaplan, who remanded Bankman-Fried to a federal jail in Brooklyn, New York, where his access to lawyers was more limited.

Sam Bankman-Fried reacts to his guilty verdict

Former FTX CEO Sam Bankman-Fried looked sunken as the jury’s guilty verdict was read out. After the jury was released, he stood, head bowed and shaking as his lawyer spoke in his ear.

A few feet behind him, his parents stood watching. As Bankman-Fried was escorted out of the room, he turned back and smiled at his parents.

His father, Joe Bankman, put his arm around his wife’s shoulders. As their son left the courtroom, Barbara Fried broke down in tears.

Sam Bankman-Fried's ex-girlfriend was the star witness

Over the four weeks of his trial, former FTX CEO Sam Bankman-Fried watched a parade of people he once considered his closest confidantes testify against him. They included friends from math camp and MIT who became his co-founders; and, critically, his ex-girlfriend and trusted business adviser, 28-year-old Caroline Ellison.

The most damning evidence against Bankman-Fried came from Ellison, who testified for the prosecution over three days.

As both the CEO of sister company Alameda Research and Bankman-Fried’s romantic partner for two years, Ellison wasuniquely positioned to comment on what was happening within the tight inner circle of Alameda and FTX executives, many of whom lived together in a $30 million luxury apartment in the Bahamas.

Ellison’s at times emotional testimony offered a narrative of events in which virtually every decision at both Alameda and FTX came down to Bankman-Fried, who founded and was the majority owner of both firms. A common refrain from Ellison, when asked who directed her to carry out various actions, criminal or otherwise, was a variation on the words “Sam did.”

What is Alameda, the hedge fund that brought down FTX?

Alameda Research, a hedge-fund-like crypto trading house that Bankman-Fried launched in 2017, played a pivotal role in FTX’s downfall.

Almost as soon as FTX was created in 2019, former CEO Sam Bankman-Fried ordered co-founder Gary Wang to and Chief Technology Officer Nishad Singh to tweak the platform’s code to allow Alameda, as a customer on the exchange, certain“special privileges” that other customers lacked, according to Wang’s testimony.

Both Wang and Singh pleaded guilty to financial crimes as part of a plea deal with the government.

Those privileges included a virtually unlimited line of credit for Alameda that its executives could tap at any time, Wang testified. Alameda’s main trading account was also given an “allow negative” flag, meaning it could incur a negative balance without repercussion – a privilege that no other FTX customer was granted, Wang testified.

A stunning downfall for what was the most trusted name in crypto

The guilty verdict for former FTX CEO Sam Bankman-Fried comes a year after the crypto exchange entered a death spiral that fueled a panic in the trillion-dollar crypto industry and left an estimated 1 million customers facing potential losses. Prior to its collapse, the exchange attracted millions of users and a coterie of A-list backers, such as Tom Brady and Gisele Bundchen.

FTX, founded by Bankman-Fried in 2019, billed itself as a safe and easy way to start trading cryptocurrencies – digital assets whose values are based largely on a collective hope for their future application, which remains murky.

In the early 2020s, with interest rates at zero and millions of amateur investors stuck at home, FTX’s popularity as a crypto portal skyrocketed. By 2022, FTX was airing Super Bowl ads and plastering its name on the Miami Heat’s arena.

But FTX collapsed into bankruptcy on November 11, 2022 after what was effectively a run on the bank – a customerpanic sparked by a leaked document that suggested irregular financial dealings between FTX and another firm owned by Bankman-Fried.

But, unlike bank customers, FTX depositors had no federal insurance fund to compensate them when the cash dried up. And despite FTX’s public assurances that it didn’t invest or move customer deposits in any way, Bankman-Fried’s other firm had been secretly siphoning deposits to repay its own lenders, underwrite executives’ luxury lifestyles, gamble in crypto markets and funnel millions of dollars in US political campaigns.

Guilty on all counts

Sam Bankman-Fried was found guilty on all seven counts for his role in the collapse of crypto exchange FTX.

Jurors deliberated from 3:15 pm ET to 7:45 pm ET.

The former crypto billionaire was found guilty of:

Count one: Wire fraud on customers of FTX

Count two: Conspiracy to commit wire fraud on customers of FTX

Count three:Wire fraud on Alameda Research lenders

Count four:Conspiracy to commit wire fraud on lenders to Alameda Research

Count five: Conspiracy to commit securities fraud on investors in FTX

Count six: Conspiracy to commit commodities fraud on customers of FTX

Count seven: Conspiracy to commit money laundering

SBF's fate lay in a jury of his peers

Over the past four weeks in a Manhattan federal court, 12 jurors and five alternates sat through more than 60 hours of testimony about the rise and fall of a multibillion-dollar crypto business empire and the person at the center of it all.

Judge Lewis Kaplan read instructions to the jury on Thursday morning, explaining each of the seven counts against Bankman-Fried before sending jurors off to deliberate.

Throughout the trial, prosecutors told the jury that 31-year-old Bankman-Fried orchestrated a yearslong fraud — building a “pyramid of deceit” — that ultimately crumbled when the market soured and his luck ran out.

Bankman-Fried has pleaded not guilty to seven federal counts of fraud and conspiracy, and he has broadcast to just about anyone who’ll listen his version of the events that landed both companies in bankruptcy. According to him, the mistakes that brought down FTX and Alameda were innocent — the kind of sloppy errors that startups are prone to.

Chief among those errors, according to his own testimony, was was not hiring a dedicated risk management team.

“I made a number of small mistakes and a number of larger mistakes,” Bankman-Fried said on the stand last week. “By far the biggest mistake was we did not have a dedicated risk management team, we didn’t have a chief risk officer.”

But on Thursday, US Assistant Attorney Danielle Sassoon described that as a strategy rather than a mistake.

“When you’re embezzling customer money, of course you’re not going to hire a risk officer,” she said.

Lead defense attorney Mark Cohen told the jury that the government’s portrayal of his client as a “movie villain” was wrong. Although Bankman-Fried made mistakes, he never defrauded anyone, Cohen told jurors.

“In the real world — unlike the movie world — things canget messy,” Cohen said.“Poor risk management is not a crime.”

How we got here

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (7)

FTX founder Sam Bankman-Fried arriving at the U.S. federal courthouse in New York City on March 30, 2023.

The verdict is set to come almost a year after FTX entered a death spiral that fueled a panic in the trillion-dollar crypto industry and left an estimated 1 million customers facing potential losses.

Prior to its collapse, the exchange attracted millions of users and a coterie of A-list backers, such as Tom Brady and Gisele Bundchen.

FTX, founded by Bankman-Fried in 2019, billed itself as a safe and easy way to start trading cryptocurrencies — digital assets whose values are based largely on a collective hope for their future application, which remains murky.

In the early 2020s, with interest rates at zero and millions of amateur investors stuck at home, FTX’s popularity as a crypto portal skyrocketed. By 2022, FTX was airing Super Bowl ads and plastering its name on the Miami Heat’s arena.

But FTX collapsed into bankruptcy on November 11, 2022.

A word about the prosecutors

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (8)

Danielle Sassoon, assistant US Attorney for the Southern District of New York, exits court in New York, on October 5.

The collapse of FTX fell to the Southern District of New York, widely known as an elite organization packed with some of the nation’s top lawyers. Its nickname is the “Sovereign District of New York.”

“People who work in the Southern District went to the best law schools, were elected to law reviews and clerked for federal judges,” Nicholas Lemannwrote in the New Yorkerin 2013. “They prosecute the biggest, baddest, scariest criminals: evil billionaires, the Mafia, drug gangs, terrorists.”

“When [the Southern District of New York] gets involved, if there is criminality, odds are that they will make the case aggressively, prosecute it and secure a conviction,” Samson Enzer, a partner at Cahill Gordon & Reindel, told CNN last year. “They rarely fail.”

US Assistant Attorney Danielle Sassoon lead the government’s cross-examination in Bankman-Fried’s trial.

Sassoon was a law clerk to Justice Antonin Scalia,whom she said taught her “how to fire a pistol and a rifle, and made me feel like I had grit,”she wrote in 2016.

Sassoon received her law degree from Yale and has a bachelor’s degree in History and Literature from Harvard.

SBF didn't follow basic legal advice: Don't talk

In the weeks after his crypto empire collapsed, Sam Bankman-Fried ignored the most fundamental legal advice that any lawyer — or even a casual viewer of TV crime procedurals — would give: Shut your mouth.

Instead, SBF went on an apology tour, variously tweeting, DM-ing, and giving recorded interviews with reporters, repeatedly admitting that he “f**ked up.”

“What SBF is doing is a form of litigation suicide,” Howard Fischer, a former Securities and Exchange Commission lawyer told CNN last year. “Everything he says that turns out to be contradicted by admissible evidence will be taken as evidence of deceit … I don’t know if this is a sign of unrepentant arrogance, youthful overconfidence, or simply sheer stupidity.”

How SBF was arrested

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (9)

Sam Bankman-Fried is escorted out of the Magistrate Court building after his arrest, in Nassau, Bahamas, on December 13, 2022.

Bankman-Fried was arrested in the Bahamas on December 12, 2022, after US prosecutors filed criminal charges against him.

The Southern District of New York, which is investigatingBankman-Friedand the collapse of FTX and its sister trading firm Alameda, confirmed his arrest on Twitter.

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US government, based on a sealed indictment filed by the SDNY,” wrote US attorney Damian Williams. “We expect to move to unseal the indictment in the morning and will have more to say at that time.”

The United States’extradition treaty with the Bahamasallows US prosecutors to return defendants to American soil if the charges would be considered punishable by imprisonment of at least a year in both jurisdictions.

How FTX customers lost their money

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (10)

This photo illustration shows the logo of cryptocurrency FTX, reflected in its website on a laptop screen in Washington, DC, on November 13, 2022.

In November last year, FTX suffered a run on the bank — a customerpanic sparked by a leaked document that suggested irregular financial dealings between FTX and Alameda Research, a hedge fund owned by Bankman-Fried.

But, unlike bank customers, FTX depositors had no federal insurance fund to compensate them when the cash dried up.

And, despite FTX’s public assurances that it didn’t invest or move customer deposits in any way, Bankman-Fried’s other firm had been secretly siphoning deposits to repay its own lenders, underwrite executives’ luxury lifestyles, gamble in crypto markets and funnel millions of dollars to US political campaigns.

Who is SBF?

Live updates: Sam Bankman-Fried found guilty in fraud trial | CNN Business (11)

Former FTX Chief Executive Sam Bankman-Fried leaves following a hearing at Manhattan federal court in New York City on January 3, 2023.

Sam Bankman-Fried, known as SBF, studied math and physics at MIT.

His parents, Joe Bankman and Barbara Fried, are both tenured Stanford law professors. Bankman specializes in tax law, while Fried is an expert in legal ethics.

Bankman-Fried began his career as a trader at Jane Street Capital, whichhe left in 2017 to strike out on his own, starting a cryptocurrency hedge fund he called Alameda Research.The firm’s first office was atwo-bedroom Airbnbin North Berkeley, California.

His entrepreneurial drive didn’t stop there: In 2019, Bankman-Fried co-founded cryptocurrency exchange FTX and became its CEO.

Bankman-Fried moved the headquarters of both companies to the Bahamas and installed himself and several team members in a $35 million penthouse.

Almost always clad in a t-shirt and cargo shorts with wild curly hair, his ex-girlfriend testified that the disheveled appearance was actually a calculated PR strategy.

“He thought his hair had been very valuable,” Caroline Ellison told the court in the second week of the trial. She said SBF believed he’d received higher bonuses early in his career “because of his hair.”

She said she thought he was trying to cultivate an image as an eccentric crypto pioneer.

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