Former cryptocurrency mogul Sam Bankman Fried was convicted of defrauding FTX customers

NEW YORK, Nov 2 (Reuters) – FTX founder Sam Bankman Fried was found guilty on Thursday of defrauding customers of the now-bankrupt cryptocurrency exchange in one of the largest financial frauds on record, a ruling that cemented his 31-year-old rule. The former billionaire’s fall from grace.

A 12-member jury in Manhattan federal court found him guilty of all seven charges he faced after a month-long trial, in which prosecutors presented the case that he stole $8 billion from stock exchange clients out of sheer greed. The ruling came just a year after FTX filed for bankruptcy in a flash corporate collapse that shocked financial markets and wiped out his estimated $26 billion personal fortune.

The jury reached the verdict after just over four hours of deliberation. Bankman-Fried stood and clasped his hands together as the verdict was read.

Bankman-Fried, an MIT graduate whose mother and father are Stanford law professors, has pleaded not guilty to two counts of fraud and five counts of conspiracy.

The conviction represents a victory for the US Department of Justice and Damien Williams, the top federal prosecutor in Manhattan, who has made rooting out corruption in financial markets one of his top priorities.

U.S. District Judge Lewis Kaplan set Bankman-Fried’s sentencing for March 28, 2024.

His defense lawyers, who objected to several rulings Kaplan made before and during the trial, are expected to appeal the ruling.

Bankman-Fried is also scheduled to stand trial on a second set of charges brought by prosecutors earlier this year, including alleged foreign bribery and bank fraud conspiracies.

Once a darling of the cryptocurrency world, Bankman Fried, who was known for his shaggy, curly hair and wearing shorts and T-shirts instead of business attire, is instead joining the likes of admitted Ponzi conspirator Bernie Madoff, the “Wolf of the Wall.” Street” identified fraudster Jordan Belfort and insider trader Ivan Boesky as two high-profile individuals convicted of major financial crimes in the United States.

The jury began its deliberations on Thursday after hearing the prosecution’s response to the defense’s closing arguments the day before.

Prosecutors argued during the trial that Bankman-Fried funneled money from FTX to his cryptocurrency-focused hedge fund, Alameda Research, despite advertising on social media and in television ads that the exchange prioritized the safety of clients’ funds.

The Alameda company used the money to pay its lenders and make loans to Bankman Fried and other executives — who in turn made speculative investments and donated up to $100 million to U.S. political campaigns in an attempt to promote cryptocurrency legislation that the defendant viewed as favorable to his business, according to prosecutors.

Bankman-Fried took a risk by testifying in his own defense over three days near the end of the trial after three former members of his inner circle testified against him. He faced aggressive questioning by prosecutors, often avoiding direct answers to more probing questions.

He testified that although he made mistakes in running FTX, such as not establishing a risk management team, he did not steal customer funds. He said he believed Alameda’s borrowing from FTX was permissible and did not realize the extent of its debt growth until shortly before the two companies collapsed.

“We thought we might be able to build the best product on the market,” Bankman Fried testified. “It turns out basically the opposite.”

Prosecutors had a different view.

“He did not bargain for his three loyal deputies to take that position and tell you the truth: He was the one who had the plan, the motive and the greed to raid FTX customer deposits — billions and billions of dollars — to give himself money,” prosecutor Danielle Sasson told the jury Thursday. “He thought the rules didn’t apply.” on him. “He thought he could get away with it.”

The jury heard 15 days of testimony. Former Alameda CEO Carolyn Ellison and former FTX executives Gary Wang and Nishad Singh, who testified for prosecutors after pleading guilty, said he directed them to commit crimes, including helping Alameda plunder FTX and lying to lenders and investors about the companies’ finances.

The defense said the three, who have not yet been sentenced, falsely implicated Bankman-Fried in an attempt to obtain leniency at sentencing. Prosecutors may ask Kaplan to take their cooperation into account when determining the sentence.

Bankman-Fried has been jailed since August after Kaplan revoked bail, concluding he was likely to tamper with witnesses. Kaplan Bankman barred Fried from calling several proposed expert witnesses, ruling that he could not testify about the attorneys’ involvement in the FTX decisions at issue at trial.

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