Former cryptocurrency billionaire Sam Bankman-Fried, 32, has been sentenced to 25 years in prison for his involvement in a major financial scam related to the collapse of the FTX crypto exchange. He was found guilty in November on seven counts, including fraud, conspiracy, and money laundering.

How Sam Bankman-Fried pulled off the scam

Bankman-Fried got into the world of cryptocurrency at the age of 25. He founded a company called Alameda Research and soon realised he could make a lot of money by exploiting differences in Bitcoin prices between different countries.

This strategy, called arbitrage trading, earned him $20 million in just three weeks, according to BBC. He launched FTX in 2019, a crypto exchange in Hong Kong that attracted investors due to his charismatic personality and promises of big returns.

His ex-girlfriend, former CEO of Alameda Research, Caroline Ellison, described him as an extreme risk taker, saying, “He would be happy to flip a coin, if it came up tails and the world was destroyed, as long as if it came up heads, the world would be more than twice as good.”

Read | Sam Bankman-Fried Deserves 40-50 Years In Prison For FTX Fraud: Prosecutors

Bankman-Fried, known for his casual dressing style and disorganisation, had a loyal following within FTX, prompting some to compare their loyalty to him as almost cult-like. Even external observers, like venture capital firm Sequoia Capital, saw him as a visionary striving to make a positive impact.

But cracks began to appear in Mr Bankman-Fried’s empire when reports revealed conflicts of interest between his companies, raising doubts about their integrity. The confidence in Bankman-Fried’s ventures further dropped when a rival announced plans to sell off holdings in FTX’s crypto token.

Despite claiming to have altruistic motives, Mr Bankman-Fried was slammed when it was revealed that Alameda, his company, had a large investment in FTT, the token issued by FTX. This sparked concerns about conflicts of interest between the two companies.

FTX ultimately collapsed in November 2022.

Sam Bankman-Fried’s downfall

The downfall began on November 7, 2022 when a rival executive tweeted about FTX’s financial stability, triggering panic among customers and sparking a massive bank run that drained billions from the platform. Despite efforts to stem the bleeding, the damage was irreversible, resulting in over $8 billion in missing customer funds and the bankruptcy of the company.

Read | From Sam Bankman-Fried To Do Kwan, Crypto Kings Humbled By Law

During Mr Bankman-Fried’s trial, two conflicting narratives emerged about his involvement, with some calling him a brilliant but unwitting CEO, while others accusing him of knowingly siphoning billions of dollars of customer money.

Regardless, the collapse revealed the extent to which FTX’s fortunes were tied to its founder.

New York:

Sam Bankman-Fried, founder of the collapsed cryptocurrency exchange FTX, plans to make another high-stakes gamble and testify in his own defense at his criminal fraud trial.

Sam Bankman-Fried’s decision to take the stand comes after three weeks of devastating testimony for the 31-year-old accused of stealing billions of dollars from clients.

Prosecutors told Judge Lewis Kaplan that they will wrap up their case on Thursday and hand over to the defense, which said it plans to call four witnesses, including Sam Bankman-Fried.

Sam Bankman-Fried’s lawyer, Mark Cohen, did not say in which order he planned to present his witnesses but his client could testify as early as Thursday.

Sam Bankman-Fried, once one of the most respected figures in crypto, has been charged with seven counts of fraud, embezzlement and criminal conspiracy.

If convicted, he could face a de facto life sentence of more than 100 years in prison.

The Massachusetts Institute of Technology graduate had, in just a few years, turned his FTX platform into the world’s second biggest crypto exchange — making him a tech-world billionaire wunderkind.

But his empire began to crumble last November when a news report pointed to unhealthy ties between FTX and Alameda Research, Sam Bankman-Fried’s personally owned trading company.

Amid growing revelations, major investors pulled their money out of FTX, sinking it swiftly into bankruptcy.

Some $8.7 billion was still unaccounted for after the dust settled, according to the receiver appointed to manage the liquidation.

Sam Bankman-Fried has denied taking other people’s money, blaming former colleagues for the situation.

But key witnesses in recent weeks, all former FTX or Alameda employees, refuted his account.

Supported by internal documents compiled by the prosecution, they said he was behind the breaches and did not lose sight of the financial situation of FTX and Alameda.

– Ex-girlfriend offers damning evidence –

Among those taking the stand was Caroline Ellison, Sam Bankman-Fried’s former business partner and girlfriend.

She offered damning evidence against him and delivered details on his management, saying he was involved in all major decisions.

Ellison, a Stanford University mathematics graduate, was appointed by Sam Bankman-Fried in 2021 to head Alameda, whose activities were largely financed by money from customers of FTX without their knowledge.

She has pleaded guilty to fraud charges and agreed to cooperate with the prosecution, as have two other close associates of Sam Bankman-Fried.

Sam Bankman-Fried’s decision to testify in his own defense is unusual in a country where criminal defendants generally decline to do so because they have to face cross-examination and run the risk of incriminating themselves.

Hollywood producer Harvey Weinstein, comedian Bill Cosby, singer R. Kelly and drug trafficker Joaquin “El Chapo” Guzman were among high-profile defendants who declined to testify at their recent trials.

A Cornell University study of hundreds of trials published in 2009 found that 77 percent of defendants who chose to testify were convicted while 72 percent of those who declined to take the stand were found guilty.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)