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FTX founder found guilty, convicted of fraud

After 15 days of testimony and approximately 4.5 hours of jury deliberation, the founder of cryptocurrency exchange FTX, Sam Bankman-Fried, was found guilty of seven charges of fraud and conspiracy.

Bankman-Fried was found guilty of embezzling billions of dollars from FTX customer accounts and defrauding lenders associated with FTX subsidiary Alameda Research. He was also charged with defrauding FTX investors and money laundering. He faces a near-life sentence – he could face up to 115 years in prison. US Attorney Damian Williams praised the sentence, saying the government has “zero tolerance” for corruption and fraud.

At the court hearing, Bankman-Fried admitted that in 2020 he became aware that FTX customers’ funds were held by Alameda, but he failed to take steps to protect them. In autumn 2022, Bankman-Fried found out that Alameda owed FTX $8 billion, but he did not fire anyone.

FTX went bankrupt on 11 November 2022 after a CoinDesk report revealed that Alameda owned a large amount of FTX’s exchange token, FTT. This report, combined with tweets from Binance CEO Changpeng Zhao, triggered a wave of withdrawals from FTX, eventually leading to the bankruptcy of FTX, Alameda and their subsidiaries.

Bankman-Fried was arrested in December 2022. Throughout the trial, several of Bankman-Fried’s former associates testified against him, including friends from MIT who became his co-founders, as well as his former girlfriend and business consultant Caroline Ellison. Her testimony detailed events in which virtually all decisions at Alameda and FTX were made by Bankman-Fried.

FTX co-founder Gary Wang, who served as FTX’s chief technology officer, testified that Bankman-Fried instructed him to insert code into FTX’s operating system so that Alameda Research could make unlimited withdrawals from FTX and have a line of credit of up to $65 billion. According to Wang, the money came from customers.

The collapse of FTX has rattled the trillion-dollar crypto industry, with over a million of their customers at risk of loss. Prior to its downfall, FTX attracted millions of users and high-profile supporters such as Tom Brady and Gisele Bundchen. The trial was closely watched for signs of a wider crackdown on the largely unregulated cryptocurrency market.

Judge Lewis Kaplan has scheduled Bankman-Fried’s sentencing hearing for 28 March 2024. Until then, he will remain in federal prison in Brooklyn. A second trial is scheduled for March on five other charges that were filed separately from this case. However, Judge Kaplan has asked prosecutors to decide by 1 February whether that trial will take place. Bankman-Fried’s trial is far from over as he continues to defend himself against the charges.

Bankman-Fried, 31, was one of the leading players in the nascent cryptocurrency industry. He led a life to match: he spoke frequently at industry conferences and lived with a group of young executives in their 20s in the Bahamas.

Private jets, Super Bowl tickets and celebrity hangouts were all part of their world. In addition, Bankman-Fried was the No. 2 donor to the Democratic Party in the 2022 election, donating more than $40 million. Hollywood also pursued him, hoping to get exclusive footage of his story.

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