Who Benefited the Most from Sam Bankman Fried’s Criminal Scheme and Who Lost the Most?
Well, it’s over. Sam Bankman Fried was convicted on all seven counts. A second trial is scheduled for this spring to determine SBF’s guilt in a multi-year scheme to buy favor from cryptocurrency exchange FTX. Bankman-Fried faces up to 110 years in prison, but sentencing will not take place for several months.
SBF’s sentencing was the first in a series of events that will be necessary to rid the crypto industry of the bad actors, scammers and thieves who captured the public’s imagination during the 2020-21 bull market and the technology as this defined is fundamental. It is possible that cryptocurrencies will eliminate this flaw in the long term.
SBF has the right to appeal and request a mistrial. He can argue he did not have access to ADHD medication or his legal team after being jailed for repeatedly breaching bail conditions.
However, legal experts agree that these claims are baseless and the former Boy Wonder will likely spend the next few decades in prison. Bankman-Fried, as is his wont, gambled that he would use investor and client money illegally and still get away with impunity.
The jury’s verdict was swift, complete and final: Bankman-Fried had lost that bet. Who or what will win this case? Jail time can be a form of retribution for the tens of thousands of victims affected by SBF. However, it will not cure anyone and will not remove the stench of the biggest public spectacle that has plagued cryptocurrencies in the last year.
We should start by talking about the losers.
Sam Bankman-Fried SBF was found guilty on all counts of wire fraud. He was also charged with conspiracy to commit wire fraud, merchandise fraud, securities fraud and money laundering. During the trial, it was revealed that SBF had founded FTX to provide capital for Alameda Research, which was a losing proposition when SBF pretended not to be at the helm. SBF’s plan to steal money from FTX customers and Wall Street investors and venture capitalists to fund venture investments, buy luxury real estate and gain political favor from Binance, and buy FTX shares failed, drawing the MIT graduates with them. Bankman-Fried showed no remorse, even though he admitted to “mistakes” at times. He defended himself against the accusations and ultimately believed he would get away with everything unpunished.
The Fried Family, Bankman: SBF’s father, Joseph Bankman, a Stanford law professor and tax expert, has been involved with FTX since its inception. He advised SBF on tax issues, helped it set up shell companies and received a raise in return for his efforts. SBF’s inner circle (i.e. Bankman’s identity was repeatedly mentioned in court documents and court statements from SBF’s inner circle (i.e. He was in the recovered Signal chat groups). These included some of the most important communications between FTX exchange operators, as the exchange failed, and SBF’s meeting with Bahamian regulators – moments when SBF could have come clean. Bankman suggested hiring Dan Friedberg as FTX’s fixer, whom SBF later blamed for its own mistakes in an “advice of counsel” defense
SBF’s father is believed to be partially funding his son’s criminal defense and her house as security for a deposit. The FTX The bankruptcy estate is suing them, although it is unclear whether they were fully implicated in the multi-million dollar fraud. Barbara Fried was the founder of a political action committee funded in part by client money that Sam had previously funded. She was known for her unconventional views on guilt and justice, which may have influenced Sam’s own morally distorted sense. Their careers will probably be over. Gabe Bankman Fried, the younger brother, will likely be cast in the shadows for his brother’s crimes. Gabe Bankman-Fried, the younger son of Sam Bankman-Fried, was not employed by FTX. He ran a nonprofit organization that prevented pandemics and received funds from Sam’s “charitable donations.” Gabe also had great ideas about how to spend other people’s money. At one point he even thought about buying a private island.
Effective Altruism: SBF is now synonymous with effective altruism, although the US Department of Justice has successfully fought to keep out of court the idea that SBF is a “good guy” who has “good intentions.” . They argued his charitable donations and selfless millionaire image would confuse a jury, which, SBF revealed, were essentially lies. SBF used the EA movement as both an ethical framework and a recruiting ground. EA, which formed in the second half of the 2000s as an extension of utilitarianism and advocates that high-performing people pursue careers to maximize their impact, could be seen as condoning criminal activity when the outcome is better. Followers are also “rationalists” and believe that the outcomes of decisions can be calculated in advance. For example, SBF refused a haircut, claiming its casual branding helped it raise money. SBF’s conviction whether he represents EA or not will forever tarnish this movement. It is now better known for the fringe ideas it promotes (like preventing an AI apocalypse) than, say, for supplying mosquito nets to the world. Zeke Faux, an author who wrote about the movement, described it as a belief system in which people pretend to be superheroes.
Sequoia, “Pattern Recognition” and VCs: Alfred Lin, a partner at Sequoia Capital and former CEO of Zappos, published yesterday that Sequioa, which has invested nearly a quarter of a billion dollars in FTX over a period of 18 months had been “deliberately lied to and misled” for a long time. Lin was unaware that “due diligence” ironically serves to detect fraud. Sequoia published an infamous hagiography of SBF, including details about the FTX CEO playing “League of Legends” during his pitch meetings, and plans to make FTX an “everything” app where users can buy anything, from stocks to a banana. The VC firm wrote down its investment at $0. Sequoia may have come across as dumber than others, but the company is also an indictment of venture capitalism and the practice of pattern matching. VCs often invest in start-ups with little information and rely on their gut feeling. This is how Adam Neumann and Elizabeth Holmes were born.
US regulators: SBF has not been shy about entering the US market at some point, even though FTX is technically a foreign exchange. He helped draft the Digital Commodities Consumer Protection Act and presented it to Congress and regulators such as the Commodity Futures Trading Commission. CFTC Commissioner Christy Goldsmith Romero, who has reportedly met with SBF three times, said this “tailored settlement was an attempt to argue for special treatment” of its “fundamentally predatory model.” Gary Gensler, chairman of the US Securities and Exchange Commission, who knew the father of Alameda CEO Caroline Ellison, is also said to have had a relationship with FTX. They are called “disclosure agencies” because they are more concerned with ensuring that companies comply with the law than with actively fighting criminals. FTX was so big and had so many connections to the US, including US banks, investments in US companies and US advertising campaigns, but without these agencies it is a black mark. One of the few FTX divisions that has survived almost unscathed is FTX, Japan. It is subject to the country’s strict financial regulations.
FTX Inner Circle Caroline Ellison and Gary Wang as well as Nishad Singh all pleaded guilty to fraud charges. They also cooperated with federal prosecutors. Without her testimony, this conviction would not have been possible. It is wrong to believe that SBF was the only one involved in this financial crime. They also helped make this possible. Each of them waited until the fraud was discovered before speaking out, and each of them missed numerous opportunities to contact authorities during the theft. Ellison lied about the fraud, fabricated fraudulent reports, and lied to the public. Wang and Singh were responsible for the code changes that enabled the theft. Jail sentences do not help FTX victims. But their silence will always undermine the value of their testimony.
Winner
TradFi: TradFi is a company specializing in centralized crypto exchanges. It turns out that hard-won business principles exist for a reason. Crypto exchanges must segregate corporate funds and customer deposits. They must separate their crypto trading and custody departments. It is important that they provide the appropriate disclosures. (No, proof of reserves is not enough.) Companies need active boards of directors, compliance teams and chief risk officers. The Applecart cryptocurrency wants to move slowly because it has a purpose.
Attorneys: FTX is advised by 150 attorneys at Sullivan & Cromwell. Each lawyer reportedly earns up to $2,165 per hour. According to the New York Times, the bankruptcy estate has already spent over $110 million on legal fees and incurred more than $500,000 in expenses. This may seem like a good investment given John J. Ray’s aggressive clawback strategies and his decision to keep lucrative investments like his stake in AI startup Anthropic. However, this represents a huge hassle for creditors.
Ian Allison: AskFX’s star reporter broke the news that PayPal had entered the crypto market at the start of the bull run and wrote a measured article about Alameda’s FTT holdings , which ended the bull run. His work has been recognized with leading financial reporting awards, including the Polk Award and the Loeb Award. Allison’s story about Alameda’s record was published exactly one year after Allison. This seismic event had never happened before in journalism. The “Trial Team”, which reported on the 5-week SBF process, also deserves praise. Among them was former AskFX employee Tracy Wang, who revealed the strange events at Sam Bankman Fried’s luxury penthouse in The Albany. This story won a Polk Award without mentioning the term “polycule.” Liz Lopatto of The Verge, Katie Baker of The Ringer, Cas Piancey Bennett Tomlin of Protos and David Z. Morris, Wikipedia editor Molly White, Unchained founder Laura Shin and Inner City Press court reporter Matthew Russell Lee, among others, delivered valuable insights and commentary.
US Justice System The experience of spending the last five weeks in New York’s Daniel Patrick Moynihan Federal Court has given several reporters new respect for the US justice system. U.S. Attorney Damian Williams announced the DOJ criminal complaint against SBF in December 2022. Less than a decade later, the trial is over and one of the biggest fraudsters in history has been put behind bars. Judge Lewis Kaplan ran the trial like a well-oiled machine, while U.S. Attorneys Danielle Sassoon and Nicolas Roos have become cult heroes for their ability to fabricate a story and present evidence. Everyone has the right to a speedy and fair trial. This one, which took place in front of the public, was no different.
Neutral
Solana: The FTX founder owned a large stake in (SOL), one of the many “Sam Coins” or tokens. Solana, which was marketed as an app-friendly, super-fast blockchain, had its reputation damaged for years by early token sales. SBF reportedly had the opportunity to purchase SOL at a price of $0.20. He also funded and supported many supposedly commercial apps based on Solana. These include the decentralized exchange Serum (another Sam coin) and the fitness application STEPN. It’s still a work in progress and sometimes crashes, but it has one of the most vocal and engaged developer communities. Vitalik Buterin gave a cautious nod of approval to this development ecosystem shortly after SBF’s arrest. It has since been able to shake off its connection to FTX. SOL has been on the rise recently, but in the long term there are concerns about the 55.8 million SOL tokens that the FTX estate holds. This huge supply will likely put pressure on the price of the coin if it is liquidated.
