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  • Gabrielle Stine

Fall of Dark Crypto King

Gabrielle Stine

Sam Bankman-Fried, the founder of the failed FTX cryptocurrency exchange company, was found guilty on Nov. 2, 2023, on all seven counts of fraud and conspiracy related to his hedge-fund activities. Despite denying his culpability in the company's bankruptcy, the young billionaire now awaits his sentencing hearing scheduled for March 2024.

Nearly a year after his arrest, Bankman-Fried faced trial in Manhattan federal court. The defense representing the crypto entrepreneur maintains his innocence, while Bankman-Fried himself attributes the company's collapse to the downturn in the crypto market. However, the 12-member jury rendered a guilty verdict on all seven counts, spanning from wire fraud to conspiracy to commit money laundering. Consequently, Bankman-Fried faces a potential sentence of up to 110 years in prison for these offenses.

Back in November 2022, speculation started circulating about the company's financial health when approximately $6 billion was withdrawn from the exchange within 72 hours. The funds were funneled to his hedge fund, Alameda Research.

Despite the company's claims of prioritizing customer safety, the money belonging to clients, utilized by the hedge fund, was later employed to pay lenders and extend loans to the crypto king and his executives.

Shortly after, FTX filed for bankruptcy protection, prompting Bankman-Fried's unsurprising resignation as CEO. Following this sequence of suspicious events, federal prosecutors and the U.S. Securities Exchange Commission initiated investigations into SBF. On December 12, 2022, he was arrested from his home and FTX headquarters in the Bahamas and subsequently extradited to New York.

Although Bankman-Fried maintains his innocence, individuals within his inner circle opted for plea deals with the prosecution. Gary Wang, a former Google employee and co-founder, Caroline Ellison, Alameda's chief executive and Bankman-Fried’s ex-girlfriend, along with Nishad Singh, the former FTX head of engineering, all pleaded guilty to their crimes to mitigate harsher punishments.

It's estimated that Bankman-Fried misappropriated around $10 billion from his clients, marking one of the largest financial frauds on record. This places Bankman-Fried in the company of notorious fraudsters like Bernie Madoff and Jordan Belfort.

Since Aug. 11, Bankman-Fried has been held at the Brooklyn Metropolitan Detention Center, and he is likely to remain there until his sentencing hearing in March 2024. However, the prosecution isn’t finished yet, considering the possibility of bringing additional charges, such as foreign bribery and bank fraud conspiracy, against him.

Damian Williams, the top federal prosecutor in Manhattan, remains resolute in his pursuit to eradicate corruption in financial markets, even within the new and unfamiliar crypto industry.

He claims, despite the new players, 'this kind of fraud is as old as time.' Bankman-Fried isn’t the first crypto-fraudster that Williams has brought to court, and he remains determined in his efforts to ensure that Bankman-Fried won’t be the last. The game might appear more accessible for these crypto players now but investigators and prosecutors are swiftly adapting to the technology. Meanwhile, the devious fraudulent tactics employed by these individuals remain unchanged.

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