Sam Bankman-Fried, also known as ‘SBF’ was found guilty on November 2nd of conspiring and committing wire fraud on customers and lenders, conspiring to commit commodities fraud, securities fraud, money laundering, and defrauding the U.S. and campaign finance laws. Bankman-Fried now faces a maximum prison term of 110 years. This conviction was made possible by testimonies from three individuals within Bankman-Fried’s “inner circle” on behalf of the Justice Department. All three individuals face fraud charges; they are Caroline Ellison (former CEO of Alameda Research), Nishad Singh (Former Director of Engineering at FTX), and Gary Wang (Co-Founder of FTX).
‘SBF’ started Alameda Research in 2017, a trading firm specializing in cryptocurrency that received initial funding from its founders and wealthy loaners. As acquiring more funding proved difficult, ‘SBF’ then started FTX in 2019, a crypto exchange that would work as a way to fund Alameda Research - this detail was unknown to FTX customers. Bankman-Fried stepped away from Alameda Research to head FTX. He assigned the CEO role to his close associate, Caroline Ellison. Ellison would later reveal that even though she was running the operation at Alameda Research, she would ultimately report to Bankman-Fried.
Turmoil for FTX started when a balance sheet from Alameda Research leaked (Alameda and FTX are private companies, so financial statements are not made available to the public). The balance sheet showed that the “sister hedge fund” was propped up on FTT Token, a crypto made by FTX, which suggested the instability of Alameda as the FTT assets were balanced with over a billion in loans. The leak also shed light on the fact that the financial ties between the two companies were strangely close. Prompting a wave of worried FTX customers to take their money out of the exchange, FTX could only cover a percentage of the withdrawals. The company's dwindling customer base and inability to provide customers their money back forced FTX to file for bankruptcy, which prompted the investigation and eventual swarms of indictments aimed at the executives responsible for the corporate failure.
Bankman-Fried used FTX customer funds (disguised as money from a wealthy contributor) to donate to both Democrat and Republican politicians such as Cory Booker and Lisa Murkowski, as well as PACs like ‘Protect Our Future.’ In recent years, ‘SBF’ has been one of the top political funders as a way to influence tech/crypto regulations and ensure FTX market share. Using funds to also invest in tech companies, property, and personal use.
He is scheduled for sentencing in March 2024, with additional charges yet to face for bribery and bank fraud. If sentencing was not enough of a burden, new FTX management has filed a civil suit against 'SBF' for a billion dollars in fraudulent transfers. Customer funds in FTX were estimated to be 16 billion; of that, only 7.3 billion has been found.
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