Sam Bankman-Fried has let the world know enough times that he likes wearing t-shirts and shorts. Journalists reported fascinated by the cool billionaire, who appeared so relaxed, so different from most financial professionals. Millions of people trusted Bankman Fried with their money. And then the money was gone.
This Tuesday, in front of the New York South District Court building, a cluster of photographers snapped the 30-year-old founder of the defunct crypto exchange FTX in a shirt, dark suit and tie. He was on his way to his hearing and faces 115 years in prison. US authorities accuse him of “fraud of epic proportions” and money laundering. Sam Bankman-Fried – known as SBF – is said to have gambled away $10 billion from his clients as FTX boss. Prosecutors say he also violated party donation laws by donating $5.2 million to US President Joe Biden and his Democrats.
The suit was the only concession. During the half-hour hearing, Bankman-Fried made the New York Times According to notes, while the lawyers were speaking, he didn’t say a word. But his lawyers got the message across: He’s pleading not guilty. That means: As of now, there will be no deal with the state to reduce the penalty. In contrast to the rest of his defunct crypto platform’s leadership, who have pleaded guilty to assisting Bankman-Fried in his alleged crimes.
The fact that Bankman-Fried does not accept a deal also means that he and New York are facing a long, sensational process that will illuminate the abysses of cryptocurrency trading. The court is to clarify how a late 20-year-old could set up a billion-dollar company, be courted by celebrities such as ex-President Bill Clinton and football star Tom Brady, and then gamble away his customers’ money in a spectacular way. The trial is expected to begin October 2, according to Judge Lewis A. Kaplan. He also nodded off a prosecutor’s motion to bar Bankman-Fried from sending money from what’s left of FTX or its sister firm, crypto hedge fund Alameda Research, anywhere. This is due to reports that money is still draining from digital wallets that companies have access to. Bankman-Fried denies it’s him who is stashing that money.
Customers want to file a class action lawsuit
A young group of crypto enthusiasts around Bankman-Fried had turned FTX into a huge marketplace for cryptocurrency transactions in just a few years. A year ago, the company was valued at $32 billion, and Bankman-Fried’s personal wealth was estimated at $26 billion. There is practically nothing left of either. A trustee scrapes money for FTX clients and other creditors. Customers want to file a class action lawsuit.
Just before Christmas, Bankman-Fried was arrested in the Bahamas, from where he ran FTX. He was extradited to the United States and, thanks to a bail agreement, is not in custody but is under house arrest at his parents’ home in Palo Alto, California.
The prosecution will also fall on two of Bankman-Fried’s closest associates: Caroline Ellison was head of Alameda Research, Gary Wang was chief technology officer of FTX. Both have pleaded guilty to helping embezzle the funds.
Bankman-Fried is the son of college professors Joseph Bankman and Barbara Fried. He studied at the renowned Massachusetts Institute of Technology. After graduating, he traded cryptocurrencies with a broker and made a fortune betting on bitcoin price differences in different countries. In 2017 he became self-employed with the crypto hedge fund Alameda, in 2019 he founded the stock exchange FTX. Bankman-Fried presented himself to politicians and the public as a visionary and reliable face of the crypto industry, which is considered a magnet for fraudsters.
The bankruptcy of FTX is considered by critics of the crypto boom to be the most prominent evidence that the digital “coins” (tokens) that companies like FTX market are little more than hot air. FTX had also invented its own token called FTT. With the Bankman-Fried presumably underpinned the business of his hedge fund Alameda Research, which should actually be strictly separated from that of the online stock exchange FTX. When this involvement became known in early November and FTX competitor Binance then threw a large amount of FTT onto the market, the company’s “currency” crashed. FTX clients panicked and withdrew billions of dollars within days. As it turned out, FTX didn’t stock enough hard currency to pay out clients. Bankman-Fried allegedly used the money to finance speculation and company acquisitions by Alameda Research.
There is guesswork as to who else supported Bankman-Fried and why he is in custody and not. He is free on bail of $250 million, one of the highest in US history. So far, no money has flowed, but if he does not appear in court, the state can seize his parents’ house in California. But who is responsible for the rest of the $250 million? According to Bankman-Fried, he only has “$100,000” left in his account. Ahead of Tuesday’s hearing, his lawyers had asked the court to keep secret the identities of two people who were signing as guarantors for bail. The motion states: “If the two remaining guarantors are publicly identified, they are likely to become the target of media media attention, and possible harassment, even though they have no substance to the case.” The judge initially granted the request. The last supporters of “SBF” remain secret.