When funds are placed into a bank account, the institution utilizes those funds for investments in various areas. In the year 2019, Sam Bankman-Fried played a pivotal role in the establishment of Futures Exchange (FTX), which operates as a cryptocurrency exchange platform.
To attract potential investors, FTX assured its clients that their funds would not be subjected to investment activities; rather, the company would merely safeguard the funds. Regrettably, this assurance proved to be untrue, and as a result, Bankman-Fried is now facing the possibility of spending an extended period of time behind bars.
Despite Bankman-Fried’s commitment to not engaging in investments with client funds, he was, in fact, channeling their deposits into his cryptocurrency trading company, Alameda Research. Subsequently, he employed these funds for various purposes, including capital investments, political contributions, real estate acquisitions, and personal expenditures.
Throughout a span of three years, FTX rose to become the world’s second-largest cryptocurrency exchange. During this period, Bankman-Fried gained significant popularity, partly due to his generous contributions to charitable endeavors. However, in November 2022, everything took a dramatic downturn when a technology-focused website published a piece about Alameda Research.
The article disclosed that Alameda Research held billions of dollars in assets, primarily in the form of an FTT token created by FTX, essentially signifying that the vast majority of these assets were tied to a coin personally devised by Bankman-Fried.
The article raised alarm among clients, leading to a swift and substantial withdrawal of their funds. Unexpectedly, FTX encountered difficulties in processing these transactions because the company lacked the assets that Bankman-Fried had asserted it possessed. Subsequently, FTX initiated bankruptcy proceedings.
One month later, in December 2022, Bankman-Fried found himself facing a litany of charges from the Department of Justice. These charges included conspiracy to engage in wire fraud, wire fraud itself, conspiracy to defraud the Federal Election Commission, conspiracy related to securities fraud, conspiracy to commit money laundering, and conspiracy tied to commodities fraud.
At the start of October, the legal proceedings against Bankman-Fried commenced. Referred to as the “King of Crypto,” he entered a plea of not guilty to all the charges lodged against him. Over the course of a month, both the prosecution and the defense presented their respective arguments and evidence.
On November 2, Damian Williams, the US Attorney for the Southern District of New York, revealed that a Manhattan federal jury had convicted Bankman-Fried of multiple charges, including wire fraud, money laundering conspiracy, and securities/commodities fraud conspiracies. The maximum sentences for the conspiracy charges are five years, and for the others, it’s 20 years each. In total, Bankman-Fried faces a potential 110-year prison term.