Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sam Bankman-Fried spent many of the breaks during his trial in New York sitting alone at the defence table flanked by two hulking federal marshals. But on the day he was due to testify, he stood up and walked to the witness stand early. An official told him to step down and wait to be called.
The 31-year-old former billionaire, who faces decades in prison after being convicted of fraud and money laundering, has always been eager to spin his own story. But in the 26th floor Manhattan courtroom, he watched in silence as his closest friends and former girlfriend took the stand to give a damning account of his stunning rise and fall.
Prosecutors said he “secretly” took “billions out the back door” at his FTX crypto exchange to fund reckless spending by his private trading firm, leading to FTX’s collapse last November with an $8bn hole in its balance sheet. “The defendant was motivated by greed and ambition,” prosecutor Nick Roos said. “Thousands of people lost billions of dollars . . . because he wanted more money to do whatever he wanted with . . . Let the evidence prevail over his storytelling.”
Bankman-Fried’s defence lawyer said prosecutors engaged in deceptive storytelling of their own. “They wrote him into this movie as a villain, a bad guy,” said Mark Cohen. “What the government kept leaving out of its movie was the ‘why’.”
After less than five hours, the jury found he had criminal intent. But we will never know what was in Bankman-Fried’s mind. Natalie Tien, his former assistant and spokesperson, said neither side’s arguments fitted the man she knew. “He did lie, he did take the money, but I don’t think it was about greed,” she said. “I think he was aiming to play a more significant role, a bigger game in his mind, and was taking those actions to achieve that goal. Perhaps he genuinely thought it was for the greater good.”
Bankman-Fried was the poster boy for crypto’s push into the mainstream, welcomed on Capitol Hill and winning backing from top investors including Sequoia and BlackRock. The FTX fraud has become the ultimate indictment of the crypto bubble and the dangers of largely unregulated companies handling billions of dollars for millions of customers. Speaking after the late evening verdict, district attorney Damian Williams said Bankman-Fried had tried to make himself “king of crypto”.
The son of two eminent Stanford law professors, Joseph Bankman and Barbara Fried, who sat grim-faced in court, Bankman-Fried attended the same Palo Alto private school as Steve Jobs’s son. He studied at the Massachusetts Institute of Technology, and took a job at Jane Street Capital before quitting to apply Wall Street trading logic to crypto with his own private trading firm Alameda Research.
His greatest success came after founding FTX in 2019, just before the boom in cryptocurrencies during the pandemic. His vision of a high-tech future for finance won FTX around $2bn in venture capital backing at a peak valuation of $40bn. Bankman-Fried’s pitch convinced investors despite playing video games on most of his calls with them. This became part of his legend, along with his frizzy hair, cargo shorts and the beanbag he slept on next to his desk.
He and nine employees lived in a $30mn Bahamas penthouse with an orchid-shaped pool. He watched the 2022 Super Bowl — and a multimillion dollar FTX commercial starring Larry David — in a box with Katy Perry, Orlando Bloom and Kate Hudson.
But behind the scenes, FTX had loaned billions to Alameda, fuelling the trading firm’s increasingly wild bets on rising crypto prices. The crypto crash crushed those leveraged investments, and left Alameda unable to pay back FTX, wiping out customer deposits. Prosecutors say the “unlimited borrowing” amounted to “unlimited stealing”.
The trial left unanswered questions. Why would a young billionaire, running the world’s most successful start-up, risk illicitly borrowing billions to fund risky crypto trades? Nearly absent from the courtroom was Bankman-Fried’s philanthropy, which was key to how he sold his story. He claimed his business empire was an engine to feed money to charities tackling existential threats to humanity — from rogue AI to future pandemics.
Caroline Ellison, his former girlfriend and CEO at Alameda, who has pleaded guilty to fraud, gave the clearest view into his mind. Bankman-Fried, she said, believed in taking any gamble if he had a knife-edge advantage in probability. “He thought that the only moral rule that mattered was doing whatever would . . . essentially . . . create the greatest good for the greatest number,” she testified. He didn’t think “rules like don’t lie and don’t steal” were justified.
On the stand, Bankman-Fried’s narrative powers were hemmed in by legal procedures. The judge had commented in court that robbing a bank and then playing the lottery is still a crime (even if you intend to win, pay back the bank and donate the profits). Bankman-Fried tried to convince the jury that he thought Alameda was allowed to do “anything” with the borrowed money, whether to “buy muffins” or “pay business expenses”, and that he simply misjudged the scale and risk of the borrowing until it was too late.
It was a final test for crypto’s master storyteller, and it failed. In the midst of a gruelling cross examination, in which Bankman-Fried said he ‘didn’t recall’ more than 140 times, prosecutor Danielle Sassoon asked him: “Mr Bankman-Fried, would you agree that you know how to tell a good story?”
He paused: “I don’t know. It depends on what metric you use.”
Read the full article here