Cryptocurrencies are volatile and thus the crypto holders, it doesn’t take a long time to transform from a crypto king to a convicted man, and the same happened with Sam Bankman Fried, once known as the titan of the corporate world and one of the youngest billionaires in the entire universe. What happened to him and why did he get convicted? Let’s unwind the journey of Sam Bankman from crypto king to an imprisoner.
Let’s get started.
Who Is Sam Bankman Fried ?
Samuel Benjamin Bankman Fried, or Sam Bankman Fried is an American entrepreneur born on March 5, 1992, in Standford California. He started his career as an intern at Jane Street Capital, a trading firm trading international ETFs. In 2017, he cofounded Alamada Research, a quantitative trading firm. He then set up an arbitrage trade, moving $25 million per day to take advantage of the price variations in Japan and the United States in January 2018.
In April 2019, Bankman founded FTX, a cryptocurrency exchange, where his life took another turn. The FTX exchange’s popularity was quick and got a global reach with more than 130 international companies. FTX’s success led to a venture fund worth $2 billion. He was once ranked the 41st richest American in the Forbes Richest 400 list.
He was addressed as the ‘crypto boy’ in many leading magazines and newspapers. His friend circle was wide, he was seen with actors, musicians, and athletes. He got an image of a nerdy do-gooder who was willing to donate all his wealth to charity. But fate has some other plans.
FTX Bankruptcy: The Beginning Of The Downfall Of Bankman
In November 2022, Binance CEO, Chang Peng Zhao revealed that they are planning to sell their FTT holdings, the native crypto of FTX, which led to the customers withdrawing from FTX. The withdrawal rate was such massive that FTX couldn’t meet up, creating a bank run.
Zhao published the announcement of the sale after knowing that most of the holdings of Alamada, the trading firm of Friedman were in FTT, which declined the price of the FTT and other cryptocurrencies.
On November 8, Binance announced its plan to purchase FTX due to the liquidity crisis faced by FTX. However, on the day of the announcement the FTT lost 80% of its value, making Binance back off their decision.
The crisis transformed Bankman into a non-billionaire, as per the billionaire index of Bloomberg. It also reported that the Security and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) began an investigation on FTX and its connection with Bankman’s other holdings.
On November 11, FTX, Alamada, and other 130 associated legal entities announced bankruptcy. Reports about Bankman’s misuse of funds circulated from anonymous sources. He then resigned from the FTX CEO position and was immediately replaced by John Jay Ray III, who had headed to recover the Enron assets from creditors, which was involved in the Enron bankruptcy case.
FTX and other linked entities filed for bankruptcy, and the Royal Bahamas Police questioned Bankman. John Ray submitted the reports in the court stating that Alamada research has lent $1 billion to Bankman, he also added that he has never seen such trustless financial information in his entire career.
Bankman’s Arrest
Bankman was arrested on December 12, 2022. Southern District of New York has charged Bankman for wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering. During a trial, Bankman’s former colleague revealed to the jury that conspiration to loot the customer’s account was made by him and Bankman.
Bankman’s parents and lawyers conducted campaigns to secure a reduced sentence and rewrite the public’s narrative of the FTX’s failure. However, the defense centered on the customer’s lost money and the effort it takes to return. The new FTX chair promised customers that they would get the money returned but as per the value of holdings in November 2022.
The court then sent him to prison for 25 years, though some state it is a long time, while others have a say that is nothing compared to the victim’s loss of cryptocurrencies.
What Does the 25-Year Sentence Convey?
Crypto assets are considered the future investments, that have a large scope in the digital world. But acts like this affect the security of the citizen’s fund, resulting them a loss that they could never have imagined. The 25-year imprisonment of Bankman highlights the government’s strong measures to stop such activities that could affect US citizens. This also prevents others from mirroring a similar act.
