It was exactly one year ago today when authorities arrested FTX founder Sam Bankman-Fried, alleging the billionaire defrauded customers, investors, and lenders. His criminal trial became one of Yahoo Finance's biggest stories of 2023.
The face-off was important because of what Bankman-Fried represented. The 31-year-old entrepreneur was a prime beneficiary of the crypto world's meteoric rise in 2021 and the face of its fall in 2022 as digital assets collapsed and FTX's $32 billion empire imploded.
He then became the most prominent target of a widespread government crackdown on crypto's biggest players that will likely remake the industry for years to come. Several of his rivals, including Binance CEO Changpeng Zhao, were also hobbled by law enforcement dragnets this year.
What created so much legal trouble for Bankman-Fried was a $9 billion shortfall that his crypto trading platform FTX couldn't repay as it unraveled and filed for bankruptcy in November 2022.
What the Justice Department ultimately alleged — and set out to prove at trial — was that the deficit existed because Bankman-Fried had deliberately stolen as much as $14 billion in FTX customer deposits.
Bankman-Fried redirected that money, prosecutors said, to a crypto trading firm that he founded before starting FTX called Alameda Research. The funds, they alleged, were spent on Alameda's risky investments, multimillion-dollar real estate, and political donations.
"He spent his customers' money, and he lied to them about it," prosecutor Nicolas Roos said during the trial.
Bankman-Fried carried out this scheme, prosecutors said, with three of his top executives: Alameda CEO Caroline Ellison, FTX co-founder Gary Wang, and FTX engineering director Nishad Singh. The group allowed Alameda "secret" backdoor access to FTX’s customer deposits.
The most damning evidence came from these former executives who had also been friends of Bankman-Fried, all of whom took government plea deals and agreed to testify against him.
Their days on the stand offered some of the trial's most emotional moments.
Ellison, one of Bankman-Fried’s top deputies and his onetime romantic partner, testified that Bankman-Fried "directed" her to steal billions from customers of his cryptocurrency exchange and that she lied again and again at his request.
At one point she broke down in tears, referring to the final week of FTX as "the worst week of my life."
But the most dramatic portion of the trial came at the end, as Bankman-Fried made a risky gamble to take the stand in his own defense.
He testified that poor business decisions and management screwups — and not fraud — were to blame for the undoing of his cryptocurrency exchange.
"Did you defraud anyone?" Bankman-Fried’s lawyer, Mark Cohen, asked him.
"No, I did not," Bankman-Fried answered.
It didn't sway the jury, which found him guilty on all seven criminal charges after just four hours of deliberation.
David Mills, a prominent criminal defense lawyer who volunteered to oversee the defense case, said in an interview with Bloomberg that Bankman-Fried didn't follow his advice on the witness stand.
"He may be at the very top of the list as the worst person I’ve ever seen do a cross-examination," Mills was quoted as saying to Bloomberg.
After the jury's verdict was read in court, Bankman-Fried retuned to a Brooklyn detention center where he awaits his sentencing set for March 28.
He faces up to 110 years in prison, plus fines and restitution.
While Bankman-Fried is expected to appeal his case, he faces even more potential legal jeopardy in the year ahead.
He is scheduled to face a separate set of criminal charges from the Justice Department alleging he committed bank fraud and bribed Chinese officials. Those charges are scheduled to go to trial in March.
The Alameda and FTX executives who testified against Bankman-Fried in exchange for plea agreements are expected to be sentenced in 2024.
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