Unlock the Editor’s Digest at no cost
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
Sam Bankman-Fried spent most of the breaks throughout his trial in New York sitting alone on the defence desk flanked by two hulking federal marshals. However on the day he was as a consequence of testify, he stood up and walked to the witness stand early. An official advised him to step down and wait to be known as.
The 31-year-old former billionaire, who faces a long time in jail after being convicted of fraud and cash laundering, has all the time been wanting to spin his personal story. However within the twenty sixth flooring Manhattan courtroom, he watched in silence as his closest associates and former girlfriend took the stand to present a damning account of his beautiful rise and fall.
Prosecutors stated he “secretly” took “billions out the again door” at his FTX crypto change to fund reckless spending by his personal buying and selling agency, resulting in FTX’s collapse final November with an $8bn gap in its steadiness sheet. “The defendant was motivated by greed and ambition,” prosecutor Nick Roos stated. “Hundreds of individuals misplaced billions of {dollars} . . . as a result of he needed more cash to do no matter he needed with . . . Let the proof prevail over his storytelling.”
Bankman-Fried’s defence lawyer stated prosecutors engaged in misleading storytelling of their very own. “They wrote him into this film as a villain, a nasty man,” stated Mark Cohen. “What the federal government stored leaving out of its film was the ‘why’.”
After lower than 5 hours, the jury discovered he had felony intent. However we’ll by no means know what was in Bankman-Fried’s thoughts. Natalie Tien, his former assistant and spokesperson, stated neither facet’s arguments fitted the person she knew. “He did lie, he did take the cash, however I don’t suppose it was about greed,” she stated. “I feel he was aiming to play a extra vital position, a much bigger sport in his thoughts, and was taking these actions to realize that objective. Maybe he genuinely thought it was for the larger good.”
Bankman-Fried was the poster boy for crypto’s push into the mainstream, welcomed on Capitol Hill and profitable backing from high buyers together with Sequoia and BlackRock. The FTX fraud has grow to be the last word indictment of the crypto bubble and the hazards of largely unregulated corporations dealing with billions of {dollars} for tens of millions of shoppers. Talking after the late night verdict, district lawyer Damian Williams stated Bankman-Fried had tried to make himself “king of crypto”.
The son of two eminent Stanford regulation professors, Joseph Bankman and Barbara Fried, who sat grim-faced in court docket, Bankman-Fried attended the identical Palo Alto personal faculty as Steve Jobs’s son. He studied on the Massachusetts Institute of Know-how, and took a job at Jane Road Capital earlier than quitting to use Wall Road buying and selling logic to crypto along with his personal personal buying and selling agency Alameda Analysis.
His biggest success got here after founding FTX in 2019, simply earlier than the growth in cryptocurrencies through the pandemic. His imaginative and prescient of a high-tech future for finance received FTX round $2bn in enterprise capital backing at a peak valuation of $40bn. Bankman-Fried’s pitch satisfied buyers regardless of taking part in video video games on most of his calls with them. This grew to become a part of his legend, alongside along with his frizzy hair, cargo shorts and the beanbag he slept on subsequent to his desk.
He and 9 staff lived in a $30mn Bahamas penthouse with an orchid-shaped pool. He watched the 2022 Tremendous Bowl — and a multimillion greenback FTX industrial starring Larry David — in a field with Katy Perry, Orlando Bloom and Kate Hudson.
However behind the scenes, FTX had loaned billions to Alameda, fuelling the buying and selling agency’s more and more wild bets on rising crypto costs. The crypto crash crushed these leveraged investments, and left Alameda unable to pay again FTX, wiping out buyer deposits. Prosecutors say the “limitless borrowing” amounted to “limitless stealing”.
The trial left unanswered questions. Why would a younger billionaire, operating the world’s most profitable start-up, danger illicitly borrowing billions to fund dangerous crypto trades? Almost absent from the courtroom was Bankman-Fried’s philanthropy, which was key to how he offered his story. He claimed his enterprise empire was an engine to feed cash 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 responsible to fraud, gave the clearest view into his mind. Bankman-Fried, she stated, believed in taking any gamble if he had a knife-edge benefit in chance. “He thought that the one ethical rule that mattered was doing no matter would . . . basically . . . create the best good for the best quantity,” she testified. He didn’t suppose “guidelines like don’t lie and don’t steal” had been justified.
On the stand, Bankman-Fried’s narrative powers had been hemmed in by authorized procedures. The choose had commented in court docket that robbing a financial institution after which taking part in the lottery remains to be against the law (even if you happen to intend to win, pay again the financial institution and donate the earnings). Bankman-Fried tried to persuade the jury that he thought Alameda was allowed to do “something” with the borrowed cash, whether or not to “purchase muffins” or “pay enterprise bills”, and that he merely misjudged the size and danger of the borrowing till it was too late.
It was a remaining take a look at for crypto’s grasp storyteller, and it failed. Within the midst of a gruelling cross examination, by which Bankman-Fried stated he ‘didn’t recall’ greater than 140 occasions, prosecutor Danielle Sassoon requested him: “Mr Bankman-Fried, would you agree that you understand how to inform an excellent story?”
He paused: “I don’t know. It is dependent upon what metric you employ.”