Crypto Exchange Founder Convicted on Conspiracy and Fraud Charges
Cryptocurrency exchange founder Sam Bankman-Fried was convicted yesterday on charges of fraud and conspiracy related to the collapse of FTX. He was convicted on seven charges, including stealing customer funds to offset losses at crypto hedge fund Alameda Research; lying to investors and lenders; and money laundering.
Bankman-Fried, 31, allegedly stole as much as $10 billion from customers to finance political contributions, make venture capital investments, and make extravagant purchases, such as real estate in the Bahamas, Reuters reported. Together, the counts carry a maximum sentence of 110 years. He also faces additional charges of bank fraud and foreign bribery conspiracy charges, but those were split off into a separate trial scheduled for March 2024.
The monthlong trial “laid bare the rampant hubris and risk-taking across the crypto industry,” reported The New York Times. Meanwhile, crypto critics note that the verdict may signal future legal consequences in the field of digital currencies.
In a news conference outside the courthouse, Damian Williams—Manhattan’s top federal prosecutor—said Bankman-Fried had “perpetrated one of the biggest financial frauds in American history.” He added that “The crypto industry might be new, but this kind of fraud, this kind of corruption, is as old as time.”
In a statement, Williams said that the conviction delivers on his promise to root out corruption in financial markets. He warned fraudsters that if they think they are untouchable, they should “think again, and cut it out,” adding that “if they don’t, I promise we’ll have enough handcuffs for all of them.”
In another case this week, the U.S. Department of Justice charged the founder and two top executives at digital asset company SafeMoon with running a fraud that diverted tens of millions of investor dollars for their own uses. The three individuals allegedly used the funds to purchase luxury vehicles, real estate, and personal investments. The U.S. Securities and Exchange Commission filed related civil charges against the defendants on 1 November.
“As fraudsters increasingly use digital assets to mislead investors and misappropriate funds, our office will be at the forefront of pursuing them and their ill-gotten gains,” said U.S. Attorney for the Eastern District of New York Breon Peace in a statement. “We will continue our focus in the digital asset space and bring those who defraud investors in this area to justice.”
Cryptocurrency is being widely used for more directly nefarious acts, as well as financial corruption and fraud. It is used frequently in illicit marketplaces, ransomware schemes, scam rings, virtual kidnappings, and terrorism financing, Security Management reported earlier this year.
Various law enforcement agencies and countries are pursuing stricter rules around digital assets to address its use in criminal actions. Turkey, for instance, announced that it is preparing new legislation about cryptocurrency in order to persuade an international crime watchdog, the Financial Action Task Force, to remove the country from a grey list of nations that have taken insufficient action to prevent money laundering and terrorist financing.
