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The Manhattan federal jury has reached a verdict in the high-profile case of FTX co-founder, Sam Bankman-Fried. The 31-year-old entrepreneur presided over what is now known as the largest crypto collapse in history.

The jurors deliberated for several hours following the conclusion of Bankman-Fried's criminal trial. The jury found Bankman-Fried guilty of defrauding his customers, investors, and lenders. And delivered a verdict of guilty on all seven criminal charges, which ranged from wire fraud to money laundering. 

This conviction echoed through the crypto community. And the counts collectively carry a maximum sentence of a staggering 110 years. 

Bankman-Fried, known for his stoicism, remained composed as the verdict was read in the courtroom. His parents were visibly upset. 

But the legal troubles for Bankman-Fried are far from over. In the coming year, he is set to face a separate set of criminal charges, alleging bank fraud and bribery of Chinese officials in a March 28 trial.

The prosecution's case against Bankman-Fried revolved around the accusation that he intentionally embezzled $14 billion in customer deposits from his cryptocurrency exchange, a scheme that he purportedly executed in collaboration with three of his top executives: Alameda CEO Caroline Ellison, FTX co-founder Gary Wang, and FTX engineering director Nishad Singh. 

These executives all pleaded guilty to fraud charges after the collapse of FTX and provided crucial testimony against Bankman-Fried under plea agreements with the government.

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Crypto Collapse

Prosecutors allege the group facilitated Bankman-Fried's sister crypto trading firm, Alameda Research, with "secret" backdoor access to FTX's customer deposits. The funds were then utilized for a myriad of purposes, including investments, loan repayments, political donations, and real estate acquisitions. 

In the government's closing argument, prosecutor Nicolas Roos asserted, "He spent his customers' money and he lied to them about it." 

Throughout the trial, Bankman-Fried steadfastly maintained his innocence, contending that poor business decisions and management errors, not fraud, were responsible for the failure of his cryptocurrency exchange. When asked directly by his lawyer if he defrauded anyone or took customer funds, he vehemently denied both accusations. Ultimately the jury was not convinced.

At the core of the charges against Bankman-Fried were allegations that he and FTX falsely represented that customer deposits were secure within the exchange's custody.

 Prosecutors argued that this misrepresentation occurred through public Tweets, on FTX's website, and in private communications with customers, lenders, and investors. Bankman-Fried, on the other hand, contended that FTX's terms of service allowed for customers to borrow from FTX deposits, provided that the funds were held in accounts that opted into FTX's margin-trading program.

Bankman-Fried's attorney, Mark Cohen, argued, "At FTX, the way it was set up, margin customers could use the funds they borrowed from the exchange for any purpose." 

According to Cohen, at the time, this practice was not seen as problematic because borrowers had to post collateral to support their borrowing, reducing the risk of losses.

FTX computer code

Prosecutors, however, maintained that Bankman-Fried and his deputies surreptitiously altered FTX's computer code to permit Alameda to access billions in customer funds classified as "borrows" or loans from FTX. 

Alameda enjoyed privileges that were not available to other accounts, including exemption from collateral requirements and liquidation, and the ability to carry negative balances on the exchange.

 Bankman-Fried asserted that it was his deputies who developed this code, and he argued that Alameda's special privileges were essential for it to function as a market maker, a payment processor, and a backstop liquidity provider for FTX.

The trial also featured a contentious debate over the timeline of events leading up to FTX's downfall. Bankman-Fried claimed that it was not until October 2022 that he became aware of the exchange's liquidity crisis. 

In November 2022, FTX filed for bankruptcy. Prosecutors disputed this timeline, asserting that Bankman-Fried and his three executives were aware of the impending crisis as early as June of that year when they worked on a project that unveiled an $8 billion deficit owed to FTX by Alameda.

Perhaps one of the most striking moments of the trial was when Assistant US Attorney Danielle Sassoon confronted Bankman-Fried about his actions in 2022, asking whether he had fired anyone for spending $8 billion of customer deposits. 

Bankman-Fried's response, a simple "No," further underscored the magnitude of the alleged mismanagement and financial improprieties that led to the colossal crypto collapse.