FTX’s collapse at the end of 2022 rocked the cryptocurrency industry. The founder of this cyber currency exchange, Sam Bankman-Fried, has now been found guilty of multi-billion dollar fraud. He has to be behind bars for 25 years.
Below are some questions and answers about Bankman-Fried and this affair:
WHO IS SAM BANKMAN-FRIED?
Sam Bankman-Fried is the son of university professors Joseph Bankman and Barbara Fried. The 31-year-old grew up in California and studied at the renowned Massachusetts Institute of Technology (MIT).
After graduating from university, he joined the Jane Street brokerage firm as a cryptocurrency trader and made a fortune betting on Bitcoin price differences on stock exchanges in the USA and Asia. In 2017 he became self-employed with the brokerage firm Alameda, and in 2019 he founded the crypto exchange FTX.
FTX will be valued at $32 billion in early 2022. Forbes magazine estimates Bankman-Fried’s private assets at $26.5 billion (24.5 billion euros). The trademarks of Bankman-Fried, known in financial circles by his initials “SBF”, are his curly head of hair and unconventional appearances in T-shirts and shorts.
He donated $5.2 million to Joe Biden’s presidential campaign in 2020 and is one of the largest donors to his Democratic Party. “SBF” even toyed with the idea of paying former President Donald Trump not to run for office in the 2024 election, writes investigative author Michael Lewis in a book about the rise and fall of Bankman-Fried. Lewis is best known for his now filmed work “The Big Short,” about the 2008 financial crisis.
Bankman-Fried’s psychiatrist George Lerner attests that the FTX founder has an autism spectrum disorder. Joseph Bankman writes to the judge in the fraud trial that his son has long had problems with social interaction. But no one was interested in this as long as FTX was flourishing. It was only after the collapse that characteristics such as avoiding eye contact were interpreted as a sign of contempt or lying.
WHY DID FTX COLLAPSE?
After rumors of irregularities and a failed rescue by arch-rival Binance, investors are withdrawing money from FTX on a large scale at the end of 2022. The crypto exchange then filed for bankruptcy protection on November 11th. According to insiders, Bankman-Fried is said to have secretly transferred ten billion dollars in FTX customer funds to Alameda. In November 2022, he himself told the Reuters news agency that his “confusing internal labeling” had been misinterpreted.
WHY WAS BANKMAN-FRIED ARRESTED?
Bankman-Fried will be arrested at his home in the Bahamas in mid-December 2022 and extradited to the USA. The authorities there accuse him of, among other things, fraud. If convicted, he faced up to 115 years in prison. FTX customers also want to file a class action lawsuit. Bankman-Fried does not initially have to be in custody in return for bail of $250 million, but is under arrest in his parents’ home. His mother and father, among others, are responsible for this sum.
In August 2023, Bankman-Fried will have to go to prison. A judge finds it proven that he influenced witnesses in at least two cases. He is sent to the Metropolitan Detention Center in the New York borough of Brooklyn, which is notorious for, among other things, unsanitary conditions. He spends the time there until the sentence is announced.