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$8 billion fraud in America, One of the biggest financial fraud in history


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Sam Bankman-Fried, the founder and former CEO of FTX, a prominent global cryptocurrency exchange, has been sentenced to 25 years in prison. The conviction stems from charges related to orchestrating what US Attorney Damian Williams has described as “one of the biggest financial frauds in American history.” US District Judge Lewis Kaplan of New York handed down the sentence.

Bankman-Fried’s Journey in the Crypto World and the Fraud

Bankman-Fried initially entered the cryptocurrency world in 2017 through Bitcoin arbitrage. He took advantage of a significant price difference across exchanges by buying Bitcoin at a lower price on one platform and selling it at a higher price on another. This venture eventually led him to establish Alameda Research and later FTX.com, an international cryptocurrency exchange renowned for its innovative trading features.

Sam Bankman Fried, the founder of the cryptocurrency exchange FTX, has been found guilty on all seven counts of fraud and conspiracy. The charges against him include wire fraud, conspiracy to commit wire fraud, conspiracy to commit securities fraud, conspiracy to commit commodities fraud, and conspiracy to commit money laundering. Bankman Fried was accused of orchestrating a multi-billion-dollar fraud scheme that involved defrauding FTX customers and Alameda Research lenders.

During the trial, it was revealed that Bankman Fried had directed his top deputies to lie to the public and transfer billions of dollars in customer funds from FTX to its sister trading firm, Alameda Research. This fraudulent activity led to the collapse of FTX and its subsequent bankruptcy filing. Bankman Fried’s actions were described as one of the biggest financial frauds in American history.

The jury’s verdict comes after a month-long trial that shed light on the hubris and risk-taking prevalent in the cryptocurrency industry. Bankman Fried, once considered a rising star in the crypto world, now faces a maximum sentence of 115 years in prison. However, the actual sentence imposed was 25 years, which is half of what the prosecutors had requested but still significantly longer than the 6.5 years suggested by the defense.

The 2022 Crypto Market Crash and its Consequences

The crypto market crash in 2022 had a significant impact on Bankman-Fried’s ventures. The value of stablecoin Luna plummeted, leading to the bankruptcy of several lenders. Alameda had borrowed from these lenders using FTT tokens minted by FTX as collateral. As prices continued to fall, Bankman-Fried resorted to using FTX customers’ deposits by mid-2022 to meet margin calls.

Unveiling the Balance Sheet and Bankruptcy

On November 2, 2022, CoinDesk published details of Alameda’s balance sheet, disclosing $14.6 billion in assets, with over $7 billion tied to FTT tokens or coins backed by Bankman-Fried, such as Solana or Serum. This revelation prompted investors to withdraw their holdings from FTX, triggering a liquidity crisis for Alameda and FTX. By November 11, FTX had filed for bankruptcy, leading Bankman-Fried to step down as CEO of FTX and associated entities. He suffered a personal wealth loss of 94% during this process.

Judge Kaplan’s Findings and Verdict

During Bankman-Fried’s trial in December, Judge Kaplan determined that Bankman-Fried had lied about his hedge fund using customer deposits taken from the FTX cryptocurrency exchange he had founded. The judge also found that FTX customers had lost $8 billion, FTX’s equity investors had lost $1.7 billion, and lenders to Alameda Research had lost $1.3 billion. Bankman-Fried’s argument that customers would be fully repaid through the bankruptcy process was rejected.

Conviction and Bail

During the trial, a jury swiftly convicted Bankman-Fried on all seven criminal charges against him, reaching a verdict in just three hours. This outcome surprised experts due to the numerous witnesses and extensive evidence presented. Bankman-Fried, however, was initially released on a $250 million bond and placed under house arrest at his parents’ house in California. However, he is now back behind bars once again.

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