Sam Bankman-Fried was found guilty of seven counts of fraud and conspiracy. Insider reporter Jacob Shamsian fills you in on how the former crypto billionaire got here.
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00:00 For a while, Sam Bankman-Fried was the most important person in the world of crypto.
00:05 I'm Jacob Shamsian, I'm a legal correspondent at Insider,
00:08 and I've been covering the Sam Bankman-Fried trial.
00:10 SPF founded two billion dollar companies.
00:14 One is called FTX, which is a cryptocurrency exchange.
00:17 It's kind of like the New York Stock Exchange, but for cryptocurrency.
00:20 One is called Alameda Research, which is a cryptocurrency hedge fund.
00:23 Basically where, you know, he bought and sold and made investments using cryptocurrency.
00:28 After he founded FTX and Alameda, and it became very successful,
00:31 they eventually moved to the Bahamas, where at that point he used Alameda Research to buy
00:37 a 35 million dollar penthouse, which has become a big deal in this criminal trial.
00:42 He and 10 other people, employees of FTX and Alameda, and their significant others,
00:47 all kind of lived in this big mansion.
00:50 Sam has kind of put out this image of himself as someone who did not care about the finer things in life.
00:56 He famously seldom cut his hair.
00:59 He wore cargo shorts.
01:00 He wore t-shirts that did not look very clean and did not really fit him.
01:04 But prosecutors have said this is sort of just an image for himself.
01:07 In reality, he, you know, did want to amass enormous wealth and he wanted it for himself.
01:13 One example of where this came from the trial is Caroline Ellison,
01:17 who was Sam's on and off girlfriend for a while,
01:20 and who was also the CEO of his hedge fund, Alameda Research.
01:24 She testified that when they moved to the Bahamas, Sam bought them luxury cars for each of them.
01:29 And then a little while later, he said, "You know what?
01:31 Let's get a Toyota Corolla and a Honda Civic because that's better for our image."
01:36 This all fell apart in November of 2022.
01:39 FTX customers had gotten the sense that something was wrong
01:43 and they started withdrawing their money all at once.
01:45 There just wasn't enough money in FTX's accounts to fulfill those withdrawals.
01:51 And at that point, prosecutors really started circling to bring charges.
01:56 So Sam was arrested in the Bahamas in December of 2022.
02:00 He was extradited to the U.S.
02:02 His lawyers didn't fight his extradition because they said, you know, he didn't do anything wrong.
02:06 He's happy to go to court and explain himself.
02:08 After he was arrested, he lived with his parents under house arrest.
02:12 After the judge found he was witness tampering with one of the chief witnesses in the trial,
02:16 Caroline Ellison, he remanded him to jail.
02:18 And he's been commuting from a jail in Brooklyn to this courthouse in Manhattan every day of the trial.
02:24 Prosecutors basically say that the customers who are using FTX,
02:28 their money was going to Alameda Research
02:31 as opposed to being safe on the FTX platform that they can use to trade.
02:35 And Alameda was using it as its off-fit, basically as its own piggy bank,
02:38 to make investments that ultimately benefited Sam because Sam owned Alameda.
02:43 Prosecutors charged him with defrauding FTX customers,
02:46 saying that they couldn't withdraw their own money out of their FTX accounts.
02:51 And they also charged him with defrauding investors into Alameda
02:54 and FTX by not disclosing the secret relationship between the two companies.
02:58 And the other charge is money laundering,
03:01 basically saying that he took money from FTX customers and used it for purposes that
03:05 otherwise would have seemed legitimate,
03:07 like repaying lenders and making it other sorts of investments that ultimately benefited him.
03:12 The structure of the fraud is a little bit complicated.
03:16 Basically, Alameda had an account on FTX,
03:19 but it had a line of credit that went up to $65 billion.
03:22 So it can effectively just take out up to, theoretically, $65 billion
03:28 and use it to whatever degree they saw fit.
03:30 And the internal alarm bells on FTX wouldn't stop them.
03:35 According to Sam, the liabilities never rose above $2 or $3 billion.
03:40 Caroline Ellison, the CEO of Alameda who testified against him in court,
03:44 claimed that the number reaches high as about $10 or $11 billion.
03:47 Ultimately, by the end of it, Alameda Research was about $10 billion in the red.
03:53 And prosecutors say that this was ultimately FTX customer money
03:58 that just should have been there but wasn't.
04:00 Sam's defense is that if you look at the FTX terms of service,
04:05 it does say that on rare, extremely rare occasions,
04:08 everyone who used a margin trading service could suffer socialized losses,
04:13 meaning their accounts could be drained to cover other big losses of other users.
04:18 Sam Bankman-Fried took the really risky and unusual step of testifying
04:22 in his own criminal case.
04:23 It's not something that any defendant has to do, but he decided it was worth the risk.
04:28 And when he was questioned by his own lawyers, his very forthcoming,
04:32 he talked about how he built FTX and Alameda into two multi-billion dollar businesses.
04:37 But under questioning from prosecution, he seemed that he couldn't remember anything.
04:42 He answered, "I don't recall" 140 times.
04:45 He would take long pauses and be like, "I'm not sure about that."
04:49 He definitely was more evasive, and I do think that the jury could tell that.
04:54 There were a bunch of times where prosecutors did seem to nail him on certain questions.
04:58 His lawyers are also saying, "This isn't a person who's, you know, a fraudster.
05:04 He did legitimately build two billion dollar companies, and he just made mistakes.
05:09 He made bad business decisions.
05:11 He took risks that were ill-advised.
05:14 But at the end of the day, that is not a fraud.
05:16 That's just bad business decisions."
05:18 So we heard testimony from members of SPF's inner circle in this trial.
05:22 Gary Wang was one of Sam's closest friends for a long time.
05:26 They went to MIT together.
05:27 They lived together.
05:27 And he was an executive at FTX and also owns a chunk of Alameda Research.
05:33 And he was also basically was a lead programmer at the same time.
05:37 So he was one of the people who developed this so-called backdoor in FTX
05:41 that allowed Alameda to take a lot of funds.
05:43 Nishad's role was also as a programmer, head programmer for FTX.
05:48 He also participated in the straw donation scheme, where basically they were taking money
05:52 and giving it to Democrats, Republicans, people who SPF wanted to influence
05:58 crypto regulation in the United States.
06:01 In addition to his criminal trial, Sam Behnfried has a lot of legal problems.
06:06 He is being sued by two regulatory agencies.
06:09 There's a massive bankruptcy of FTX, which is very messy.
06:12 There are other lawsuits against him, against members of his family,
06:16 against other FTX entities.
06:18 So he's going to have to deal with that for a long time.
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