Ex-FTX CEO Sam Bankman-Fried faces a lengthy prison sentence after being found guilty of defrauding FTX customers out of billions, marking a significant downfall in a case that spotlighted the darker sides of the cryptocurrency world.

Sam Bankman-Fried, the founder of the now-defunct cryptocurrency exchange FTX, was found guilty on all counts of defrauding his customers in a Manhattan federal court on Thursday.

Bankman-Fried, who once enjoyed the status of a mogul in the crypto world, now faces decades in prison, with his sentencing scheduled for 28 March 2024 by US District Judge Lewis Kaplan. The rapid deliberation by the jury, who reached a verdict in just four hours, signaled the compelling nature of evidence presented during the trial, much of which came from Bankman-Fried’s closest allies.

A deep-seated culture of deceit within FTX

Manhattan US attorney Damian Williams was categorical in his remarks post-trial, marking this case as a stern warning to other potential fraudsters within the burgeoning cryptocurrency industry. He emphasized the traditional nature of the crimes committed despite the modern facade of cryptocurrency, stating, “while the cryptocurrency industry might be new … this kind of corruption is as old as time.”

Williams stressed the importance of integrity within financial markets and assured relentless efforts in rooting out corruption, making it clear that the swift pace at which this case moved was a deliberate choice aimed at sending a strong message to the industry.

The trial unearthed a deep-seated culture of deceit within FTX, spearheaded by Bankman-Fried. The prosecution laid bare his elaborate schemes to siphon “stolen funds” for personal enrichment and to cover high-risk investments of FTX’s sister hedge fund, Alameda Research. His exorbitant spending, unrelated to FTX’s operations, was highlighted, alongside his blatant attempts to bypass regulatory scrutiny. Additionally, the trial revealed a significant lack of risk management within FTX, which was exacerbated by the lack of a dedicated risk management team, a fact Bankman-Fried admitted to.

Repercussions on the crypto industry

The guilty verdict against Bankman-Fried and the subsequent public remarks by US attorney Damian Williams underline the regulatory scrutiny facing the cryptocurrency industry.

The case against Bankman-Fried unveiled the systemic risks embedded within some cryptocurrency platforms. The lack of operational transparency, coupled with a blatant disregard for regulatory compliance, as seen in Bankman-Fried’s actions, underscore the vulnerabilities that customers face.

The swindling of FTX customers out of some $10 billion highlights the magnitude of risks involved and raises questions on the oversight mechanisms within the cryptocurrency landscape.