Looking back: The fall of crypto giant Sam Bankman-Fried

March 28, 2024 1:58 PM

Sam Bankman-Fried, disgraced co-founder of the now-defunct cryptocurrency exchange FTX, was sentenced to 25 years in prison on Thursday for his part in defrauding customers of billions of dollars.

Lewis A. Kaplan, senior judge of the United States District Court for the Southern District of New York, delivered Bankman-Fried the sentence in federal court on Thursday, according to Bloomberg. This decision concludes what has arguably been the most prominent case in the crytpo industry — and its most notorious.

"I know a lot of people feel really let down," Bankman-Fried said at his sentencing hearing Thursday morning in lower Manhattan. "I'm sorry about that. ... I'm sorry about what happened at every stage."

Below are examples of American Banker and outside reporting detailing Bankman-Fried's impact on the banking industry.

Bankman-Fried Released on $250 Million Bond in FTX Fraud Case

Stephanie Keith/Bloomberg

What the indictments against FTX's Sam Bankman-Fried mean for banks

Article by Penny Crosman

One thing many bankers are wondering, in the wake of Sam Bankman-Fried's arrest and the indictments against him and his colleagues at the disgraced cryptocurrency exchange firm FTX, is what this means for banks that work with crypto-related companies.

Among the specific indictments against FTX CEO Sam Bankman-Fried and co-founders Caroline Ellison and Gary Wang are wire transfer fraud, directing FTX customer funds to affiliated hedge fund Alameda and misappropriation of customer deposits — activities in which banks allegedly had a role. Banks that did business with FTX, according to the risk advisory firm Kroll, included Bank of America, BMO Harris Bank, Customers Bank, Deltec Bank & Trust, JPMorgan Chase, LendingClub, Moonstone Bank, Signature Bank, Silicon Valley Bank, Silvergate Bank and Wells Fargo.

"There's more maturing to do for banks to work directly with exchanges," said Jeff Sinnott, CEO of Vantage Bank Texas, in a recent interview. FTX's issues came about in part "because they don't follow the purity of what a blockchain technology is supposed to do. It needs to be back to where our customers have trust."

Click here to read the full story.

A panel of speakers in white leather chairs during a session at the Credit Union National Association's Governmental Affairs Conference in 2023,

From left: Glen Sarvady, managing principal at 154 Advisors, Rahm McDaniel, head of business development, platform and payments for NYDIG, Becky Reed, chief executive of Lone Star Credit Union in Dallas and Elizabeth Kwok, assistant director in the bureau of consumer protection at the Federal Trade Commission. "We decided, because we are 'resource poor,' that we were going to implement an option that helped our members and was the safest and best option we could afford," Reed said.

Frank Gargano

After FTX, credit unions evolve their approach to crypto

Article by Frank Gargano

WASHINGTON—With the recent collapse of the controversial cryptocurrency exchange FTX and subsequent indictments of its former chief executive Sam Bankman-Fried, credit union executives are shifting focus away from the monetary value of digital assets and towards their overall utility.

In the wake of FTX's downfall, many credit union leaders received a flurry of calls from concerned members who owned digital assets and needed help transferring them to a safer environment — a majority of which weren't positioned for addressing these needs.

"There's an opportunity for member service that I think is more broadly recognized now than it was this time a year ago and custody is [similarly] a very important topic," said Rahm McDaniel, head of banking solutions for NYDIG, a bitcoin technology and financial services company in New York, in a panel discussion hosted during the Credit Union National Association's Governmental Affairs Conference on Monday.

Click here to read the full story.

The Federal Reserve announced a cease and desist agreement with Farmington State Bank, a small institution in rural Washington State with ties to the failed crypto exchange FTX.

Stefani Reynolds/Bloomberg

Fed hits FTX-backed Farmington State Bank with cease and desist

Article by Kyle Campbell

Regulators have issued a cease and desist order against a small bank in rural Washington State for its engagement with the crypto industry.

In an enforcement action announced Thursday morning, the Federal Reserve said it has entered into an agreement with Farmington State Bank, a $22 million bank that had received an $11 million investment from Alameda Research, the hedge fund arm of failed crypto exchange FTX.

The enforcement action, which does not cite FTX or Alameda by name, notes that Farmington — a more than 130-year-old institution that briefly changed its name to Moonstone Bank — and its Baltimore-based holding company FBH Corporation, violated commitments to state and federal regulators by engaging in digital asset activity and helping third parties issue stablecoins.

Click here to read the full story.

FTX Co-Founder Sam Bankman-Fried Appears In Court

Stephanie Keith/Bloomberg

What might the Sam Bankman-Fried trial mean for banks?

Podcast by Penny Crosman

The spectacular implosion of the cryptocurrency exchange FTX had repercussions in the banking industry as banks like Silvergate Capital, Farmington State Bank and others that worked with the company were brought down with it.

The trial of FTX CEO Sam Bankman-Fried is bringing to light some of the specific ways the company was mismanaged and perhaps committed fraud as the closely watched trial could affect how cryptocurrency and digital assets are regulated going forward and how much banks are allowed to be involved in this industry going forward.

We have with us today Seoyoung Kim, department chair and associate professor of finance and business analytics at the Levy School of Business at Santa Clara University. Welcome Seoyoung.

Click here to listen to the full episode.

Sam Bankman-Fried, co-founder of FTX Cryptocurrency Derivatives Exchange, leaves court in New York on July 26, 2023.

Yuki Iwamura/Bloomberg

Bankman-Fried found guilty of fraud at FTX criminal trial

Article by Bob Van Voris, Chris Dolmetsch and Yueqi Yang, Bloomberg News

Sam Bankman-Fried was convicted of a massive fraud that led to the collapse of his FTX exchange, following a monthlong trial that pitted the testimony of the former crypto king against that of some of his closest friends.

Bankman-Fried was found guilty of seven counts of fraud and conspiracy after jurors in Manhattan deliberated for less than five hours Thursday. He faces as much as 20 years in prison on each of the most serious charges. Judge Lewis Kaplan set a sentencing date in March.

The verdict is a win for Manhattan U.S. Attorney Damian Williams in the highest-profile criminal prosecution in the crypto world. It also caps a spectacular fall for Bankman-Fried from early 2022 when FTX was valued at $32 billion and celebrities including Tom Brady, Larry David and Steph Curry were paid to urge people to trade digital currency on the platform.

Click here to read the full story.

FTT token down -79%. Crypto crash of FTX's coin. FTT falls, FTX crashes, SBF arrested.

FTX's implosion made it even harder for crypto-related businesses to work with U.S. banks. With the fraud conviction of the company's founder, regulatory clarity may gradually come.

maurice norbert - stock.adobe.com

With the Sam Bankman-Fried trial over, can banks get back into crypto?

Article by Penny Crosman

Before the cryptocurrency exchange FTX collapsed last November, there were four U.S. banks serving cryptocurrency businesses to any significant extent: Silvergate Capital, Signature Bank, Farmington State Bank and Metropolitan Bank.

Now there are none.

In January, New York City-based Metropolitan Bank announced it would "fully exit the crypto-asset related vertical," six days after the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. put out a joint statement on crypto-asset risks to banking organizations. In March, Silvergate Capital and Signature Bank were shut down by regulators. Farmington State Bank shut down in April after receiving a cease-and-desist order from federal regulators.

Click here to read the full story.

Sam Bankman-Fried's defense depicted him as an innovative, inexperienced executive who made some bad business decisions. But he deserved to be convicted "because he misled a lot of ordinary people into placing some of their life savings into FTX under the false promise that their money would always be available for them to withdraw," a former prosecutor says.

Stephanie Keith/Photographer: Stephanie Keith/Bl

Is Sam Bankman-Fried a villain or was he in over his head?

BankThink by Penny Crosman

Sam Bankman-Fried, founder and CEO of the collapsed cryptocurrency exchange FTX, late last week was convicted of all seven counts of fraud, money laundering and conspiracy to commit these crimes. Was he a criminal from the start, or did he get in over his head?

The prosecution painted a picture of a criminal who set out to defraud people.

"He told a story, and he lied to you," prosecutor Nicolas Roos told jurors during closing arguments. "To believe the defendant's story you'd have to ignore all the evidence."

Bankman-Fried's attorney, Mark Cohen, said his client made mistakes, but not with criminal intent.

Click here to read the full story.

Inside the mind of Sam Bankman-Fried

Book review by Miriam Cross

When Sam Bankman-Fried, the former CEO of cryptocurrency exchange FTX, and his employee/sometimes-girlfriend Caroline Ellison decamped to separate living quarters in FTX's tropical compound on the heels of another breakup, hardly any colleagues living on the property noticed. That was because few people were aware of their romantic involvement in the first place.

"People never see what they're not looking for," Bankman-Fried told author Michael Lewis, whose newest book, "Going Infinite: The Rise and Fall of a New Tycoon," chronicles Bankman-Fried's path from high-frequency trader to billionaire CEO before his crypto empire collapsed in November 2022.

The same sentiment could describe how Bankman-Fried escaped deep scrutiny for years, despite allegedly shoveling billions of dollars belonging to FTX customers into his other firm, hedge fund Alameda Research. The crypto exchange founder was celebrated for his advocacy around government regulation and the massive charitable donations he made as an "effective altruist"; now he is facing decades of jail time after he was convicted earlier this month of various criminal charges related to fraud, conspiracy and money laundering.

Click here to read the full story.

One man's cynical crusade to follow the crypto money

Book review by Catherine Leffert

Bloomberg journalist Zeke Faux set out on an oracle-like mission to chronicle the phenomenon of crypto in 2021, around the time bitcoin and ethereum values were at all-time highs. An investigation that began rooted in cynicism and a decade of writing about scams turned into "Number Go Up," a feat that offers readers an accessible, entertaining, infuriating account of crypto's "wild rise and staggering fall."

"Number Go Up" is a crash course into the wild world of crypto that covers a lot of ground, both topically and geographically. Faux, a self-described "Brooklyn dad with a minivan," trekked across four continents on a two-year journey, landing in places like a yacht party in the Bahamas, a shaved ice cart in El Salvador and an art exhibit in Switzerland.

Faux originally hypothesizes that Tether, a crypto company behind an eponymous stablecoin and the backing for much of the crypto world, is fraudulent. Admittedly, Faux doesn't exactly prove it in the book, but "Number Go Up" works hard to tell a clear story about how $2 trillion dollars in the broader crypto industry went poof, and who was responsible. In 2022, prices of cryptocurrencies plummeted as exchanges went bankrupt, investments disappeared and one of the biggest players in the game, FTX, was shown to be fraudulent.

Click here to read the full story.

Wire pickup on SBF's sentencing & crypto loophole

Bankman-Fried, the 32-year-old FTX co-founder, is scheduled to be sentenced on Thursday following his October conviction for his role in the collapse of the cryptocurrency exchange.

Yuki Iwamura/Bloomberg

SBF faces decades in jail as prosecutors plug crypto loophole

Article by Chris Dolmetsch and Greg Farrell, Bloomberg News

In the waning days of 2022, a month after the collapse of FTX, federal prosecutors filed eight charges against Sam Bankman-Fried, the face of the bubble-like crypto industry. Four of them involved wire fraud.

Manhattan U.S. Attorney Damian Williams was able to act quickly because he relied on a law passed in the 1950s, decades before the advent of the internet, email and the world of digital currencies. Wire fraud, which applies when any form of electronic communication is used, has become the weapon of choice to home in on crypto crime as the debate over whether crypto currencies are securities plays out in court.

Prosecutions built around wire fraud as the most serious charge — which include cases against Bankman-Fried and Theranos founder Elizabeth Holmes — have reached an all-time high even as overall white-collar crime cases have dropped. In 2023, prosecutors used wire fraud in more than 1,300 instances, up from about 900 in 2016, according to Department of Justice data compiled by Syracuse University. That corresponds with a flurry of crypto cases last year, including prosecutions linked to the collapse Celsius Network LLC.

Click here to read the full story.