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The Impact of Sam Bankman-Fried’s Conviction

Author: Syedur Rahman  3 November 2023
2 min read

With the founder of the collapsed crypto exchange FTX being found guilty of fraud, Syed Rahman considers the likely effect of the verdict.

A US jury having found Sam Bankman-Fried guilty of two counts of fraud and five of conspiracy is the latest stage in his well-publicised fall from grace. But it will have implications for the crypto sector as a whole.

The 31-year-old founder of the FTX crypto exchange has been held to account for one of the biggest-ever financial frauds. Prosecutors made the case that he had taken $8 billion from FTX’s users.

The verdict came just under a year after FTX filed for bankruptcy and Bankman-Fried’s estimated $26 billion personal fortune was erased. He will be sentenced in March next year – the same month he goes on trial on a second set of charges.

This is a landmark case for the crypto industry – and not in a good way. There will be many who will now equate crypto with the activities of FTX and, as a result, will want little or nothing to do with the sector.

In simple terms, the FTX case will lead many to distance themselves from the industry. Many current or potential retail investors in crypto will, at the very least, think twice about being involved in a sector that has produced such a large, high-profile scandal.

One point that hits home for many is that FTX was, at its peak, the second-largest crypto exchange in the world. For many potential investors, it brings into question who they can actually trust with their assets - if even the most high-profile and well-established firms are operated by fraudulent individuals.

But it should be emphasised that this was a case about criminality – not the technology. This was a trial of one individual rather than the whole crypto sector. The focus should be on the person who committed the wrongdoing.

The case does lead to questions being raised and doubts expressed about the practices of the crypto industry as a whole. But there is a lot about this industry that is not clear to the public.

What is clear is that the jury took nearly five hours to find Sam Bankman-Fried guilty on all seven counts. This was one of the biggest frauds in US history and a relatively complex matter – and yet the jury came to their conclusions rather quickly.

Sam Bankman-Fried’s conviction does highlight the importance of due diligence in the cryptocurrency space. The involvement that he had with prominent figures in Wall Street emphasises the need for vigilance, even among seasoned professionals.

This was a case that serves as a stark reminder that even those well-versed in the industry can succumb to hype and misinformation.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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