Cryptocurrency made Sam Bankman-Fried a billionaire but also dragged the FTX founder into a whirlwind of legal troubles, facing decades behind bars.
Two years ago, Sam Bankman-Fried (SBF) was a billionaire, living in a $35 million penthouse in the Bahamas, partying with friends while running FTX—one of the world’s largest cryptocurrency exchanges.
Today, at 32, he is an inmate at the Metropolitan Detention Center in Brooklyn, New York. This week, the court will deliver its final verdict on his prison sentence for what prosecutor Damian Williams called “one of the largest financial frauds in U.S. history.” In early March, prosecutors recommended a sentence of 40 to 50 years for SBF.
The Crypto King
The story began in 2017 when Bankman-Fried traded Bitcoin and noticed some unusual price discrepancies on CoinMarketCap. Instead of a uniform price, SBF discovered that Bitcoin prices on different exchanges sometimes varied by up to 60%.
Sam Bankman-Fried, founder of the FTX exchange. Photo: Coindesk
SBF quickly took advantage of the price discrepancies by buying Bitcoin on lower-priced exchanges and selling it on higher-priced ones. He also noticed that Bitcoin prices on South Korean and Japanese exchanges were significantly higher than in other countries. Within a month of entering the market, SBF made a substantial profit and founded Alameda Research, setting up its first office in California, USA. He later revealed to CNBC that some days, he made up to a million dollars through Bitcoin trading.
Following Alameda’s success, in April 2019, Sam Bankman-Fried co-founded FTX. The crypto exchange quickly gained prominence, with its logo appearing on F1 race tracks and Miami basketball games.
By the end of March 2022, Bloomberg estimated the former CEO’s net worth at $25.9 billion. Unlike other crypto billionaires who focused solely on accumulating wealth, SBF actively lobbied for more crypto-friendly regulations and openly expressed his ambition to “dominate the crypto market.”
At his peak, SBF’s image was displayed on outdoor billboards, including Washington D.C.’s Union Station. He hosted lavish parties at his private mansion and traveled by private jet. His extravagant lifestyle and immense influence earned him the nickname “The Crypto King.”
Castle in the Sand
In 2022, FTX was the third-largest cryptocurrency exchange in the world by trading volume, valued at $32 billion, and was a formidable competitor to Binance. When the “crypto winter” hit in mid-2022, Sam Bankman-Fried was hailed as a hero. After the collapse of Luna and TerraUSD, about 15 crypto companies reached out to SBF for loans, including BlockFi and Celsius.
At that time, SBF claimed that he and his company were “immune” to the crypto winter. However, behind the scenes, it was reported that Alameda Research, the hedge fund linked to SBF, was using investors’ money recklessly. A large portion of FTX’s assets was mortgaged through tokens like FTT and Serum, which were illiquid.
In November 2022, CoinDesk reported significant financial holes in FTX and SBF’s operations. On November 7, CZ, the founder of Binance, announced that he would sell all FTT tokens to manage risk after the lessons learned from the Luna collapse. This move immediately shook the entire cryptocurrency market and triggered the downfall of FTX within just 48 hours.
On November 9, 2022, SBF informed investors that if funds weren’t raised, the company would have to file for bankruptcy. FTX was facing a shortfall of up to $8 billion. The 1992-born CEO tried to find financial support to save the exchange but failed. On the same day, Bloomberg reported that FTX and Sam Bankman-Fried were under investigation by regulatory authorities. The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) were investigating whether the company had misused customer deposits.
By November 10, 2022, SBF’s net worth plummeted from $16 billion to under $1 billion— the largest drop ever recorded. The price of the FTT token also fell from $22 to $2.5.
Sam Bankman-Fried exits the federal court in New York on July 26, 2023. Photo: Reuters
FTX filed for bankruptcy on November 11, 2022. Sam Bankman-Fried resigned as CEO and nearly “disappeared” from social media. On December 12, 2022, Bankman-Fried was arrested by the Bahamian authorities and extradited to the U.S. SEC filings revealed that prosecutors and federal regulators accused Bankman-Fried of executing a fraud “from the very beginning.” FTX had over a million creditors, including top tech companies such as Apple, Meta, Netflix, LinkedIn, Adobe, and AWS. The 50 largest creditors alone accounted for approximately $3.1 billion.
In the trial on November 2, 2023, the 12-member jury unanimously agreed that SBF was guilty of all 7 charges in the indictment, including: defrauding customers, conspiracy to defraud customers, defrauding lenders, conspiracy to defraud lenders, conspiracy to defraud securities, conspiracy to defraud commodities, and money laundering.
