Sam Bankman-Fried tried to pin his fraud scheme on his closest friends. Then they turned on him for it.

Loading Something is loading.

Thanks for signing up!

Access your favorite topics in a personalized feed while you’re on the go. download the app

If you throw your friends under the bus, can you really be surprised if they do the same to you when they get the chance?

That’s a question for Sam Bankman-Fried, the former cryptocurrency mogul who claimed ignorance after his crypto exchange, FTX, collapsed a year ago. He tried to blame some of his executives who ended up testifying against him in his federal trial, but his tale quickly became too messy for him to dig himself out.

One by one, his friends flipped to work with the prosecution and threw Bankman-Fried under a much bigger bus. That’s how a jury found him guilty of seven counts in his federal fraud trial in downtown Manhattan on Thursday evening.

Prosecutors successfully proved to the jury that Bankman-Fried funneled money from unknowing customers on his cryptocurrency exchange to another firm he owned before using the funds on lavish real estate, political donations, and other investments, ultimately losing billions of customer funds.

The highly anticipated trial drew throngs of people to the courthouse, but a conviction was largely expected. With a witness list stacked with Bankman-Fried’s former executives, the tables had turned on the former billionaire well before the trial began.

And it’s Bankman-Fried’s fault. While he rose to fame and fortune in the crypto world, he planted the seeds of his downfall when he made his closest friends complicit in his fraud scheme.

In the end, they had the last word.

Bankman-Fried was not a ‘figurehead CEO’

It was a difficult sell to onlookers, and likely the jury as well, that Bankman-Fried was acting in good faith when he lost billions in FTX customer deposits while his closest friends pointed their fingers at him as the ringleader of a fraud scheme.

The defense also tried to argue that their client, nicknamed SBF, simply didn’t know Alameda was using customer funds and took a backseat in decisions about FTX’s code that allowed it to happen. Always PR-conscious, Bankman-Fried made the argument himself in a slew of media interviews after FTX collapsed in November 2022.

The prosecution said Bankman-Fried had lied on the stand when he claimed ignorance of the crimes and weaved his testimony around that of his top three executives who spoke before him.

“You would have to believe that the defendant – who graduated from MIT, who ran two billion-dollar companies, and who was testifying before Congress – was actually clueless, and he had no idea what was happening at his own company, and he had no idea what he was doing was wrong,” assistant US attorney Nicolas Roos said during closing statements.

Sam Bankman-Fried. Angela Weiss/AFP via Getty Images

Bankman-Fried had the topmost titles at FTX — his exchange where he was CEO, co-founder, and majority owner — and Alameda, the crypto trading firm he co-founded and was CEO of before FTX was born. He owned 90% of the firm and was the chairman and sole member of its board until November 2022, when both companies filed for bankruptcy.

And despite his claims, Bankman-Fried was a decision-maker and not a “figurehead CEO” to his colleagues, said Jim Angel, a faculty affiliate at Georgetown University’s Psaros Center to Financial Markets and Policy.

“He was the guy in charge. He was calling the shots. He was closely involved in the operations,” Angel told Insider. “So it’s real hard for SBF, I think, to wiggle out of this.”

At various points in the trial, the defense blamed Caroline Ellison, the co-CEO and later sole CEO of Alameda appointed by Bankman-Fried. The defense later called into question testimony by CTO Gary Wang and engineering director Nishad Singh, who both testified Bankman-Fried directed them to make changes in FTX’s code that gave Alameda certain benefits over other customers on the exchange.

Bankman-Fried never disclosed those advantages to customers, investors, regulators, or Congress. Instead, he repeatedly insisted that FTX and Alameda were entirely separate and that the latter didn’t have any special perks, much less that it had access to FTX customers’ money.

Singh, for example, testified he was “blindsided and horrified” when he found out in November that Alameda had used FTX customer money.

“I felt really betrayed,” Singh said, “that five years of blood, sweat, and tears from me and so many employees, driving towards something that I thought was a beautiful force for good, had turned out to be so evil.”

Ellison testified: “Sam directed me to commit these crimes.”

Caroline Ellison testified for two days at the criminal trial of SBF. Eduardo Munoz Alvarez

The defense tried to paint a different picture. Ellison, Wang, and Singh — along with the prosecutors in the case — cast Bankman-Fried as a monstrous villain, defense attorney Mark Cohen said. He added that the trio of co-conspirators had their own culpability, repeatedly reminding the jury that they secured cooperation agreements with the government.

“They wrote him into this movie as a villain, a bad guy, directing others, who apparently had no free will of their own, to steal billions of dollars,” Cohen said of Bankman-Fried during closing statements.

“That depiction of him made no sense in the real world, especially coming from these witnesses who were his closest friends, who knew him for years, who had gone to camp with him, to college, who had lived together with him, who’d worked with him for years, starting two businesses, who traveled with him and moved all over the world with him,” he added. “That’s a lot to do with someone you’re now coming forward and saying is so terrible.”

A fourth witness, an FTX developer named Adam Yedidia, testified under the condition of immunity, saying he feared he had “unwittingly written code that contributed to the commission of a crime.” A fifth, FTX corporate counsel Can Sun, testified that Bankman-Fried was “not surprised at all” when Sun told him there was no legal defense for taking customer funds – deflating Bankman-Fried’s claim that he had attorneys look over legal documents and thought everything was OK.

The defense team, Angel said, was trying to “blame everyone but their client,” but the co-conspirators’ cooperation agreements do little to detract from Bankman-Fried’s culpability.

“They can always make the argument that, ‘Well, they’re just trying to save their own skins by ratting out their boss.’ But the reality is he was their boss, and they’re all very knowledgeable,” Angel said. “These people were literally living together, sleeping together, and operating everything together. It’s pretty hard for SBF to make the case that, ‘Well, they did it.'”

The personal relationships and entanglements made the betrayal by Bankman-Fried that much more damning and set the stage for it to boomerang back to him.

Bankman-Fried knew Wang and Yedidia from MIT; Singh was a family friend; Ellison was his on-again-off-again girlfriend he met at his first job out of college. They testified to respecting Bankman-Fried and trusting his judgment. When they thought his instructions were questionable (or unethical, or illegal), they may have pushed back, but said they ultimately placed their faith in his seemingly reasonable explanations.

Chelsea Jia Feng/Insider

Now, Wang, Ellison, and Singh have pleaded guilty to felonies and are awaiting their sentences after they cooperated in this trial. While Bankman-Fried faces over a century in prison, the co-conspirators could potentially dodge prison time altogether.

Lead prosecutor Danielle Sassoon said that Bankman-Fried thought he could “get away with it.”

“He didn’t bargain for his three loyal deputies taking that stand and telling you the truth, that he was the one with the plan, the motive, and the greed to raid FTX customer deposits, billions and billions of dollars to give himself money, power, influence,” she said in her closing argument. “He thought the rules did not apply to him.”

Bankman-Fried tried to flip the script but couldn’t ‘recall’ key details

After hearing his ex-friends testify, Bankman-Fried made the risky move to take the stand himself to tell his version of the story. He was polished when questioned by his own attorney, saying he should’ve prioritized risk management more than he did.

But he became a “different person” on cross-examination and “couldn’t remember a single detail about his company or what he said publicly,” Assistant US Attorney Roos said.

Bankman-Fried claimed he couldn’t recall details over 140 times, the prosecutor added.

The jury likely saw through Bankman-Fried’s claims of ignorance and selective amnesia, Angel said.

“When somebody does the ‘I cannot recall’ over and over again, it sure sounds fishy,” he told Insider.

Perhaps Bankman-Fried “got in over his head” with the fraud scheme, but it doesn’t change the outcome that some $8 billion customer funds are gone, Angel added.

“In a lot of these white collar cases, that’s part of what happens, that people start off, they get into a little trouble and say, ‘Oh, I’ll just borrow a little bit here, and I won’t tell people I’m borrowing their money from them. So in other words, I start stealing the money intending to make it up, and I’ll give it back,'” Angel said.

“Well, when you lie over and over again about the fact that you’re using other people’s money without their permission, I got bad news for SBF, that’s fraud,” he added.

As for the impacts on the industry at large, Angel says, Bankman-Fried’s conviction comes amid a timely cleanup effort.

“It certainly looks bad for Sam, no doubt about it, but I think it is a good cleansing for the crypto industry,” Angel said. “It shows that the sheriff is riding into town and trying to clean up the mess.”

After a month-long trial, it took the jury four hours to convict Bankman-Fried on all seven counts.

A sentencing hearing will be scheduled to decide how many years he spends in prison. If given the max on each count, it would be the rest of his natural life.

The sentencing schedule may depend on a second criminal trial Bankman-Fried faces for alleged illegal campaign contributions. That trial is scheduled for March 2024.