FTX Trading Founder Sam Bankman: Fried or Freed?

Sam Bankman-Fried was an American success story. The now-31-year-old wunderkind was just 27 when he started FTX Trading, Ltd., in 2019. It only took him two years to grow the business from a no-name enterprise to the third-largest cryptocurrency exchange in the world. More than a million users traded crypto on FTX’s exchange at its peak, and its associated hedge fund did brisk business. It earned an estimated valuation of about $32 billion after a slew of acquisitions and funding rounds. It was truly impressive.

And then it all fell apart.

Why? Sam and company weren’t the honest operators they pretended to be. The saga of FTX’s fall is too long and complicated to spell out in full detail here, but it was spectacular. FTX ultimately went bankrupt, leaving its clients and investors to wonder if they’d ever get their money back. As for Bankman-Fried? He was indicted on a laundry list of financial crimes — 13 of them, to be exact.

Bankman's Lucky 13 Legal Woes

Federal prosecutors have accused Bankman-Fried of 13 counts of securities fraud, securities fraud conspiracy, money laundering, campaign finance violations, wire fraud, wire fraud conspiracy, bribery, and generally being a complete jerk. Eight of these counts were levied in his first indictment, with five more being added after he was extradited from the Bahamas.

The initial indictment concerned an alleged scheme that Bankman-Fried conducted to defraud FTX’s customers by misappropriating their deposits. He was also accused of defrauding lenders to Alameda Research (his hedge fund, another in the Fried family of flim-flams) by providing them with false and misleading information about the fund and its finances. To put the icing on the cake, he also allegedly concealed the money he’d made by committing wire fraud.

The later charges were more political in nature. Four of the five charges came in February 2023, and all concerned an alleged spree of illegal political donations made by and on behalf of Bankman-Fried. The more than 300 sizable donations were illegal because Bankman-Fried allegedly used corporate funds and a squad of "straw donors" to get around campaign contribution limits. Prosecutors allege that he spread his donations across both major parties, intending to sway candidates and legislators to support laws that would benefit FTX and his other endeavors.

The final charge of foreign bribery was added to the list in March 2023. Federal prosecutors allege that Bankman-Fried attempted to convince Chinese officials to unfreeze accounts belonging to Alameda Research through a $40 million bribe. Bankman-Fried didn’t make the payments himself; he allegedly directed his subordinates to make surreptitious cryptocurrency transfers to the officials. But for legal purposes, that doesn’t matter when a paper trail shows Bankman-Fried giving the orders.

Sam I Am (Screwed)

Bankman-Fried recently lost an appeal to have the bulk of the charges against him thrown out. The five campaign finance violations and the foreign bribery charge have been punted to be tried sometime next year. The trial for the original eight charges will begin in early October 2023. We’ll have to wait until at least then to see if the U.S. justice system will work as intended or let another rich white-collar criminal walk free.  

Related Resources:

• Will FTX Clients Get Their Money Back? (FindLaw's Law and Daily Life blog)
• U.S. Federal Campaign Finance Laws (FindLaw's Learn About the Law)
• Money Laundering (FindLaw's Learn About the Law)