He risked a sentence of more than 100 years in prison for fraud and criminal conspiracy. The American Sam Bankman-Fried was finally sentenced, Thursday, March 28, to 25 years in prison for having embezzled 8 billion dollars from the funds of the clients of FTX, the digital currency exchange platform that he created in May 2019. He appealed the judgment.

Before its spectacular fall, "SBF" nevertheless appeared as the ideal son-in-law of cryptos: defender of better regulation of the virtual currency market, engaged in numerous charitable works, the former billionaire was a courted personality in Washington because of his generous donations to the Democratic Party.

In just a few months, this physics graduate from the prestigious Massachusetts Institute of Technology (MIT) with constantly tousled hair had turned a small start-up into the world's second largest cryptocurrency exchange platform.

Also read: The fall of prodigy Sam Bankman-Fried casts a chill over cryptocurrencies

But behind this facade of respectability, the young prodigy with a fanciful appearance was in reality engaging in fraudulent financial schemes. Sam Bankman-Fried used funds from FTX clients to fund a subsidiary called Alameda Research, in order to make risky investments. The “genius” of cryptocurrencies dipped into the savings of others to speculate for his own account.

At the beginning of November 2022, the specialized media CoinDesk revealed that Alameda Research had converted a good part of its assets into FTT, the cryptocurrency created by FTX. The financial health of FTX was no longer based on cold hard cash but on a virtual currency subject to strong variations. Result: a movement of panic, which collapsed the price of FTT... and the empire of "SBF".

The chaotic management of the company has long been the focus of the world press which, day after day, discovered the extent of the scandal. According to the receiver appointed to manage the company's liquidation, some $8.7 billion vanished, to the dismay of a million customers and a dozen major investors. US prosecutors have called the alleged scheme masterminded by Sam Bankman-Fried "one of the largest financial frauds in American history."

Prosecution witnesses

The trial which opened in October 2023 was based on millions of pages of evidence, but also testimonies from Sam Bankman-Fried's former partners, including that of his ex-girlfriend, former managing director of Alameda Research , Caroline Ellison.

Described as a group of retarded adolescents, living in community in a luxury residence in the Bahamas where the destiny of FTX was written, the first circle of "SBF" quickly turned their back on their former boss to collaborate with the American justice and hope to escape heavy prison sentences.

Several damning testimonies for Sam Bankman-Fried have been heard in recent weeks, including those from Gary Wang, co-founder and chief technology officer of FTX, Nishad Singh, the chief technology officer, and Ryan Salame, the former chief customer officer. All recognized illegal transfers of funds and pointed the responsibility to “SBF”.

Read alsoFTX scandal: the Who's who of the incredible debacle in the kingdom of cryptocurrencies

In addition to the mountain of evidence accumulated by the prosecution and the testimonies of his four former lieutenants, “SBF” had also irritated the justice system before his trial by violating the conditions of his bail.

At the end of December 2022, the fallen crypto hero was released on a gigantic bail of $250 million. But seven months later, a federal judge accused him of sending messages from his parents' house where he was under house arrest to former FTX employees, including Ryne Miller, the former lawyer for FTX US, or even for having used a VPN, which his judicial control prohibited. “SBF” also sent extracts from Caroline Ellison’s diary to the New York Times. A maneuver, according to American justice, to intimidate this key witness and tilt media coverage in his favor.

“Rotten Apple”

The trial of the former FTX boss represented a pivotal moment for the world of cryptocurrencies, which is struggling to recover from the shock wave generated by the fall of this respected figure. Several companies with significant exposure to FTX were dragged into its downfall while other players in the sector suffered from the crisis of confidence that resulted from the scandal.

Read alsoCryptocurrencies at half mast: investors on the verge of a nervous breakdown

“The industry now wants to paint SBF as a bad apple, but the implosion of FTX has exposed many of the problems endemic to the entire cryptocurrency industry,” explained Hilary Allen, professor of law at American University, interviewed by the Financial Times.

“Many of them were Ponzi schemes,” confirmed lawyer Erica Stanford to AFP, referring to pyramid investment schemes designed to defraud consumers through the lure of quick profit.

The SBF trial also represented a first major test for American authorities in their efforts to bring order to a still poorly regulated sector.

See also FTX bankruptcy: should the crypto sector be regulated?

Most cryptocurrencies, including bitcoin, the most popular unit in the world, are based on "blockchain", a decentralized information storage and transmission technology, which therefore tends to operate off the radar of financial policemen .

Several regulatory texts are being developed in the American Congress, but none has yet been put to a vote, in a context of strong divisions between Republicans and Democrats, which complicates hopes of compromise. Ahead in the field, the European Union has for its part agreed on a regulatory project (MiCA), which requires platforms to be more transparent and rigorous.

With AFP

This article was published on October 2

, 2023 and updated on March 29

, 2024. The original can be found here.

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