He was considered a child prodigy and was the star of the crypto scene: Sam Bankman-Fried aka SBF amassed a fortune of $15 billion in cryptocurrencies in just three years – and lost it all again. In just one week. Now SBF has to go to prison. The 31-year-old will be on trial in New York from October 2 on charges of “fraud of epic proportions” and money laundering.
The crypto billionaire was under house arrest with an electronic ankle bracelet before the judge in New York announced his decision to remand SBF on Friday. However, the court now accuses him of having influenced the proceedings from his house arrest in California. At least twice he is said to have tried to influence important witnesses at the trial.
SBF wanted to “hurt, discredit and scare” the key witness
The first time in January: SBF is said to have suggested via signal messages to the chief lawyer of its insolvent crypto exchange FTX that they keep each other informed and coordinated during the investigation.
The second influence is said to have taken place at the end of July, when he is said to have leaked excerpts from Caroline Ellison’s diary to the “New York Times”. Ellison is his ex-girlfriend and the prosecution’s key witness. By releasing the diary excerpts, the defendant intended to “hurt, discredit and frighten Ellison,” the judge said.
From billionaire crypto superstar to inmate
Sam Bankman-Fried’s journey from crypto superstar to prison inmate began in California in 2017. There he dealt intensively with cryptocurrencies and began to trade. However, this was only possible to a limited extent via the then established trading platforms Coinbase and Binance. Two years later, SBF launched its own platform: FTX.
FTX grew rapidly and ranked third among cryptocurrency exchanges during the Corona period behind Coinbase and Binance. The combination of trading platform, trading company and its own cryptocurrency made SBF rich. The financial magazine “Forbes” estimated his fortune at $ 26.5 billion. But all of that is history.
The free fall of FTX and SBF began last fall. At that time, the Bitcoin price fell rapidly. Many companies in the industry went bankrupt. And the rumor mill also began to boil over FTX. At that time it was said that FTX was on the verge of bankruptcy. Investors and customers tried to save what could be saved and withdrew their deposits. Finally, in November, it turned out that there was a hole of eight billion dollars in the FTX balance sheet. In addition, speculation had been made with customer funds on the crypto markets. Bankman-Fried was subsequently charged with fraud and embezzlement.
“A house of cards built on shenanigans”
“We accuse Sam Bankman-Fried of building a house of cards on hoaxes,” said SEC chief Gary Gensler at the time. On December 12, 2022, he was arrested at the instigation of the US judicial authorities in the Bahamas, where FTX was based, and extradited to the United States. Initially, SBF was under house arrest – until last Friday.
Judge Lewis Kaplan ruled out bail and ordered Bankman-Fried to leave his California home and go to prison in Brooklyn, New York. The bail was $250 million. “He pushed the limits over and over again,” Kaplan said, also declining a defense request to stay SBF’s detention pending an appeal of the verdict. After the hearing, he was taken away in handcuffs, the New York Times reported.
Whether and when the defrauded can hope for compensation will become apparent in the course of the process. According to the bankruptcy trustees in the Bahamas, FTX had 2.4 million customers outside the United States. Thousands of them also in Germany. The trial of the crypto prodigy is considered the largest in the industry before a US court.