Discover more from Jacob Silverman
Sam Bankman-Fried did it. So did some others.
Sam Bankman-Fried was convicted last week on seven charges of securities fraud, commodities fraud, conspiracy, money laundering — a Whitman’s sampler of financial crimes. He didn’t break “crypto law”; he committed serious and very recognizable crimes that harmed a lot of everyday people (and some very annoying, powerful people who will be fine).
The verdict was handed down 366 days after Coindesk published a leaked Alameda Research balance sheet, which eventually led to a run on FTX deposits. Customers withdrew their funds until FTX had to put a stop on redemptions and admit that a lot of the money simply wasn’t there. In the just-completed trial, we learned that the portentous balance sheet was a fake concocted by Alameda CEO Caroline Ellison at the behest of Sam Bankman-Fried. It was one of seven fake balance sheets she created, some of which were then sent to lenders. At the time, Alameda Research was dependent on two streams of revenue: stealing money from FTX customer accounts and marking up the value of its FTT holdings — a token that FTX created — using it as collateral to get billions of dollars in open-term loans. The doctored balance sheets helped.
It’s remarkable that a fake document — one that showed a rosier picture of Alameda’s finances — would be deemed acceptable enough to send to wildcat crypto lenders but, when leaked, would cause a panic among ordinary retail investors. It shows the vast gulf between what was considered acceptable inside Alameda/FTX (and for lenders), and what made journalists, crypto degens, retail traders, and CZ start laughing into their collars. Bankman-Fried was $9 billion in the hole but seemingly didn’t care. He showed an inexhaustible tolerance for risk — “risk neutral,” as he told Ellison — which in practice translated into bad judgment, greed, reckless behavior, and an insatiable appetite for money and expensive baubles, like AI startups, politicians, and Bitcoin mines in Kazakhstan.
It’s not over. Bankman-Fried’s run as a crypto mogul lasted less than five years, but he might be in legal proceedings, and perhaps in federal prison, for the rest of his natural life. A second trial is scheduled for March 2024, the same month as his sentencing for this first trial, and that’s when you may hear about a $150 million bribe allegedly paid to Chinese officials or a wide-ranging political influence operation that poured tens of millions of dollars into Congress and broke some laws in the process. The bankruptcy and the civil suits are their own beasts, leviathans of litigation that’ll get white-shoe lawyers paaaaiiiiddd while returning a few bucks, but not enough, to victims’ pockets.
I was at the courthouse for much of the Bankman-Fried trial and followed the case closely. I’ve written a lot about it and will almost certainly write some more, though it would be nice to report on a different sociopath for a bit. Below are some links to recent articles and podcast episodes I’ve done about Bankman-Fried, Alameda/FTX, and the larger network of crypto hustlers and money launderers of which they were one part. Bankman-Fried also appears in the book I wrote with Ben McKenzie, Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud. And I’ve appeared on a bunch of podcasts and shows that you might be able to find on YouTube.
Thanks for tuning in. More to come.
The Naked Emperor Podcast, CBC
Blowing Up the Crypto Cartel, The Baffler
The Coming Trials of Sam Bankman-Fried, Substack
The Journalist and the Fraudster, Air Mail
Lies All the Way Down, Air Mail
Lies All the Way Down: Part II, Air Mail
The SBF Verdict and Crypto’s Unindicted Scam Network, The Nation