During Sam Bankman-Fried’s monthlong fraud trial, prosecutors presented damning evidence that the fallen crypto founder knew full well what he was doing from the beginning. He knew that Alameda Research borrowed billions in customer funds from FTX. He knew his fellow executives fabricated balance sheets to send to lenders. He knew FTX wasn’t fine when he told customers it was.
In cryptoland, the response to these revelations was largely to condemn Bankman-Fried and FTX as an aberration. When the truth about FTX came out, Binance CEO Changpeng “CZ” Zhao slammed Bankman-Fried, saying he “lied to everyone.” Similarly, Coinbase CEO Brian Armstrong wrote on X (formerly Twitter) that “even the most gullible person should not believe Sam’s claim” that the missing funds stemmed from an accounting error.
But as Bankman-Fried awaits sentencing after being convicted on seven criminal counts, including wire fraud, the rest of the industry has been left to take stock of its future. FTX may have been one of the most brazen fraud operations in recent years, but it’s far from the only embarrassing crypto collapse. While some of the decisions Bankman-Fried made might have been unique to FTX, it’s one of the multiple cases where no one on the outside caught on until it was too late — and in the wake of Bankman-Fried’s trial, it may take work to convince the public he was an outlier.
Before his fall, Bankman-Fried was a poster child for an upstart industry. The 31-year-old power broker maintained the scruffy, somewhat quirky appearance of the kid in your computer science class that you would probably ask for help. (This particular look, according to his ex-girlfriend and former Alameda CEO, Caroline Ellison, was carefully crafted.) He became crypto’s golden boy, appearing on the cover of Fortune magazine and getting profiled in Forbes. He testified about his operation’s safety in front of Congress. While other firms collapsed last year, FTX appeared strong, with Bankman-Fried inviting comparisons to JP Morgan while bailing out other struggling firms.
Some media outlets continued to burnish his representation even after FTX crashed and burned. The Washington Post highlighted Bankman-Fried’s contributions to pandemic research (some of which apparently came from customer funds). Then, The Wall Street Journal focused on how Bankman-Fried’s “Plans to Save the World Went Down in Flames” and said FTX’s collapse “wiped out his wealth and ambitious philanthropic endeavors.” (The ambitions of FTX customers were presumably not headline material.) The information we know now lets us see past that persona — but it also gives the crypto-curious a lot to chew on.
Other crypto companies seem to think that picking out the one bad apple…