Well, it's over. Sam Bankman-Fried has been convicted on all seven counts, with another trial on the docket for this spring to gauge SBF's guilt and responsibility in a multi-year scheme to buy political favor for the FTX crypto exchange. At this point, Bankman-Fried faces up to 115 years in prison, though sentencing won't happen for months.
For many crypto fans, SBF's conviction is the first of many that need to happen to rid the industry of bad actors, scammers and thieves that captured the public imagination and defined what this technology fundamentally is during the 2020-21 bull run. Over the long term, it's entirely possible crypto polishes off the tarnish.
Of course, SBF can appeal the decision and angle for a mistrial, arguing he didn't have adequate access to ADHD medication, his legal team (after being remanded into jail for repeatedly violating the terms of his bail) and, maybe, that District Judge Lewis Kaplan was heavy-handed in his oversight of the trial.
But legal experts largely agree those claims are groundless, and that the former Boy Wonder is likely to spend the next few decades in prison. Bankman-Fried took a gamble that he could use customer and investor funds for essentially anything he wanted at the moment, illegally, and get away with it.
The jury's complete, quick and decisive ruling is clear: Bankman-Fried lost that wager. But who or what, if anyone or anything, will come out ahead at the end of this trial? While prison time is a type of retribution for tens of thousands of victims of SBF, it will not exactly make anyone whole or eliminate the stink of the biggest public spectacle that has haunted crypto for the past year.
First, we should talk about the losers.
Sam Bankman-Fried: SBF was convicted on all counts of wire fraud as well as conspiracy charges to commit wire fraud, securities fraud, commodities fraud and money laundering. During the trial it came to light he had essentially founded FTX as a new source of capital for his hedge fund, Alameda Research, which was a money-losing operation while SBF was the helm and while he pretended he wasn't. SBF's scheme to pilfer money from FTX users and his Wall Street and venture capitalist backers to buy luxury property, political favor and FTX equity from rival Binance as well as finance venture investments unraveled, taking the MIT graduate down with it. Worse, Bankman-Fried, while at times admitting he "messed up," was never exactly contrite and fought the damning accusations until the end, perhaps thinking he could get away with it all, one last time.
The SBF Family: SBF's father, Joseph Bankman, a Stanford law professor and tax expert, was involved in FTX from the early days. He helped SBF spin up shell companies, advised on tax decisions and angled for a raise for his efforts. In trial testimony from SBF's inner circle (i.e. Caroline Ellison, Gary Wang and Nishad Singh) as well as court documents, Bankman's name came up time and again. He was present in recovered Signal chat groups, including some of the most pivotal communications between FTX operators as the exchange was failing and SBF's meeting with Bahamian regulators — moments when SBF could have come clean. Bankman recommended they hire Dan Friedberg, FTX's "fixer," who SBF later tried to blame for his own failings in a terminal "advice-of-counsel" defense.
SBF's parents are thought to have partially financed their son's criminal defense, and put their family home up as bail collateral. While it's not yet clear whether they are fully implicated in this multi-million dollar fraud, they are being sued by the FTX bankruptcy estate. Barbara Fried, the founder of a political action committee that Sam funded, in part using customer funds, was previously best known for her offbeat views on justice and blame, which seem to have influenced Sam's own skewed sense of morality. It's likely both of their distinguished careers are over. Finally, Gabe Bankman-Fried, the younger son, will likely be overshadowed by his brother's crimes. While not an FTX employee, Gabe ran a pandemic-prevention nonprofit financed by Sam's "charitable giving" and apparently harbored equally grandiose ideas about spending other peoples' money better than they could — at one time entertaining the thought of buying a private island.
Effective Altruism: Although the U.S. Department of Justice lobbied successfully to keep the idea that SBF had "good intentions" out of court, arguing his charitable donations and image as a selfless billionaire would confuse the jury (and were, SBF disclosed, essentially lies), SBF has become synonymous with the effective altruism cause. The EA movement was both SBF's ethical framework and recruiting ground. Coalescing during the latter half of the 2000s as a branch of utilitarianism, EA can be summed up as "earn to give." It advocates for high-achieving individuals to pursue careers that enable them to "maximize their impact," and could be interpreted as condoning crime if it ultimately leads to a better outcome. Adherents also tend to be "rationalists," believing that outcomes can be weighed in advance by calculating the "expected value" of particular decisions. SBF, for instance, refused haircuts because his nonchalant brand supposedly helped him raise funds. Whether SBF is representative of EA, his conviction will indefinitely tarnish the movement, which is now known more for the fringe beliefs it incubated (like trying to prevent an AI apocalypse) than, say, delivering mosquito nets around the world. Author Zeke Faux referred to it as a philosophy where believers pretend they are superheroes.
Sequoia, and VCs in general: Yesterday, hours after SBF was convicted, Alfred Lin, a partner at VC firm Sequoia Capital and former chief operating officer of Zappos, posted that the company which had invested nearly a quarter billion dollars into FTX, was "deliberately misled and lied to." He came to this conclusion after an "extensive review" of Sequioa's due diligence processes over the course of its 18-month relationship with Sam Bankman-Fried, apparently without understanding that, ironically, "due diligence" is supposed to find fraud. Sequoia published an infamous hagiography of SBF at his peak – including details that the FTX CEO was playing "League of Legends" during his pitch meeting and had plans for FTX to become an "everything app" where users could buy anything from stocks to a banana – based on the idea of that he could have become the world's first "trillionaire." The VC firm has since written down its investment to $0. While Sequoia has come out looking more foolish than most, the company also stands as an indictment of venture capitalism and the prevalent practice of "pattern matching." Often when investing in upstarts, there is little information to go on — and so VCs, whether they admit this to themselves or not, go by gut. This is how the world ended up with Adam Neumann, Elizabeth Holmes and Sam Bankman-Fried...
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–D.K.
@danielgkuhn
daniel@coindesk.com
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