King Midas is credited with this phrase, “I want everything I touch to turn into gold.” And that’s how they say it happened. The gold overflowed, to him and around him. This occurred approximately 700 years before Christ. There have been other imitators over the centuries. The latest version, totally fraudulent according to United States justice, responds to the name of Sam Bankman-Fried, who, turning 32, this Thursday received a sentence of 25 years in prison (plus three under supervision) for deceiving clients appropriating their money to lead an existence of luxury and lust. But he can claim victory, the prosecution asked him for three more decades of confinement.
From the 35 million penthouse in the Bahamas, and the falsehood of suffrage for just causes, to the cell of a Brooklyn penitentiary, where he has been preventively for some time, after at the end of 2022 his house of cards collapsed and became volatile. a great fortune, at least 8 billion dollars, but still difficult to quantify as a whole.
Behind SBF, the acronym with which he earned glory and ignominy with his company FTX, is this young financial prodigy, the cover of major magazines, the so-called king of cryptocurrencies (modern representation of Midas) who does not He was more than a lifelong trickster, a contemporary version of those sellers of the elixir of eternal youth who only sought their enrichment at the expense of greed and, also, the naivety of many people.
Its fall caused an earthquake in the digital currency exchange sector and in the banking industry, in addition to ruining quite a few families. “My entire life has been destroyed,” one of Bankman-Fried’s victims wrote to the Department of Justice ahead of the sentencing hearing, held this Thursday on the 26th floor of the Manhattan courthouse, the same one in which a jury He was found guilty last November of seven crimes for orchestrating a multimillion-dollar scam. They only needed three hours of deliberation.
“He had two children, the second born shortly before the fall of FTX. I have lost all my money and my happiness, the ability to get out of bed and the desire to live. “My wife suffers from depression and suicidal outbursts,” that victim insisted in a letter that the prosecutor presented to federal judge Lewis A. Kaplan to reinforce his request for 50 to 60 years in prison, although below the more than 100 that could have been imposed. required. The defense reduced it from five to six years.
The public prosecutor argued that not only the nature of the fraud should be taken into account, but also his high education, which made him very aware of his actions, and the magnitude of the number of victims, without the convict showing any type of remorse. during the oral hearing.
This time, however, before the magistrate he showed an apologetic tone. “I made a series of selfish decisions. A lot of people feel really disappointed,” he lamented. “They built something nice and I threw it away,” he said, alluding to his colleagues at FTX. “This haunts me every day,” he said. And he continued his plea for benevolence: “It has been unbearable to watch all this unfold. The clients do not deserve this pain. I was the director and I was responsible.”
His message seemed to resonate with the judge, who opted for a sentence much lower than that requested, although much higher than that requested by the defense, in addition to the payment of 11,000 million in compensation. But he had harsh words for her. “He knew that what he was doing was wrong and that they were criminal actions,” he said before the sentencing. “He regrets that he made bad bets, but he won’t admit anything,” he continued. “There is a risk that this man will find himself in a position to do something very bad in the future. And it is not a trivial risk at all,” he added.
“With all the advantages offered by a comfortable crib, an MIT education, a prestigious start in finance, and a valuable idea for founding a startup, Bankman-Fried could have pursued altruistic goals,” the prosecutor noted. “But he opted for an existence of incomparable greed and arrogance, a rationalization of risk by making bets with other people’s money,” he concluded.
His lawyers replied that the $10 billion amount of the scam is “an exaggerated figure” and that “the damage to clients, lenders and investors is zero.” To this he added that his patron is “a brilliant and complex human being” and reiterated his leniency to the magistrate for his mental problems, his alleged disinterest in his personal life and the security risk he faces behind bars. .
Bankman-Fried was the founder and CEO of FTX, a cryptocurrency exchange platform from which he was hailed as a titan of the industry and which reached, at least on paper, a net worth of approximately $26 billion.
It all started in 2017. As a mathematician working in the stock market, he discovered something curious when he looked at the price of bitcoin on the CoinMarketCap platform. Instead of a uniform price across all exchanges, he sometimes saw a difference of 60% of the value of the digital currency.
According to his explanation, when he was at the top, his immediate instinct was to get into the arbitrage business, so he bought bitcoins in one trade and sold them based on his observations, pocketing the difference.
After a series of personal forays into the market, Bankman-Fried launched Alameda Research, named after the California county where she had her first office. At times, this firm made a million dollars a day trading bitcoins, he said in an interview on CNBC.
Alameda’s success spurred the launch of FTX in April 2019, an international cryptocurrency exchange that offered customers innovative products, a reliable company, and industry expertise. Its success led to a $2 billion venture fund that boosted other companies.
The FTX logo soon began to appear on numerous events, from Formula One races to the Miami Heat basketball court. Bankman-Fried even talked about one day buying the powerful investment bank Goldman Sachs. His presence was common in Washington and he became a donor to the Democratic Party.
Until the market said enough. The so-called crypto winter of 2022 wiped out hedge funds and lenders across the crypto universe. This was reached after the young magician (nothing here, nothing there) assured that his company was immune, but, behind it, Alameda requested loans to invest in failed digital asset companies to keep the industry afloat.
The precedent is in May of that year, when the fall of the Luna cryptocurrency occurred. This caused a domino effect of falling prices that affected other lenders. Alameda, which had asked for support from companies that went under, collateralized the loans with FTT tokens minted by FTX. The Bankman-Fried empire controlled the vast majority of the currency available, with a small amount of FTT circulating at the time.
Alameda fixed its entire FTT value in the prevailing market despite being a virtually illiquid asset. The fund employed the same methodology with other coins, including Solana and Serum (tokens created and promoted by FTX and Alameda), using them as collateral for billions of dollars in loans.
The fall was irremediable in November 2022 when the crypto trading site CoinDesk published the Alameda figures, with a value much lower than the apparently real one. Clients began to withdraw their stakes in the company. Alameda and FTX ran into a liquidity crisis.
The worst remained. Four days after that article, Changpeng Zhao, founder of Binance, leading cryptocurrency operator and FTX’s first external investor, handed down his verdict. He announced the liquidation of all his remaining FTT holdings of FTX. Bankman-Fried replied in a post that FTX assets were fine and safe. He then deleted that message. On December 12 he was arrested in the Bahamas.
He managed to be placed under house arrest at his parents’ home in California, after paying to guarantee a bail of 250 million in bonds. Shortly afterward they made him return to prison. He was still there this Thursday, when it was proven that he had tried to manipulate witnesses. There he will continue.
