The Times Australia
The Times World News

.

Sam Bankman-Fried convicted for massive FTX fraud, in stark reminder of risks of crypto trading

  • Written by John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of Canberra

It is not just crypto tokens that have spectacular downfalls. So can crypto personalities.

Sam Bankman-Fried founded FTX, one of the world’s largest exchanges for so-called cryptocurrencies, which collapsed last year owing billions of dollars. Now he has gone from being hailed as potentially the world’s first trillionaire[1] to a lengthy term in prison.

After a month-long trial, a New York jury took less than five hours to find him guilty[2] on seven counts of fraud and money laundering.

Bankman-Fried’s conviction highlights the risks of crypto markets, where people trade tokens with no fundamental value via hugely complex and poorly regulated financial machinery.

The Australian government is currently considering how to protect consumers in such markets. Treasury has commenced a consultation process[3]. But it will not be an easy task when so much of the activity occurs overseas or in cyberspace.

FTX was not fine

Bankman-Fried chose to testify in his own defence. But he failed to convince the jury he was merely a maths nerd[4] with a poor memory who was unaware of what his friends and colleagues were doing with the companies in which he was the largest stakeholder.

In FTX’s final days, as concerned customers started withdrawing their deposits, Bankman-Fried tweeted “FTX is fine. Assets are fine[5]”. It appears the jury did not accept he truly believed this at the time.

A dishevelled man is escorted through a doorway.
Sam Bankman-Fried was extradited from the Bahamas to face trial in the United States. Rebecca Blackwell / AP[6]

The verdict is a salutary warning about the dangers of unregulated financial markets such as crypto. As the former chair of the United Kingdom’s Financial Conduct Authority put it, fraud is “a feature, not a bug[7]” for much of the industry.

Crypto tokens such as Bitcoin have no underlying assets to give them some fundamental value. They only generate a return if the owner can sell at a higher price, to someone who expects the price to go even higher. This makes them one of the purest examples of a speculative bubble.

Read more: Almost no one uses Bitcoin as currency, new data proves. It's actually more like gambling[8]

No government

One of the ironies of the crypto market is that cryptocurrency is sold as a way to avoid having to trust governments or banks, as one does with traditional currency. But in practice, crypto trading often relies on trusting individuals – some of them charlatans such as Bankman-Fried.

Punters thought they could trust FTX to mind their funds for them while they switched between speculative crypto tokens such as Bitcoin and Dogecoin. They were not investing in FTX, or even lending their money to it.

Read more: The spectacular collapse of a $30 billion crypto exchange should come as no surprise[9]

But instead of letting customers’ funds sit around waiting to be withdrawn, FTX transferred a lot of them to another company, Alameda Research. This was an investment fund, poorly run by Bankman-Fried and his cronies.

It is still not clear what happened to all the missing billions. Some of the money was frittered away on extravagant living. Some went to pay celebrities for advertisements and endorsements, such as the famous Super Bowl clip starring comedian Larry David. At least David can say he was warning people against “getting into crypto”.

Some of the missing cash went on large political donations. Much was lost on poor bets by Alameda which failed to hedge against the risk that the price of crypto tokens could quickly plummet.

FTX was essentially a casino. But Bankman-Fried both owned the casino and was gambling in it – and gambling with other people’s chips.

Prison looms

Bankman-Fried is still proclaiming his innocence[10]. But he looks likely to be in prison for decades.

He will find out how long on March 28 2024. It could be more than a century[11] if he receives the maximum penalty on all the counts on which he has been convicted. And he may yet face further charges.

Read more: Fallen crypto king Sam Bankman-Fried was 'perfectly positioned to make a religion of himself'[12]

Read more https://theconversation.com/sam-bankman-fried-convicted-for-massive-ftx-fraud-in-stark-reminder-of-risks-of-crypto-trading-216991

Times Magazine

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Decline of Hyper-Casual: How Mid-Core Mobile Games Took Over in 2025

In recent years, the mobile gaming landscape has undergone a significant transformation, with mid-core mobile games emerging as the dominant force in app stores by 2025. This shift is underpinned by changing user habits and evolving monetization tr...

Understanding ITIL 4 and PRINCE2 Project Management Synergy

Key Highlights ITIL 4 focuses on IT service management, emphasising continual improvement and value creation through modern digital transformation approaches. PRINCE2 project management supports systematic planning and execution of projects wit...

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

From Beach Bops to Alpine Anthems: Your Sonos Survival Guide for a Long Weekend Escape

Alright, fellow adventurers and relaxation enthusiasts! So, you've packed your bags, charged your devices, and mentally prepared for that glorious King's Birthday long weekend. But hold on, are you really ready? Because a true long weekend warrior kn...

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Times Features

Tricia Paoluccio designer to the stars

The Case for Nuturing Creativity in the Classroom, and in our Lives I am an actress and an artist who has had the privilege of sharing my work across many countries, touring my ...

Duke of Dural to Get Rooftop Bar as New Owners Invest in Venue Upgrade

The Duke of Dural, in Sydney’s north-west, is set for a major uplift under new ownership, following its acquisition by hospitality group Good Beer Company this week. Led by resp...

Prefab’s Second Life: Why Australia’s Backyard Boom Needs a Circular Makeover

The humble granny flat is being reimagined not just as a fix for housing shortages, but as a cornerstone of circular, factory-built architecture. But are our systems ready to s...

Melbourne’s Burglary Boom: Break-Ins Surge Nearly 25%

Victorian homeowners are being warned to act now, as rising break-ins and falling arrest rates paint a worrying picture for suburban safety. Melbourne residents are facing an ...

Exploring the Curriculum at a Modern Junior School in Melbourne

Key Highlights The curriculum at junior schools emphasises whole-person development, catering to children’s physical, emotional, and intellectual needs. It ensures early year...

Distressed by all the bad news? Here’s how to stay informed but still look after yourself

If you’re feeling like the news is particularly bad at the moment, you’re not alone. But many of us can’t look away – and don’t want to. Engaging with news can help us make ...