Sam Bankman-Fried is not the only guilty person involved in crypto’s fall from grace.
There are many others who have made small fortunes off of the rapid rise and just as rapid fall of this new form of money and people’s lust for lucre. For some, it might just have been a hope for a better return on investment, for others a weird middle finger to the establishment. Investors in the FTX Exchange that Bankman-Fried built and ran were assured of many things when placing their bets – er, investing their bitcoin – but not that a backdoor to these funds was programmed in to let Alameda Research siphon off $8 billion.
The world is full of quick-talking hustlers who helped themselves to their investors’ funds – as happens in all sectors of the financial services industry – but none as brazen as Sam Bankman-Fried (SBK) and pals. They took these billions and lived largely – all while SBK was proclaiming some higher purpose by being part of the jargonistic “effective altruism” movement.
Crypto’s fall from grace
But he was just a conman. His closest allies testified that it was Bankman-Fried who was at the heart of the whole charade and instructed them to steal the money. His sometimes girlfriend Caroline Ellison, the former CEO of Alameda, and former FTX executives Gary Wang and Nishad Singh admitted guilt, took plea deals and dished the dirt.
Bankman-Fried funded political parties, gave money to social causes and presented himself as a fluffy-haired boy genius who was trying to change the world and make crypto more mainstream. In the end, he was just a grifter. Now 31, he will likely spend the rest of his life in jail.
“While the cryptocurrency industry might be new and the players like Sam Bankman-Fried might be new, this kind of corruption is as old as time. This case has always been about lying, cheating, and stealing, and we have no patience for it,” said Damian Williams, the lead federal prosecutor in Manhattan, after the guilty verdict.
What’s particularly galling is that Bankman-Fried’s parents are both Harvard law professors. He has come from unbelievable privilege and seemingly professors who lecture in the law must have imbued him with some ethics, at the very least a sense of right and wrong.
He reportedly bought his parents a house, which they put up as collateral for his bail. I wonder if they will sell the house and give the proceeds back to those people whose $8 billion their son blew? Don’t hold your breath.
The astounding thing is how Bankman-Fried was allowed – and enabled – to get away with it for so long.
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There were a lot of warning signs and reports about FTX and SBK. There is never smoke without fire in Ponzi schemes – and there has been a disproportionate amount in the crypto industry.
Because it is complex and complicated, as much investing is, too many people let their guard down. There was a gold rush mentality as Bitcoin kept breaking records and rising – and an equally destructive lemming-like response when its price plummeted. Many people lost their life savings in an unregulated industry that prided itself on being so brazen. Turns out those financial regulations that protect consumers’ investments are there for a good reason, not that it is much comfort to all those people whose crypto is now worthless or those whom SBK stole from.
Sam Bankman-Fried wasn’t a genius. He was just a conman who didn’t brush his hair.
This column first appeared in the Daily Maverick.