On 2 November, the verdict finally came down. Sam Bankman-Fried ā the fallen crypto king ā had been found guilty of seven charges of federal fraud. The courtroom at 500 Pearl Street in Lower Manhattan sat in silence as SBF, shorn of his normal tousled hair, heard his fate. āGuiltyā, the jury forewoman said over and over, confirming what most watchers already knew (but SBF had long failed to accept). After a month of damning testimony from his former associates and friends, it was clear: SBF had swindled his customers at FTX, the crypto empire he founded, out of $8 billion. And, heād used this money to fund a lifestyle of excess, wild deal-making and epic influence-peddling. SBF, still only 31, could now face 115 years in prison, though heās more likely to get around 20 when heās sentenced in March next year.
Strangely, 2 November was the exact day, a year earlier, that CoinDesk ā the news organisation where I work ā had broken the story that precipitated the fall. Ian Allisonās scoop showed that much of the balance sheet propelling FTX (through its hedge fund, Alameda Trading) was composed of a stablecoin token (FTT) that FTX itself had created. In effect, our reporting showed, FTX had been swapping real peopleās real money for a coin with little liquidity and no intrinsic value. And, as the trial would reveal, even this balance sheet was a fiction created by Alamedaās chief, Caroline Ellison, to make FTX look healthier than it actually was.
This was fraud, pure and simple. And over the month of the trial, SBF has been turned into the white-collar criminal par excellence, all by the same media that once fĆŖted and foregrounded him as a charming eccentric. But, though his personal foibles have come to dominate coverage, SBFās downfall has also been seen as a parable for the entire crypto industry. Our original story set off a tailspin of valuations and crypto prices that is only today righting itself, and the fall of FTX hurt cryptoās reputation among the public and regulators ā particularly in Washington D.C., which has turned viciously on the industry and its apologists. The jury on Pearl took just three hours to reach its unanimous verdict, and to many the conclusion was peremptorily clear: crypto was and is a scam, just as SBF and FTX were. For the faithful within the crypto industry, this is a terrifying conclusion. Was FTX really representative of the fundamental wrongness of crypto, an industry that literally creates money out of thin air, as SBF had done with FTT? Or, was FTX, in fact, just a story of immature corporate governance, of structural forces that keep allowing boy-wonders like SBF to do terrible things?
Iāve covered the crypto/blockchain/web3 space as a journalist since 2014, and this is far from the first scandal itās seen. In fact, long before SBF, I thought Iād seen every flavour of exotic financial scam going. The stories behind āBitConnectā, āOnecoinā, āQuadrigaCXā, and āMt. Goxā are notorious, and the losses staggering. The Onecoin Ponzi scheme, for instance, started in Bulgaria and fleeced victims of $4 billion. The main perpetrator was one Ruja Ignatova ā aka the CryptoQueen ā who went missing for years after the scam was first discovered in 2017. She is now thought to have been murdered on a yacht by a drug lord, her remains scattered into the Ionian Sea. QuadrigaCX was a mid-size crypto exchange operating in Canada in the mid-2010s, until its founder, Gerald Cotten, died in mysterious circumstances while on a trip to India in 2019. With his death, $145 million in tokens stored on the exchange inexplicably went offline, apparently missing forever.
Covering these and many such stories was fun. The characters were outsized (BitConnectās Carlos Matosās speech to an investor crowd in Thailand became an era-defining meme). And the claims they made for themselves were always outlandish, from āyouāre going to get rich!ā to āweāre going to save the worldā. A lot of the journalists covering crypto at the time believed in the underlying technology and the message of decentralisation (that banks, governments and Silicon Valley fundamentally do have too much control over our lives). But we didnāt take the industry overly seriously, because the actors involved were often not serious about following through on their promises. Crypto was an entertaining sideshow to the mainstream events happening in finance and business.
By the time SBF came along, emerging as a boy-genius during Covid, it seemed like much of the fun-and-games was over. Crypto had grown up. Its leading companies, like Coinbase, had gone public, sanitised of their earlier ideological commitments of banking-the-unbanked and usurping central banks in controlling the money supply. The industry had disciplined advocates in Washington. Its leaders were part of the financial establishment, still on the margins to be sure, but not in the way the cypherpunks ā the community of Nineties-era digital anarchists who gave rise to Bitcoin ā were outside society. They had believed in utterly breaking the banks following the 2008 financial crisis, not in getting Wall Streetās assent to reshape finance for the digital age.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
Subscribe