Sam Benkman Fried and the fate of the biggest scandal in the history of digital currencies

Before November 2022 (Aban 1401) and at a time when the digital currency exchange “FTX” was constantly developing new and creative ideas, investing in startups in this field and jumping to buy large platforms, few people even imagined that One day, the empire of Sam Bankman-Fried, a young American billionaire with rare political connections, will be completely destroyed; But how did this collapse happen and what factors caused the fall of FTX and the Bankman Farid scandal?

Last week (Thursday, November 11), the verdict of the jury of the court of Sam Benkman Farid, the former CEO of FTX digital currency exchange, was announced. According to the opinion of the jury, Bankman Farid was found guilty of all seven charges he faced and faced a heavy punishment of up to 110 years in prison.

Fraud, stealing from FTX customers, abusing their assets for the purpose of paying financial aid to political figures and making risky investments, as well as money laundering, are among the main crimes of Bankman Farid, which caused the destruction of one of the largest groups active in the digital currency space of the world.

Considering the extent of the FTX case, it is better to first get acquainted with the personality of the former CEO of this group and the story of the formation of this giant of the world’s digital currencies. After that, we can go to Bankman Fried’s fraud, the reasons for FTX’s bankruptcy, and the end of this case.

Who is Sam Benkman Fried and how was FTX formed?

Farid Benkman’s parents are both law professors at Stanford University, and Sam himself is a physics graduate from MIT University. After graduating from university, Fried Benkman started working at Jane Street Investments, a fairly large firm dealing in various forms of assets with offices in major commercial cities around the world. It is interesting to know that Sam regularly gave half of his salary to charity during his tenure at Jane Street.

He founded Alameda Research in 2017; A hedge fund for digital currencies, which according to him even brought them a million dollars a day at one point. A little later, in 2019, he launched the FTX digital currency exchange in Hong Kong together with one of his MIT classmates.

The cooperation of these two classmates had worked perfectly at the beginning of the work. At its peak, the platform hosted $10-15 billion in daily cryptocurrency transactions, according to what FTX executives have said. In early 2022, the value of the FTX group reached 32 billion dollars. During FTX’s heyday, there were talks of big advertising deals including buying the naming rights to the home stadium of the Miami Heat basketball team, and for a while the name of the stadium was changed to “FTX Arena”.

The next thing was the news of FTX’s attempt to buy the Robinhood trading platform, which is already considered one of the giants in the field of small stock trading in the US market. Sam Benkman Fried, who was one of the shareholders of Robin Hood, apparently intended to acquire this platform by paying a huge amount, but this purchase was not completed.

The beginning of the fall of the FTX exchange and the Bankman Farid scandal

It can be said that the beginning of the collapse of Farid Bankman’s empire came with the disclosure of CoinDesk, a media active in the field of digital currencies. CoinDesk reporters published reports before other media that showed that FTX was in a risky financial situation and had misused its clients’ funds.

As the disastrous situation of the FTX exchange and the frauds of the managers of this complex became clear, the customers of this platform, fearing the loss of their funds, started withdrawing billions of dollars from their accounts, and finally it came to the point where the FTX exchange was forced to close on November 11, 2022 (20 Aban 1401 ) declare bankruptcy. With the bankruptcy of FTX, more than one million users of this exchange lost their funds and did not manage to withdraw their assets at that time.

Damian Williams, an American lawyer, says that Benkman-Fried committed one of the biggest frauds in American history in this case. Sam Benkman-Fried’s main charge, which of course is now considered a crime, is the misuse of FTX clients’ funds to make risky investments at the Alameda Research Institute.

He also used millions of dollars of his clients’ deposits to live a luxurious life and pay financial contributions to political figures, although some of these financial contributions were illegal in themselves.

A number of Benkman Farid’s associates, including Caroline Ellison, his ex-fiancée, also confessed to participating in these crimes. In December 2022, he pleaded guilty to money laundering and fraud and testified against his ex-partner in hopes of a reduced sentence. According to Ellison’s testimony, it was Benkman-Fried’s idea to use funds from FTX clients to prevent the collapse of Alameda Research.

Also read: Getting to know the most important people of FTX exchange

What happened to the case of FTX and Farid Bankman?

Bankman Farid has been found guilty of all seven charges, including fraud and money laundering. During the trial, many FTX employees and executives appeared before the jury, including Gary Wang, the group’s former chief technology officer, Nishad Singh, former director of FTX’s engineering team, and Carolyn Ellison.

The witnesses in this case mostly made it more difficult for Farid Benkman. For example, Elision, his ex-fiancé, testified that he was instructed to use FTX customers’ money to repay the group’s loans and that he had submitted to Bankman Fried’s decisions despite his personal concerns about the matter.

In his defense, Benkman Farid claimed that although he made mistakes, he acted in good faith and was only responsible for a part of these decisions. He also referred to his previous comments on social media where he said protecting FTX customers was their priority.

After Benkman Farid’s trial, which lasted for a month, the jury issued its verdict in less than 5 hours; A maximum of 110 years in prison for a total of 7 charges against the former American billionaire, 5 of which have a maximum of 20 years and 2 of which have a maximum of 5 years of legal imprisonment.

Of course, it should be kept in mind that the court hearing is scheduled for March 28, 2024 (April 9, 1403) and there is a possibility that the judge’s final verdict in this case will contain a lighter punishment than the jury’s output.