The ongoing trial of Sam Bankman-Fried and his co-conspirators represents the most-high profile financial crimes since Bernie Madoff was exposed for running one of the largest Ponzi schemes in history. Over the past few weeks, two of SBF’s closest confidants have testified against him. Where does this trial leave the broader crypto market in late 2023? Let’s jump in.
FTX Trading Ltd. was a cryptocurrency exchange that was founded by Sam Bankman-Fried and his friend and roommate Gary Wang. The exchange enjoyed massive growth over its short period of operation. Indeed, by 2021, FTX boasted over 1 million users and was the third-largest cryptocurrency exchange on the planet by trading volume. Sam Bankman-Fried, or SBF, also opened a partner firm, Alameda Research, which was largely operated by his on-again off-again girlfriend Caroline Ellison.
The former crypto exchange has been in Chapter 11 bankruptcy proceedings since November 2022. Cryptocurrencies suffered a broad-based sell-off in 2022, which saw many top digital currencies like Bitcoin and Ethereum lose value. The pressure of the sell-off led to the financial demise of FTX, which then led to revelations that SBF and his allies had allegedly embezzled customer funds to finance property purchases, multi-million-dollar celebrity marketing campaigns, and massive political donations.
SBF’s defense has aimed to prove that FTX’s demise was due to incompetence, rather than deliberate criminal acts. FTX may have cast a shadow over the broader industry, but there are still many functioning crypto exchanges that remain trustworthy today. Moreover, Bitcoin and other top digital currencies have gained some momentum in the second half of 2023.
Sam Bankman-Fried’s fate may be determined by the end of this much-publicized trial, but crypto continues to thrive as an alternative asset class.
