Sam Bankman-Fried found guilty – what it means for Australian FTX victims
The verdict is the first moment of justice in the US$10 billion fraud case.
The founder of the FTX cryptocurrency exchange, Sam Bankman-Fried, has been found guilty on all 7 charges. The charges include wire fraud and securities fraud and carry a maximum sentence of up to 110 years in prison, with sentencing scheduled for March next year.
The jury reached their decision after only 4 hours of deliberation, after having heard more than a month of evidence.
The case was brought against SBF by the US Justice Department and took place in New York, beginning in October.
The trial laid bare the deceitful and unethical practices used by FTX and its executive team to defraud their clients and enrich themselves, particularly their trading firm, Alameda Research.
Alameda was granted a near-infinite line of credit and amassed a debt of US$8 billion ($12 billion), which was ultimately paid for by unwitting FTX users.
User funds were also used to purchase luxury property, finance hundreds of venture capital investments, political donations and even used to purchase naming rights on a stadium in Miami.
Other members of Sam Bankman-Fried's inner circle were able to avoid a criminal trial by pleading guilty to fraud and aiding prosecutors. This includes Caroline Ellison (CEO of Alameda), Gary Wang (CTO of FTX) and Nishad Singh (engineering director at FTX).
What does this mean for victims of FTX?
The FTX exchange serviced customers globally as well as in the US, which has complicated the claims process. But here's a few things you need to know:
- The first deadline for reimbursing customers is by July 2024.
- In Australia, FTX's local wing filed for bankruptcy and creditors are now seeking to claw back $353 million from the global insolvency process.
- Digital Surge, another Australian crypto exchange, had a portion of funds held on FTX and subsequently went bankrupt.
- Digital Surge has since reopened the exchange and reimbursed users 55 cents on the dollar, partially bankrolled by the firm's executive team.
Last week, the FTX administrators were given permission by a court to start selling off assets to reimburse users. Onchain analysis shows that more than US$78 million was moved out of FTX-owned wallets and onto exchanges Binance and Coinbase. Among the assets moved by FTX recently are SOL, ETH, DYDX, AAVE and AXS.
It's believed these assets will be sold for US dollars in order to reimburse creditors.
So far it's estimated that US$7 billion ($11 billion) has been recovered.
The total owed to customers is still unclear, with estimates ranging between US$8 billion and US$10 billion.
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