Liar or unlucky? Making sense of the Sam Bankman-Fried crypto trial

Bankman-Fried became something of a talisman for the industry, and when his crypto trading platform FTX crashed into bankruptcy owing $US3.1 billion to creditors, so did the chances of crypto’s chances of ever being accepted as a legitimate investment.

FTX’s collapse last year was as large and fast as it was noisy.

‘Behind the curtain, Sam Bankman-Fried was not who he appeared to be. He was using his company, FTX, to commit fraud on a massive scale.’

Prosecutor Thane Rehn

The Bankman-Fried trial will remind those arguing that crypto can be a legitimate investment option that the risks attached are considerable, and as supporters they are in the minority.

Rather than a middle-aged, suit-wearing person in an office, the portrait of a crypto investor these days looks like a young person, most often male, who when not trading gimmicky-sounding blockchain assets is playing video games. It is a demographic which rarely baulks at risk.

But it’s worth remembering how crypto as an asset class became difficult to ignore in 2021, with its market value rising to $US3 trillion before it imploded the following year to be worth $US796 billion.

Many of the venture capital funds that joined the crypto craze in 2020 and 2021 were burned, and their current investment in the sector is a shadow of where it was at the peak.

The implosion was the result of a decision by central banks to increase interest rates, making riskier assets far less attractive.

FTX wasn’t the only or the first crypto company to fall. But its implosion hastened the dominoes falling.

Although crypto has now had several periods of reckoning, it still has a pulse. This year, much of the price volatility has disappeared – which perversely would hamper its appeal to investment thrill seekers.

As for Bankman-Fried, the rollercoaster that started moving a year ago is far from finished.

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As Rehn summed it up in the court proceedings, “one year ago, it looked like Sam Bankman-Fried was on top of the world. He ran a huge company called FTX. He lived in a $US30 million apartment in the Bahamas. He jetted around the world on private planes. He hung out with celebrities like Tom Brady and politicians like Bill Clinton. Behind the curtain, Sam Bankman-Fried was not who he appeared to be. He was using his company, FTX, to commit fraud on a massive scale.”

Bankman-Fried’s lawyer Mark Cohen in contrast portrays his client as an unlucky guy with a challenged ability to make good judgement calls.

“Things were happening quickly, very quickly. Sam and others were making hundreds of decisions a day,” Cohen said. “And as a result, some things got overlooked … things an older company would have built out over time.”

The jury has the job of sifting through these arguments, and piecing together what really went down at FTX in the crypto craze.

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