Sam Bankman-Fried is guilty. What does this mean for crypto?

Sascha: [00:00:02] Welcome to The Dive, the podcast that says who said business news needs to be old business. I'm your host, Sascha Kelly. Sam Bankman-fried, the founder of the crypto exchange FTX. He was arrested last year and earlier this month he was convicted by a jury of his peers in New York. Plenty has been written and said about the disgraced so-called crypto king. In fact, we did an episode on it last month where I talked to Tracey from Crypto curious what we thought as his reign comes to an end. It's worth looking at the wash up and what next for crypto? It's Monday the 13th of November and today I want to know where to from here as Crypto's dark chapter comes to a close. To talk about this today, I'm joined by the co-founder of Equity Mates, Bryce Leske. Bryce, welcome to The Dive. 

Bryce: [00:00:51] Great to be here, Sascha. Thank you. 

Sascha: [00:00:53] So, Bryce, I was going to say, for those of us living under a rock, but the last time we did this episode, I actually put a poll up on Instagram and surprising amount of people hadn't heard anything about Sam Bankman-fried. So if you're one of those people, you're not alone. Bryce, can you get us up to speed with what happened in this trial with those who just blissfully had their head in the sand? 

Bryce: [00:01:15] Well, I can tell you, Sascha, that I imagine one day this is going to be made into a Netflix drama that is going to capture the attention of many people who were not aware of the story. So watch this space. And the reason is because Sam Bankman-fried, the 31 year old founder of FTX, which was at one stage one of the world's largest crypto exchanges, he was on trial for one of the biggest financial frauds in history. 

Audio Clip: [00:01:41] From Crypto king to criminal suspect Sam Bankman-fried. Stunning fall has just gotten worse for him this morning. Federal authorities in New York are expected to unseal the indictment that led to his arrest Monday in the Bahamas. 

Bryce: [00:01:55] And streaming services love to replay.

Sascha: [00:01:58] How much we are obsessed with crime. This is just like the perfect man. 

Bryce: [00:02:02] Exactly. So at one stage, Sam Bankman-fried or SBF, as he's commonly referred to, he was worth $26 billion and was at the centre of the financial world. He was crypto's golden boy. He was out there spending money saving other crypto firms that were going bust. However, a year after FTX declared bankruptcy, prosecutors have made the case that he looted $8 billion from the exchange's customers. Now, SBF was charged with two counts of fraud and five counts of conspiracy. He did plead not guilty to all charges. So it is come crashing down. 

Sascha: [00:02:40] And really quickly because this all unfolded just last year, I just feel like the turnaround on this has been pretty swift. 

Bryce: [00:02:47] My feeling is and this is bringing in a bit of a, my feeling is that prosecutors want to make an example of Sam Bankman-fried in an industry that is highly unregulated, where time and time again people are getting busted for doing the wrong thing. They want to make a statement for an example of what Sam has done. 

Sascha: [00:03:05] Yeah, so what did the jury find? 

Bryce: [00:03:08] So the 12 member jury in Manhattan federal court reached the verdict after just over 4 hours of deliberation.

Sascha: [00:03:15] That's not long ago. 

Bryce: [00:03:16] Not long enough.

Sascha: [00:03:18] Looking in passing of our having a little chit chat, maybe a coffee out, you are.

Bryce: [00:03:23] Pretty much going around the room going, Yep, yep, yep, yep, yep, yep. I agree. I agree. We're out of here. So it was a 4 to 6 week trial where he had, as we spoken about before on the dive, he had many of his accomplices turn against him and form part of the prosecution. As a result, after 4 hours of deliberations, the jury convicted Bankman-fried on all seven counts that he faced. 

Audio Clip: [00:03:46] Sam Bankman-fried guilty on all seven counts of fraud and conspiracy. The 31 year old was accused of mismanaging customer funds, stored his crypto exchange FTX, to enrich himself and his family. We're talking about potentially $10 billion in losses. 

Sascha: [00:04:03] But what does he get for that biggest financial fraud of all time? You know, sometimes that's just a slap on the wrist when it comes to financial 

Bryce: [00:04:10] You're right. There are instances where many big banks have come unstuck and all they've walked away with is a fine or two. But but Sam faces as much as 110 years in prison if Judge Lewis Kaplan gives his maximum sentences and consecutive terms. So he's scheduled to learn his sentence on March 28th, 2024. And we'll be watching very closely to see how this plays out. As I said, I feel like he's not going to get off lightly here. 

Sascha: [00:04:37] Yeah, it's interesting because as we said, a lot of the time it does turn into a slap on the wrist. But I think you're right. The sense is very much that he's wanting to be made an example of, but this isn't going to be the end as well for Bankman-fried, is it? 

Bryce: [00:04:51] Unfortunately not. So once he's sentenced, he's also set to go on trial again in March on a second set of charges. By prosecutors earlier this year, including for alleged foreign bribery and bank fraud conspiracies. 

Sascha: [00:05:06] Well, Bryce, I reckon you're 100% on the money. There's definitely going to be in a ten part Netflix series in the making here. But while we wait for that and also send them in second trial in his sentencing, the question, of course, becomes what next for crypto? Because while this case has cast a dark cloud over the industry, crypto seems to be going from strength to strength. And just before we go on mic, you did say that you have one regret about crypto. So let's turn to that after the break. 

Audio Clip: [00:05:39] Sam Bankman-fried was convicted of orchestrating a multibillion dollar fraud in FTX customers. There's no doubt that the crypto industry cannot wait to move on and restore its reputation stained by several scandals and bankruptcies, including the implosion of the crypto exchange space founded. 

Sascha: [00:05:55] Welcome back to the Dive. Today we're talking about the wash up from disgraced FTX found us and Bankman-fried guilty verdict. Bryce, you'd think that SBF guilty verdict would cast a dark cloud over the industry. No one's going to touch it any more, but the crypto king Going to jail just doesn't slow this industry down. 

Bryce: [00:06:15] It doesn't. Sascha, so let's start by looking at the price of Bitcoin. The Bitcoin to us, day price is up 32% in the past month. It's up over 130% in the past year and up 560% in the past five years. 

Sascha: [00:06:31] 560, I guess five years with kava. It's always like my timelines, always a bit warped, but we're looking at like 2018 there really, aren't we?

Bryce: [00:06:40] Well, I mean, it started in 2018, but that was when it was back down at like seven and a half thousand or whatever it was. And it's had two huge run ups and now, now we're in the midst of another one. So you did say I regretted I did predict over on the Equity Mates Investing podcast at the start of the year that Bitcoin would double by the end of the year, which it has done. Unfortunately, I didn't put my money where my mouth is and buy bitcoin, so I've missed that. But it's not only Bitcoin Ethereum as well. The Etherium 2 USD price is up 21% in the past month, 75% in the past year, and more than 1,000% in the past five years. So there is certainly no dark cloud hanging over the industry at the moment with a lot of momentum coming back into crypto.

Sascha: [00:07:19] Yeah, but as you said, dark cloud isn't just in the price light. That's not the only thing that we look at. It's actually the whole community as well. 

Bryce: [00:07:27] Yeah, well there are other signs that crypto is certainly recovering. Google searches for buy Bitcoin have surged worldwide amid a major crypto rally, with searches in the UK growing by more than 826% in the last week. Yes, Crypto.com reported recently it experienced the highest influx of Bitcoin since its collapse, with the volume reaching around 50 million. And Wall Street investment bank Morgan Stanley released a report stating the crypto winter is over and will see a new bull run next year. Now this is not surprising. We all know that crypto goes in cycles and we're about to come into its halving. Bitcoin's halving, but it's one of those asset classes where things get on a roll. It really starts to get gone. 

Sascha: [00:08:12] Yeah, and if you're listening to us saying, What the hell is the halving, then I'm not going to even try to explain it to you. Go and have a listen to our sister podcast, Crypto Curious. They do a much better job of explaining all the crypto jargon there. Yes. And I think, you know, we do have to say that there's still a big watch out, like crypto is still the Wild West, plenty of cowboys because in the same week that Sam Bankman-fried was found guilty on all charges, American regulators arrested three top executives of cryptocurrency Safemoon. I mean, talk about an oxymoron of a title saying you know very. 

Bryce: [00:08:53] Well Safe Moon was a meme coin that rolled out in March 2021 at the height of the previous bull market. Safemoon CEO Johnny Karani and CTO Thomas Smith have been arrested, along with creator Kyle Nagy, who is still at large. The three execs face charges from both the DOJ and S.A.C.. 

Sascha: [00:09:13] You know, it's not. 

Bryce: [00:09:13] They're running around out there, Sascha. They're running around being like. [0

Sascha: [00:09:19] You know, a criminal on the run from crypto. It is pretty entertaining. 

Bryce: [00:09:22] My goodness. All three were charged by the DOJ with conspiracy to commit securities fraud, conspiracy to commit wire fraud and money laundering conspiracy. An example given by the DOJ says Smith diverted crypto tokens to buy himself a Porsche 911. At the same time, the SEC accused all three of perpetuating a massive fraudulent scheme through the unregistered sale of the crypto asset security. So with regulations still, you know, not catching up with the industry, this sort of stuff seems like it's always going to be part of the industry until, you know, regulators can actually get on top of things.

Sascha: [00:10:00] Yeah, and I've got to say, the last episode we did on SBF, Tracey did talk a little bit about how this is going to influence Australia's attempts to regulate at least and I've got to give another shout out to them on their Instagram Crypto Curious, they've started a new series called DOB in Indian and they're getting people to ring out with their worst crypto investment stories. And so if you do want a little bit of a taste of medicine, it is pretty entertaining to hear what some people are doing with their money. But first, let's leave it there for today. Thanks again for joining us on the dive. Are you surprised? I'm going to pop a pole in the Spotify player. Tell us how long you think SBF is going to go to jail for. Really curious to hear your thoughts on that. And while you're there, give us a five star review. It helps us get in front of your listeners. Bryce, thanks for your time today. 

Bryce: [00:10:53] Thanks, Sascha.