Sam Bankman Fried’s Sentencing is the Beginning, not the End of the Push for Crypto Accountability.
By Mark Hays, senior policy analyst at Americans for Financial Reform and Demand Progress
Today, Sam Bankman Fried – known as SBF, the founder of crypto firm FTX; the once exalted face of the crypto boom, and now the poster child for crypto scandals – was sentenced to serve 25 years in prison, after being found guilty of seven counts of fraud in a jury trial last year. The presiding judge found SBF, in addition to his other charges, had committed perjury and witness tampering during his trial as well.
The collapse of FTX due to the fraudulent actions of SBF and others erased billions of dollars of investments and savings, affecting as many as 1 million customers, possibly more. In the lead-up to the sentencing hearing, prosecutors shared just a few of the many stories of these crypto investors, who bought into the crypto hype, put their trust in SBF, and suffered deep financial hardship as a result.
One customer’s impact statement for the hearing read, “I lost my job due to the actions of SBF […] I incurred a loss of over $500,000 USD on the platform […] The emotional toll has been immense, leading to months of depression and ongoing insecurities about my professional and future relationships.”
Another read, “at the time of FTX’s collapse, my account held a value of $146,436, a sum that represented not just monetary value, but years of sacrifice, planning and dreams for my family’s future […] The financial impact has been devastating. It has not only erased years of financial planning and investment but has also severely compromised our ability to provide for our family’s present needs and future security. Our plans for my children’s education, our family’s healthcare and our retirement are now in jeopardy.”
Today’s sentence brings a measure of justice for these people. However, crypto industry voices will now say that SBF’s sentencing closes the book on the 2022 crypto crash and from now on, the real focus should be on fostering support for crypto’s supposed innovative potential and pushing back against what they say are overzealous regulators trying to impede such innovation.
The truth is that today’s judgment is just one chapter in a story that’s far from over. Tens of thousands of consumers who lost everything on platforms like Terra, Voyager, Celsius, Gemini and others are still languishing in bankruptcy proceedings – with additional billions of dollars of investments lost or out of reach. Many crypto CEOs such as Steve Ehrlich, Do Kwon, Alex Mashinsky, Justin Sun, Tyler and Cameron Winklevoss, and others are still facing civil or criminal charges related to the crash. Dozens of class-action lawsuits against crypto firms are still underway. And big questions remain about the crash, including how so many venture capital firms, such as Paradigm, Sequoia and other sophisticated investors, who poured hundreds of millions in seed funding into these firms and spent even more pumping the crypto bubble, missed the obvious signs of failure and fraud.
The systemic problems in the crypto industry that contributed to the crash also haven’t gone away. Hacks, thefts, rug pulls, and other predatory schemes are a near-daily occurrence in the industry. Just this past week, crypto platform KuCoin and its founders were charged with violations of anti-money laundering laws. Major firms such as Coinbase and others are still facing charges that they are operating what amount to vertically-integrated, unregistered securities exchanges – a practice that exposes investors to many gaps in investor protection law and raises a host of conflicts of interests which likely put more consumers at greater risk.
All in all, there is still a long way to go to ensure the crypto industry’s most infamous figures and firms are held to some measure of accountability, and more that regulators can do and are doing to deal with the systemic risks and harms posed by an industry that struggles to meet even basic investor and consumer protection standards.
In the days and weeks to come, when the crypto industry pushes narratives that focus on everything from voters’ supposed interest in crypto policy, the Securities and Exchange Commission’s regulatory efforts as an “attack” on crypto, the latest bump in Bitcoin prices, or crypto and AI projects, remember – these are not efforts to turn the page, but to flip the script.
Consumers and investors should take the big lesson from today’s judgment and not buy into such stories, and neither should policymakers.