It took just under a year for Sam Bankman-Fried to go from crypto wunderkind to convicted felon.
No one is happier about that than the professionals in the industry that made him, for a time, a rock star.
When Bankman-Fried’s crypto empire collapsed last November, it sent the fledgling industry back years. For the crypto faithful who are still standing and striving, the trial couldn’t be over soon enough.
“With the trial’s conclusion, the crypto community can start to turn the page on this unfortunate chapter,” said Bobby Zagotta, US CEO of Bitstamp, a European-based exchange. “SBF … does not define the crypto sector or what we aim to achieve.”
For much of the past year, crypto has been struggling to crawl out from FTX’s shadow, and there’s no shortage of schadenfreude going around now that Bankman-Fried is facing a prison sentence.
“A lot of folks in the crypto industry are delighted,” said Yesha Yadav, a law professor and associate dean at Vanderbilt University. “I think they’re very happy to see SBF and FTX punished in the harshest possible terms.”
But shaking crypto’s association with bad actors is a lot easier said than done, even as large institutional investors like BlackRock and Fidelity are lining up to get in on bitcoin funds.
“The crypto industry as a whole will celebrate and call for a ‘back to business’ attitude in light of the verdict,” said Kurt Wuckert Jr., CoinGeek’s chief bitcoin historian. “But this ignores bigger, systemic problems that exist in the industry.”
When the exchange collapsed, it set off a contagion in crypto and deepened a sustained selloff that saw the industry shed $2 trillion in value in 2022. Several firms that were exposed to FTX filed for bankruptcy or were forced to halt withdrawals. Regulators swooped in with lawsuits accusing some of the biggest names in the business, such as Coinbase and Binance, of selling unregistered securities. FTX customers whose deposits evaporated are still waiting in limbo to see whether they’ll be made whole.
The memory of Bankman-Fried won’t be easily erased. The fraud he was convicted of organizing is among the biggest in US history, earning him a spot in the grifter hall of fame alongside Bernie Madoff and Elizabeth Holmes.
And the conviction is hardly the end of his legal battle.
A second trial on five additional charges, including alleged campaign-finance violations and bribery of foreign officials, is scheduled for March, and it’s up to the Justice Department to decide whether it will still pursue that case. Bankman-Fried’s lawyers vowed to keep fighting to prove his innocence, setting the stage for an appeal.
Beyond FTX and Bankman-Fried, crypto is still locked in a regulatory tussle with the Securities and Exchange Commission and its leader, Gary Gensler, who has staked out an openly hostile position toward digital assets.
“There’s definitely an element of ‘ding-dong the witch is dead,’” said Eric Soufer, a political adviser to major crypto companies, referring to Bankman-Fried’s conviction. “But in crypto … the bogeyman is still Gary Gensler and the SEC, and I don’t think this case fundamentally changes that dynamic.”
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