The US Department of Justice (DoJ), says Estes, will consider Bankman-Fried’s conviction a “signature victory,” as its first high-profile crypto scalp. Cryptocurrency has been used for more than a decade to conceal payment for illicit products, enable extortion-based cyberattacks and launder the proceeds of criminal activity. In 2021, the DoJ announced the formation of a specialist crypto enforcement team, to “tackle complex investigations and prosecutions of criminal misuses of cryptocurrency,” it said. But until now, the agency had secured few landmark convictions.
Though he was charged with old-fashioned fraud, Bankman-Fried was crypto royalty, which lends his conviction a symbolic importance, says Estes. The DoJ, she says, has sent “a message to the crypto industry that fraud and wheeling-and-dealing is not to be tolerated.” An investigation into another member of crypto’s elite, Changpeng Zhao, CEO of Binance, the world’s largest crypto exchange, is reportedly ongoing.
In crypto circles, the trial of Bankman-Fried was considered a “galactic embarrassment,” a sideshow whose outcome would have little effect on the prospects or trajectory of remaining crypto businesses, but cast a dark cloud over the industry and attracted a torrent of unflattering press.
Its conclusion marks an opportunity for the crypto sector to start anew. Bankman-Fried and FTX may be the story of the day, says Kurt Wuckert Jr., bitcoin expert at media company CoinGeek, but they will soon become artifacts of crypto history, like the closure of underground marketplace Silk Road or bankruptcy of the Mt. Gox exchange. FTX will become just another “point of reference,” he says.
But that does not preclude another similar fraud taking place in future, says Wuckert Jr., particularly while there remains a lack of regulatory clarity with respect to crypto in jurisdictions like the US. Bankman-Fried’s conviction does not signal that “crypto is clean,” says Kyla Curley, a forensic investigator specializing in crypto and partner at compliance advisory firm StoneTurn. Until crypto businesses are held to a clear and industry-specific set of standards, she says, “buyer beware” remains the message.
The most immediately tangible benefit of the conviction may be in its cathartic effect for FTX customers, even though it will have no bearing on the amount of money returned at the end of the bankruptcy process. “It’s more about justice—about feeling and emotion,” says Mike van Rossum, founder of trading firm Folkvang, an FTX creditor and equity holder. “We need a world where there is responsibility for the bad things you do. In Sam’s case, bad things were done.”
