The downfall of Sam Bankman-Fried and his multi-billion dollar crypto companies may have been sparked by a single tweet from his industry competitor.
Just days before the collapse of FTX and its sister company Alameda Research, the head of competitor Binance, Changpeng Zhao, announced that his company would divest from Bankman-Fried’s businesses.
He made the announcement on Twitter, citing “recent revelations” about the state of FTX. These revelations were detailed in an Alameda financial statement that had been leaked days earlier and highlighted the financial chaos in which Bankman-Fried’s businesses found themselves.
Zhao said Binance would liquidate its FTT tokens. FTT is a cryptocurrency issued by FTX – and Binance’s decision to sell its stake caused widespread panic among users of the Bankman Fried platform.
The Binance announcement sparked a run on the bank at FTX – but the company didn’t have enough money to pay investors who wanted to withdraw their assets. Customers tried to withdraw $6 billion in 72 hours.
The downfall of Sam Bankman-Fried (pictured left) and his multi-billion dollar crypto companies may have been triggered by a single tweet from his industry rival Changpeng Zhao (pictured right).
The crisis ultimately exposed FTX’s fraudulent practices – and Bankman-Fried was charged with wire fraud on December 2, less than a month after Zhao’s tweet.
Zhao had tweeted on November 6: “As part of Binance’s exit from FTX equity last year, Binance received approximately $2.1 billion in cash (BUSD and FTT).” Due to recent revelations that have come to light “We decided to liquidate any remaining financial transaction taxes on our books.”
In three follow-up tweets, he said Binance would attempt to sell its holdings “in a way that minimizes the impact on the market” and that the process would take “several months to complete.”
Within days, the crypto markets had collapsed as investors sold their shares in droves due to the FTX bankruptcy.
Zhao also immediately tried to refute the theory that it was a concerted effort to harm a rival company, adding: “Binance always encourages collaboration between industry players.” Speculating on whether this was a move against a competitor is not the case. “Our industry is still in its infancy and every time a project publicly fails, it harms every user and every platform.”
A few weeks later, he also noted in another tweet that “no healthy business can be destroyed by a tweet.” Zhao then added the accusation that Bankman-Fried was “one of the greatest fraudsters in history.”
Prosecutors accuse Bankman-Fried of knowingly stealing money from customers on his FTX platform.
“This is not about complex issues of cryptocurrencies,” prosecutor Nicolas Roos told the jury on Wednesday after several days of withering cross-examination of the fallen crypto king.
Just days before the collapse of FTX and its sister company Alameda Research, the head of competitor Binance, Changpeng Zhao, announced that his company would divest from Bankman-Fried’s businesses
He made the announcement on Twitter, citing “recent revelations” about the state of FTX. These revelations were detailed in an Alameda financial statement that had been leaked days earlier and highlighted the financial chaos in which Bankman-Fried’s businesses found themselves
Joseph Bankman and Barbara Fried arrive at Manhattan Federal Court on Wednesday
“It’s about deception.” It’s about lies. It’s about stealing. “It’s about greed,” he said of the 31-year-old, whose fortune was estimated at $26 billion at the height of his fame. FTX was valued at $32 billion at its peak.
Bankman-Fried was on trial in New York for siphoning off funds invested by unwitting customers on his cryptocurrency exchange platform FTX, once the second-largest exchange for crypto investors.
He was found guilty in a trial that lasted less than five hours on Thursday evening and now faces up to 115 years in prison.
Up to $14 billion in client funds drove the transactions and venture investments of Alameda Research, Bankman-Fried’s personal hedge fund.
The jury is faced with the question of whether “the defendant knew it was wrong to take the money,” Roos said.
“He knew it was wrong. “He did it anyway (and) thought because he was smart he could get away with it,” the prosecutor argued.
To believe otherwise, “you have to assume that the defendant actually had no idea.” You have witnessed this trial and know that none of it is true.
The 31-year-old, who had already been weakened in the first three weeks of the trial, was unable to turn things around during his testimony, which lasted several days.
Zhao said Binance would liquidate its FTT tokens. FTT is a cryptocurrency issued by FTX – and Binance’s decision to sell its stake caused widespread panic among users of the Bankman Fried platform
Witness Caroline Ellison leaves federal court in Manhattan in October
“He lied to you,” the prosecutor said of Bankman-Fried’s repeated attempts to claim that he knew nothing of Alameda’s dire situation or that he did not recall false statements that all was well at his company.
But in two hours of closing arguments, prosecutors said Bankman-Fried received multiple warnings about Alameda’s finances long before its collapse late last year.
“Each time he decided to go one better and dig the hole even deeper,” Roos told the jury.
During the trial, which began on October 3, the Massachusetts Institute of Technology graduate admitted that he had made “mistakes” in managing his crypto empire, but that he had never committed fraud.
He portrayed himself as a young entrepreneur who was overloaded with work and only became aware of the problems in Alameda when it was too late.
He said the problems at Alameda arose because his orders were ignored by employees, including his former girlfriend, Caroline Ellison, whom he chose to lead Alameda.
The lawsuit has revealed that Alameda was authorized to borrow up to $65 billion from FTX through a software backdoor and use the money for risky investments, political donations and buying fancy real estate.
But the blank check turned sour when the cryptocurrency industry suffered a series of defaults in 2022, causing the value of virtually all digital currencies and Alameda assets to plummet.
Changpeng Zhao, founder and CEO of cryptocurrency exchange Binance, speaks at an event marking Binance’s fifth anniversary in Paris
Bankman-Fried’s parents are among many who are awaiting the verdict on their son
According to prosecutors, at the time of FTX’s bankruptcy, just over $8 billion from customers disappeared in bad investments at Alameda.
Bankman-Fried’s defense attorney told jurors Wednesday that prosecutors in his fraud trial tried to paint him as a “villain” and a “monster” because they couldn’t prove he stole billions of dollars from the cryptocurrency exchange’s customers .
Attorney Mark Cohen began his closing argument in Bankman-Fried’s trial in Manhattan federal court after prosecutors presented their arguments for conviction to 12 jurors.
Cohen said prosecutors sought testimony about Bankman-Fried’s sex life and appearance – the former billionaire was known for his unkempt curls and wearing shorts and T-shirts – to try to make the jury dislike him.
“Every movie needs a villain,” Cohen said. “And let’s be honest, an awkward high school math nerd doesn’t look particularly evil.” So what did they do? They put him in the film as a villain.’
“The government has continually tried to turn Sam into some sort of villain, some sort of monster,” Cohen added.