If you only remember two, wait, three things from my article, it’s this wisdom:
1. The house always wins when you gamble;
2. If something looks too good to be true, it probably is.
3. When you hire good (that means expensive/exclusive) attorneys to defend you, listen to them and don’t call them names in public.
I am writing this article because I love forensic science, criminology and criminal justice, and everything that is entailed in said topics, and you might think investing in crypto and trading, or white collar crime, is for adults and has nothing to do with you blah blah blah. Think again.
Let’s learn from the mistakes of over a million ADULTS who trusted their money with Sam Bankman-Fried and his company, FTX, in order to invest in other crypto funds. When FTX went bankrupt just one year ago, 8 BILLION dollars of customer money was missing. Where? Um, not sure…
On November 3, a federal jury in the Southern District of New York found Sam Bankman-Fried (SBF) guilty of SEVEN counts of financial fraud. This guilty verdict allowed the judge to sentence SBF to up to 100+ years in prison. SBF is the 31-year-old founder of FTX and Alameda Research, financial trading, and crypto exchange companies currently in bankruptcy. Federal trials aren’t televised so I followed updates from reporters tweeting live from the trial, Apple News’ Wall Street Journal live written updates, crypto media on YouTube like Coinbase, and occasionally, mainstream news channels like Fox News and Reuters. (For those of you who follow the news, yes I know there is one federal trial being televised this year. It’s an exception to every other federal trial).
You may already know about trading crypto, and you may be successful at it. The SBF trial wasn’t so much about cryptocurrency, but rather fraudulently using customer money. Crypto was just a way to get people to hand over money.
Many of us have student savings or checking accounts with PNC or Bank of America, for example. Banks are highly regulated financial institutions and must follow strict rules because they manage other people’s money. Most banks offer specific savings accounts that allow you to earn interest if you keep your money in savings for a certain amount of time. During that time, the bank may legally use your money to make its own investments. At any time, you, as the customer, can withdraw your money. If you withdraw it before the agreed-upon time, such as two years, you won’t earn the interest and the bank may charge you an early withdrawal fee. The bank must give you your money back when you ask for it.
SBF is 31 years old. He isn’t that much older than us. Many adults looked at SPF and thought he was a young genius. SBF is very intelligent and likes to take large risks, but gambling with other people’s money isn’t smart. SBF started his company with high school and college friends as well as coworkers, in his early 20s. Thanks to SBF’s family and professional network, and his knowledge and skill in quantitative financial trading (stock market), he built a multi-billion dollar crypto trading exchange extremely quickly. FTX was a crypto exchange that allowed anybody to deposit their money, and then trade any cryptocurrency. Customers believed they could withdraw the money at any time, as was done by hundreds of other current banks. The company did not specifically say it would use its customer’s deposits to invest and make money, but it also didn’t specifically say it wouldn’t.
SBF and his company used millions of dollars to have high profile advertising at the Super Bowl in early 2022. The company used customer money to have naming rights to the FTX Sports Arena. Thousands of people were fooled into thinking that SBF and his team were young geniuses. They absolutely were geniuses, just not in a socially acceptable way: scamming the world. Investors believed that if high profile professional athletes were endorsing FTX, the company must be safe. The lesson here, as previously mentioned, is that if something looks too good to be true, it absolutely is.
It’s important to read the fine print in terms of agreement. The legal documents that look really boring (because they are) use a lot of legal terms (that most people don’t understand) and they explain what your rights are if things don’t turn out well (money is missing). *Even if you don’t read it, save a copy in your email, or to your cloud for reference. The prosecutors showed FTX spent customer funds with no legal right and without the customers’ knowledge. This is fraud and embezzlement, a big no-no.
Fortunately, the bankruptcy lawyers are “clawing” back money that was spent illegally by FTX. For instance, if $60 million was spent on real estate, that real estate is being sold so the money may be returned, and investors may get their money back.
SBF is planning to appeal his guilty convictions. If he is unsuccessful, he may spend decades of his life in prison. This is tragic, because he is a brilliant person with the mind to help so many, and has had every advantage in life to do great things. Unfortunately, he gambled other peoples’ money, only had sight for his own gain, and ignored that the house always finds a way to win.
Currently, he has been detained in Brooklyn’s Metropolitan Detention Center since August 11th, when Kaplan found he likely tampered with witnesses at least twice, and has remained in that area during the trial. He is likely to remain there until sentencing.
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