A federal appeals court in New York has upheld the conviction of Sam Bankman-Fried on fraud and conspiracy charges stemming from the collapse of his cryptocurrency exchange, FTX. The decision by a three-judge panel of the 2nd U.S. Circuit Court of Appeals affirms the verdict against the former CEO, who was sentenced to 25 years in prison earlier this year.
Prosecutors described Bankman-Fried's actions as one of the largest financial frauds in American history. The appellate court found that Bankman-Fried was the "driving force" behind a scheme that misappropriated billions of dollars from FTX customers and investors.
Bankman-Fried had raised investments in FTX by assuring customers their funds would be kept secure and used exclusively for cryptocurrency transactions on the platform. However, the court noted that he transferred investor funds to Alameda, a hedge fund he controlled, and used them for unauthorized purposes, including personal benefit.
On appeal, Bankman-Fried argued that the trial judge improperly prevented him from presenting evidence suggesting that his investments were sound and that investors would eventually be made whole. The appellate court, however, referenced a U.S. Supreme Court precedent that establishes fraud occurs when a defendant uses a material misstatement to deceive a victim into providing money, irrespective of whether the defendant intended for the victim to suffer a financial loss.
"To secure Bankman-Fried's fraud conviction, the government did not need to prove intent to cause economic loss," the appeals court stated. "As the district court made clear, FTX customers were defrauded as soon as Bankman-Fried transferred their money to [his cryptocurrency trading firm] Alameda regardless of how strongly he believed he might later return the money."