The distancing is partly a matter of self-interest. Mr. Bankman-Fried’s trial is seen as a referendum on the crypto industry, which has struggled for more than a decade to shake its associations with lawlessness and fraud. And it may be convenient to point fingers at the FTX founder, even as some in the industry benefited from his rise. Through the boom times of 2020 and 2021, Mr. Bankman-Fried made venture capital investments in crypto companies at inflated valuations. When the market crashed last year, he initially bailed out struggling peers. When Mr. Bankman-Fried drove up the valuations of other crypto companies, “no one was like, ‘This is ridiculous,’” said Kathleen Breitman, a founder of the crypto platform Tezos. “The industry often has a reputation that it deserves.” A representative for Mr. Bankman-Fried declined to comment. At the heart of Mr. Bankman-Fried’s case is whether he oversaw the misuse of FTX’s customer deposits to fund a network of political donations, tech investments and real estate purchases. Prosecutors have charged him with seven counts of wire fraud and conspiracy on behalf of FTX’s customers and investors, as well as groups that lent money to its sister firm, Alameda Research. Mr. Bankman-Fried, who has pleaded not guilty, could serve the equivalent of a life sentence in prison if convicted. FTX’s bankruptcy in November, which incinerated $8 billion in customer deposits and damaged the reputations of famous and powerful people who were wooed by Mr. Bankman-Fried, set off a domino effect of crypto failures from which the industry has not recovered. It also incited a regulatory crackdown and soured the public on cryptocurrencies just as the asset class was going mainstream.
Who’s Rooting Hardest for a Sam Bankman-Fried Conviction? The Crypto Industry.
