November 20, 2023

On 2 November, the verdict finally came down. Sam Bankman-Fried — the fallen crypto king — had been found guilty of seven charges of federal fraud. The courtroom at 500 Pearl Street in Lower Manhattan sat in silence as SBF, shorn of his normal tousled hair, heard his fate. “Guilty”, the jury forewoman said over and over, confirming what most watchers already knew (but SBF had long failed to accept). After a month of damning testimony from his former associates and friends, it was clear: SBF had swindled his customers at FTX, the crypto empire he founded, out of $8 billion. And, he’d used this money to fund a lifestyle of excess, wild deal-making and epic influence-peddling. SBF, still only 31, could now face 115 years in prison, though he’s more likely to get around 20 when he’s sentenced in March next year.

Strangely, 2 November was the exact day, a year earlier, that CoinDesk — the news organisation where I work — had broken the story that precipitated the fall. Ian Allison’s scoop showed that much of the balance sheet propelling FTX (through its hedge fund, Alameda Trading) was composed of a stablecoin token (FTT) that FTX itself had created. In effect, our reporting showed, FTX had been swapping real people’s real money for a coin with little liquidity and no intrinsic value. And, as the trial would reveal, even this balance sheet was a fiction created by Alameda’s chief, Caroline Ellison, to make FTX look healthier than it actually was.

This was fraud, pure and simple. And over the month of the trial, SBF has been turned into the white-collar criminal par excellence, all by the same media that once fêted and foregrounded him as a charming eccentric. But, though his personal foibles have come to dominate coverage, SBF’s downfall has also been seen as a parable for the entire crypto industry. Our original story set off a tailspin of valuations and crypto prices that is only today righting itself, and the fall of FTX hurt crypto’s reputation among the public and regulators — particularly in Washington D.C., which has turned viciously on the industry and its apologists. The jury on Pearl took just three hours to reach its unanimous verdict, and to many the conclusion was peremptorily clear: crypto was and is a scam, just as SBF and FTX were. For the faithful within the crypto industry, this is a terrifying conclusion. Was FTX really representative of the fundamental wrongness of crypto, an industry that literally creates money out of thin air, as SBF had done with FTT? Or, was FTX, in fact, just a story of immature corporate governance, of structural forces that keep allowing boy-wonders like SBF to do terrible things?

I’ve covered the crypto/blockchain/web3 space as a journalist since 2014, and this is far from the first scandal it’s seen. In fact, long before SBF, I thought I’d seen every flavour of exotic financial scam going. The stories behind “BitConnect”, “Onecoin”, “QuadrigaCX”, and “Mt. Gox” are notorious, and the losses staggering. The Onecoin Ponzi scheme, for instance, started in Bulgaria and fleeced victims of $4 billion. The main perpetrator was one Ruja Ignatova — aka the CryptoQueen — who went missing for years after the scam was first discovered in 2017. She is now thought to have been murdered on a yacht by a drug lord, her remains scattered into the Ionian Sea. QuadrigaCX was a mid-size crypto exchange operating in Canada in the mid-2010s, until its founder, Gerald Cotten, died in mysterious circumstances while on a trip to India in 2019. With his death, $145 million in tokens stored on the exchange inexplicably went offline, apparently missing forever.

Covering these and many such stories was fun. The characters were outsized (BitConnect’s Carlos Matos’s speech to an investor crowd in Thailand became an era-defining meme). And the claims they made for themselves were always outlandish, from “you’re going to get rich!” to “we’re going to save the world”. A lot of the journalists covering crypto at the time believed in the underlying technology and the message of decentralisation (that banks, governments and Silicon Valley fundamentally do have too much control over our lives). But we didn’t take the industry overly seriously, because the actors involved were often not serious about following through on their promises. Crypto was an entertaining sideshow to the mainstream events happening in finance and business.

By the time SBF came along, emerging as a boy-genius during Covid, it seemed like much of the fun-and-games was over. Crypto had grown up. Its leading companies, like Coinbase, had gone public, sanitised of their earlier ideological commitments of banking-the-unbanked and usurping central banks in controlling the money supply. The industry had disciplined advocates in Washington. Its leaders were part of the financial establishment, still on the margins to be sure, but not in the way the cypherpunks — the community of Nineties-era digital anarchists who gave rise to Bitcoin — were outside society. They had believed in utterly breaking the banks following the 2008 financial crisis, not in getting Wall Street’s assent to reshape finance for the digital age.

Then, in November 2022, salacious details about SBF/FTX began to emerge on the back of our story. SBF had been running a “cabal” of former roommates (several of whom, it was speculated, had been involved in a polyamorous tryst) out of a lavish compound in the Bahamas. It had no accounting department or risk manager, despite being a $32 billion company in an infamously risky industry. Still, many aspects of FTX made it a different type of scandal to BitConnect and the rest. SBF’s organisation had been taken seriously by serious people, including the regulators and many high-profile politicians. It had investors from blue-blooded Silicon Valley firms and it presented itself as part of the next wave of crypto development: sober, measured, media-savvy, and politically connected.

BitConnect, Onecoin, QuadrigaCX et al. had never made it onto the front cover of Forbes or Fortune. The founders of these enterprises didn’t appear before Congressional committees, as SBF was wont to do, to argue for the industry’s interests. They never had private meetings with the chairman of the SEC to argue for favourable treatment. They never paid off one third of Congress — almost 200 representatives and senators. They never appeared in primetime ads, and on-stage, with A-listers like seven-time Super Bowl winner Tom Brady, Larry David or President Bill Clinton. And they certainly never paid to rename football and baseball stadiums with their brand. This was a different crowd to the old bad boys of crypto.

SBF’s need for attention from the media and the political class is one reason why he’s now taking such a rap for the industry’s failings. He brought it on himself. SBF, who dressed and acted in a casual way that reporters tended to like, was a media addict who revelled in his “king of crypto” status. He gave out his cell number to anyone who would listen to him, making himself available for comment at odd times, day and night. He never missed an opportunity to make a potentially viral TikTok video or eke out a little more airtime. Even after FTX’s collapse, he was still calling up every reporter he knew to try and press his innocence, even as every defence lawyer told him to stay quiet.

So, when the New York Times said that crypto was on trial in the SBF case, it was not entirely unreasonable (though definitely misleading). He was the face of crypto for a couple of years. But, to many in the industry, SBF’s incarceration proves little, because he was never a true believer. SBF never advocated for true decentralisation, as hardened Bitcoiners do. And, when he was palling around D.C. salons in 2021 and 2022, he was largely speaking for his own company, rather than for the industry as a whole. These people point out that the fraud was committed largely in dollars, rather than crypto, and it could have happened in any industry that’s lightly regulated and supervised. Bernie Madoff, Elizabeth Holmes and the Great Financial Crisis of 2007-8 managed fine without any Bitcoin or stablecoins changing hands.

But SBF really was supposed to be the chosen one who could make crypto safe for everyday users. As new laws and regulators come down in the wake of FTX, SBF may have achieved that goal, but not in the way he intended. Today, the words “crypto” and “Web3” are losing their currency, replaced by a legalistic vocabulary of “digital assets” and “tokenisation”. Intermediaries that hold crypto assets, like exchanges, now have to attest to their reserves, so it’s clear that people like SBF are not making off with people’s money for their own enjoyment. Crypto is less about financial freedom and wild speculation around funny sounding meme-coins (like Dogecoin and Shiba Inu) and more about “real-world assets”, such as treasury bonds and stocks.

Wall Street is gradually incorporating crypto into the wide financial nexus in subtle ways, exerting control over future regulation and controls. The T-shirt wearing Bitcoiners, who gave rise to the industry and made it culturally interesting, are being sidelined in favour of suits and compliance officers. This all makes the industry less fun to cover and less scandalous. But it also probably means that crypto is on safer ground: more trustworthy and predictable, and less volatile. SBF was part of a wave of crypto-sanitisers who aim was to move crypto from the anarchic fringe to the mainstream. His accidental legacy may be to make it more like the rest of finance — safe for grandma and relatively boring.