Opinion
Sam Bankman-Fried, a personal verdict
A few thoughts on how Americans thought about the crypto trial of the century.

By Michael Lewis
August 20, 2024 at 11:00 a.m.

When I first started chasing around after Sam Bankman-Fried, I had no idea where he might lead me. I certainly had no sense that I’d wind up with a ringside seat to a financial catastrophe. I had no slant or angle, much less a theory of the case. I was just curious about Sam and his bizarre situation. Inside of three years, he’d gone from socially and emotionally isolated 25-year-old with an upper-middle-class bank account to leader of a small army of math nerds and (according to Forbes magazine) not merely the world’s richest person under 30 but maybe the fastest creator of wealth in recorded history. The leaders of the Republican and Democratic parties solicited his money and his thoughts. The heads of big Wall Street banks felt a need to know him, and the leading Silicon Valley venture capitalists felt a need to invest in him. Tom Brady was hanging out with him, Taylor Swift was negotiating to endorse his crypto exchange, Shaquille O’Neal wanted to partner with him to solve the homeless problem in the Bahamas, and Orlando Bloom was asking to play him in a movie. He’d gone from having no friends as a child to having too many as an adult without ever developing a capacity for friendship.

It wasn’t clear if there was a story in any of this, or what the story might be, but I assumed that if I insinuated myself into the life of Sam Bankman-Fried, something would happen and a story might reveal itself. And, well, something happened.

A comedy with a tragic ending: By the time I began writing the book, that’s what I thought I had on my hands. I started on the last day of January 2023, or roughly a month after Sam had been extradited from the Bahamas to the United States and placed under house arrest at his parents’ home on the campus of Stanford University. It was published in hardcover in early October, the same day jurors were selected for Sam’s trial in a federal courthouse in Lower Manhattan.

All of this seemed to me just about ideal, at least for my narrow purposes. By trapping my main character inside a home an hour from my own, the legal authorities enabled me access to him that would have been difficult to replicate in the wild. Publication a day before the trial opened allowed the book to interact with the event without interfering with it.

Of course, I didn’t really imagine that the book should influence the legal outcome. Neither side was particularly interested in a full and rich account of events, and I was uneasy with how both might distort whatever they found useful for their purposes. But I did like the idea of, in effect, putting readers in the jury box. The rules of evidence in narrative nonfiction are looser than in federal criminal trials.

And I thought that a fuller description of events might enable a reader to render a verdict more nuanced than “innocent” or “guilty.” Which isn’t to say that I expected every reader to render the same verdict. The joy of the story was that they wouldn’t. It was too messy for that.

The trial was less messy. The two sides actually agreed upon many important facts. They agreed, for example, that Alameda Research was consistently profitable in its day-to-day trading activities. They also agreed that FTX had been a real business, with revenue that had grown from roughly $20 million in 2019 to roughly $1 billion in 2021. Also, that when FTX first opened, it was unable to obtain its own bank accounts and so directed its customers to wire their deposits into bank accounts controlled by Alameda Research. (No one explained why the customers — among them some of the world’s most sophisticated trading firms — didn’t complain about wiring the money to the wrong place.) No one disputed that, right from the start, Alameda Research also had the ability to borrow effectively unlimited sums from FTX. And that between these two mechanisms, most of the $15 billion FTX’s customers deposited on the exchange came to rest inside Sam’s private trading firm. Both sides also appeared to agree that for an amazingly long time, this commingling of customer funds with Sam’s didn’t register with the people who ran FTX and Alameda Research as a hugely important fact. For most of its life, Alameda Research held more than enough in liquid assets to cope with any run on FTX. That is, if all the depositors had turned up at once and asked for their money back, they likely could have had it.

The two sides also agreed on when this ceased to be true: mid-June of 2022. A month-long free fall in crypto prices had created panic in the market. Alameda Research had suffered big losses, or rather a reversal of the huge gains it had made on a bunch of crypto tokens (Solana, Serum, FTX Token) that Sam had bought for next to nothing. Elsewhere in cryptoland, investors who had deposited their crypto in unregulated “banks” (Genesis was the big one) were pulling their money out. The crypto banks had loaned roughly $10 billion of that money to Alameda Research and accepted Sam’s tokens as collateral. In mid-June, they asked for their money back. By then Sam had plowed much of the money he’d borrowed into a weird grab bag of assets: Elon Musk’s SpaceX, the AI company Anthropic, a bitcoin-mining company, a liquor company owned by the Kardashians and hundreds of other private companies. The one trait these assets shared was an inability to be sold quickly. Lacking its own funds to repay its crypto lenders, Alameda Research used the funds belonging to FTX’s customers.

This was obviously bad. Sam and his companies had crossed one red line back in 2019 when they warehoused FTX customer deposits inside Alameda Research. They crossed a much brighter one when they put those deposits at risk. By late June 2022, had FTX’s customers all turned up and asked for their money back, FTX wouldn’t have been able to repay them. Roughly $8 billion of it was effectively tied up in Sam’s private investments or in other Alameda Research trades. In effect, Sam Bankman-Fried had yoked a profitable crypto exchange to a profitable private trading firm and turned them into a medium-size bank. The Bank of Sam had several odd features. It invested in far riskier assets than banks typically buy. It was totally unregulated. It had no deposit insurance or other protections usually offered to customers. And its depositors were unaware of the bank’s existence.

The issue wasn’t so much what had happened, but how and why. What had Sam Bankman-Fried known, and when had he known it? What had Sam Bankman-Fried intentionally done with his customers’ deposits, and why had he done it? Here the defense and prosecution parted ways, never to reunite. Sam’s lawyers sought to persuade the jury that their perpetually distracted client never really knew that he had roughly $10 billion of other people’s money in his own private trading firm — and that, even if he had realized it, he had a right to invest the money as he pleased. The federal prosecutors argued that Sam had known from the start where the money was and that FTX was a complex criminal scheme cooked up by a deeply deceitful person to steal it.

There was never any doubt which side had the stronger case. (Before the trial, Sam put his odds of victory at 10-1 against.) What little suspense that existed at the start of the trial vanished after Gary Wang, FTX’s chief technology officer, testified. Gary started by confessing to all the crimes the prosecutors wanted him to confess to. He went on to make it clear that Sam had known all along that the money was in the wrong place. And then he was done and gone and replaced by Caroline Ellison, who finished the prosecution’s job.

Caroline was the trial’s most important witness. She’d been CEO of Alameda Research. If Sam was not responsible for what had happened, Caroline arguably was. And so she also had the most to gain from Sam being held responsible.

Caroline explained to the jury how the crypto lenders had asked her for a quick and dirty picture of Alameda Research’s finances. And how, on June 18, on Sam’s instructions, she cooked up eight different balance sheets of varying degrees of dishonesty and presented them to Sam, who selected the least honest of the bunch to show his lenders.

“Q. In the course of working with the defendant, did he talk to you about the ethics of lying and stealing?

A. Yeah. He said that he was a utilitarian, and he believed that the ways that people tried to justify rules like don’t lie and don’t steal within utilitarianism didn’t work, and he thought that the only moral rule that mattered was doing whatever would maximize utility — so essentially trying to create the greatest good for the greatest number of people or beings.”

The prosecutors didn’t need Sam’s help. Sam helped them anyway by ignoring the counsel of his lawyers and testifying on his own behalf. When confronted by older experts in some complicated field in which he had zero experience, Sam’s first step was always to doubt the value of their advice and think about the complicated field on his own. When this approach worked, it really worked. But after he took the stand, it was clear he had no idea what he was doing. It seemed he’d somehow decided, for example, that it was a good idea to respond to the prosecutors’ questions about his life by not remembering any of it. Events that any normal person would never forget — say, whether he’d flown in a private jet to the 2022 Super Bowl or dined with Bill Clinton and the prime minister of the Bahamas — Sam was suddenly hazy about.

Real-life Sam Bankman-Fried could be breathtakingly persuasive. There was a reason so many smart professional investors and traders entrusted him with billions of dollars. Witness stand Sam Bankman-Fried was so incredible that the jury must have wondered how any idiot ever trusted him with a satoshi. As Lewis Kaplan, the federal judge who presided over the case, said later: “When he wasn’t outright lying, he was often evasive, hairsplitting, dodging questions and trying to get the prosecutor to reword questions in ways that he could answer in ways he thought less harmful than a truthful answer to the question that was posed would have been. I’ve been doing this job for close to 30 years. I’ve never seen a performance quite like that.”

The judge spoke those words in his courtroom at Sam’s sentencing, five months after the trial. The sentencing was more of a cliffhanger than the trial. Even the kindest interpretation of what Sam had done left $11 billion or so of other people’s money being risked without their consent and $8.7 billion in missing customer deposits. (The judge deemed inadmissible any evidence that FTX’s customers might get their money back.) It was difficult to see any juror voting to do anything but convict. All the suspense in Sam’s case was in how you felt about it. How you felt about him.

Back in 1984, an entity called the U.S. Sentencing Commission established guidelines for all noncapital crimes. These sound very precise and almost scientific, but they’re maybe best-loved by judges who would rather not have to think too hard about a case. Judge Kaplan clearly loved thinking about Sam’s case and began by tossing the guidelines out the courtroom window. After that, he could do whatever he felt like doing, short of sentencing Sam to death. He could let him off with time served. He could also put him away for life. And his decision about what to do with Sam was going to reflect how he felt about him.

And so on that morning of March 28, 2024, the judge ordered Sam to rise so that he might address him directly. Two hours or so earlier, Sam had shuffled into the courtroom in prison khakis with his head down and his hands oddly clasped behind his back. Just before he’d entered, his guards had told him he was meant to be wearing handcuffs and asked if he could create the impression that he was doing so. It was very SBF, this: for the authorities to realize he should be constrained, but too late, and for Sam to meekly and pointlessly comply. Now, with his hands in front of him, Sam rose to listen to his fate.

Picking and choosing from the thousands of pages of trial testimony, Judge Kaplan then told the story of Sam Bankman-Fried. The exercise wasn’t very different from what I had done to write a book about Sam Bankman-Fried. Of course, I had a lot more material to work with. I’d seen much of what had gone down with my own eyes and interviewed all the main characters, along with scores of extras, over and again, in good times and bad. The judge had to go on mainly what he’d heard in the courtroom.

He opened with Sam’s childhood. The judge’s interest in the subject was different from mine. I was mainly interested in how socially isolated and peculiar Sam had been as a child; the judge was mainly interested in how many privileges Sam had enjoyed. But then he added this:

“And he suffers from autism, which is a condition that affects different afflicted persons very differently, frequently. He, I gather, is what one would call a very high-achieving autistic person, which means, among other things, that he’s capable of huge accomplishments, and he has frequently a social awkwardness and a way of interacting with people that’s unusual and sometimes off-putting. I take that all as a given.”

I’d left it to the reader to figure out what spectrum, if any, Sam was on. I’m still unsure. He exhibited some unusual mannerisms. His knee bounced and his eyes darted around when he spoke, and unless he got lucky and stumbled into a wholly absorbing topic, he seemed always to be thinking about three things at once. But he’d only been diagnosed with autism, in a bid for sympathy, in the summer of 2023. And he had qualities — a deep sense of irony, for example — not typically associated with the diagnosis. I imagine that one day, when the human brain is better understood, someone might revisit Sam’s case and say, “I can see why they thought he was autistic, but this is what it actually was.”

At any rate, as the judge proceeded it became clear that he thought that whatever afflicted Sam was beside the point. The point was that Sam had broken the law, caused a lot of pain, failed to express remorse and perjured himself in the bargain. Sam’s motive, the judge decided, wasn’t the usual desire for money. “He did it because he wanted to be a hugely, hugely politically influential person in this country,” he said. Before handing Sam his sentence, he dwelled for a moment on the deeper why of the case. He said he’d realized something important while listening to Caroline Ellison testify. Then he picked up the transcript of her testimony and read:

“Q. During your time working with the defendant, how, if at all, did he describe his approach to risk-taking? A. He described himself as truly risk-neutral, meaning that most people are risk-averse, meaning that they would rather not take a risk if they don’t have to, or they try to avoid risks. But he said that he was totally comfortable taking a risk as long as he thought it was a positive EV.

Q. What do you mean by “positive EV”?

A. “EV” stands for “expected value,” so that was a term that we used a lot when talking about trading. So, yeah, positive EV just means that sort of, on average, you expect it to pay off well, even if maybe there are lots of cases where you will end up with zero, or you’ll end up losing lots of money, because there are, like, some cases where you make a lot of money.

Q. Did the defendant ever give any example to describe his approach to risk-taking?

A. Yeah. He talked about being willing to take large coin flips, like a coin flip where if it comes up tails, you might lose $10 million. But if it comes up heads, you make slightly more than $10 million.

Q. Did he ever give other coin-flip examples?

A. Yeah. I guess he also talked about this in the context of thinking about what was good for the world, saying that he would be happy to flip a coin if it came up tails and the world was destroyed — as long as if it came up heads, the world would be, like, more than twice as good.”

“In other words,” said the judge, “a man willing to flip a coin as to the continued existence of life and civilization on Earth, if the chances were imperceptibly greater that it would come out without that catastrophic outcome, that’s really a leitmotif in my judgment of this entire case. … It’s his nature.” Because it was his nature, the judge concluded, Sam would, if given the chance, do something like what he had just done all over again. “There is a risk that this man will be in a position to do something very bad in the future, and it’s not a trivial risk, not a trivial risk at all,” said the judge. “So, in part, my sentence will be for the purpose of disabling him.” He then sentenced Sam to 25 years in prison, with no possibility of parole.

A few minutes later, Sam dutifully clasped his hands behind his back and shuffled out of the courtroom.

The mind has a gift for cleansing the past of uncertainty. However unlikely what just happened might have been — however contingent on luck and unhappy accident — it can eventually be made to feel as if it had been always inevitable. A story gets told that makes some event no one had forecast feel as if it were entirely predictable. This purging from reality of lots of messy facts began the moment FTX collapsed. By the time of Sam’s trial, the government was able to sell ideas about him that would have struck any of his closest colleagues as preposterous. The suggestion, for example, that everything about Sam’s appearance had been carefully curated to trick people. The government used Caroline Ellison’s testimony to push this line:

“Q. How would you describe the defendant’s personal appearance throughout 2022? What, if anything, did he tell you about that?

A. He said he thought his hair had been very valuable. He said ever since Jane Street, he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX’s narrative and image.”

If Sam Bankman-Fried’s appearance was an act, it was an act he’d performed his entire life. Former schoolmates who came upon Sam after he’d become a billionaire took one look at him and said, “Same guy.” His “look” couldn’t have been more sincere. He was as good as born with an indifference not just to his own appearance but to other people’s, too — and to art, nature and almost every source of beauty that in most people triggers an emotional response. At some point after he became a public figure — a thing he’d never expected to be — he no doubt noticed that other people seemed to be charmed by his look. His realization would have relieved him of any pressure to alter his appearance. But that’s different from creating a persona to deceive others. It’s more like ChatGPT-4o realizing that the way it just answered a question caused humans to laugh — and thus must be a joke.

The effect of the trial was to confine Sam Bankman-Fried to yet another box on a shelf next to identical boxes marked “fraud” and deter anyone from taking an honest interest in him. But even after the trial, I still found him interesting. There were lots of messy bits about his case that made it hard to squeeze into any of the usual boxes. For example: If he knew he’d orchestrated a giant fraud, why had he devoted so much time and energy to persuading U.S. financial regulators to regulate him? Why hadn’t Sam squirreled away a pile of money in some secret account for himself? Why hadn’t he followed every other shady crypto dude and fled to Dubai? The answers to these questions were irrelevant to his legal fate. They just cluttered the neat picture lots of people seemed to want to paint of him.

The most obvious bit that didn’t fit into the picture surfaced a few weeks after his sentencing. On May 7, 2024, John Ray, FTX’s new CEO, revealed to the U.S. Bankruptcy Court for the District of Delaware that, against the $8.7 billion in missing customer deposits, FTX was now sitting on something like $14.5 to $16.3 billion. Whatever the exact sum, it was enough to repay all depositors and various other creditors at least 118 cents on the dollar — that is, everyone who imagined they had lost money back in November 2022 would get their money back, with interest. After paying off FTX’s debts — and paying themselves at least half a billion dollars — Ray and his team will likely still be sitting on billions of dollars. How many billions of dollars is still an open question, but very few of these dollars can be the result of Ray’s various lawsuits to claw back money paid out by FTX in good times. The money came almost entirely from a fire sale of the contents of Sam Bankman-Fried’s dragon’s lair.

The success of the bankruptcy clearly surprised, and maybe even alarmed, the lawyers running it. Months after Sam Bankman-Fried handed him the company, Ray had been keen to stress how little of value he’d been given. More than a little bizarrely, he talked down the value of the assets he was meant to dispose of to repay creditors. Ray called the 20 percent stake Sam had acquired in Anthropic “worthless.” The giant pile of Solana tokens Sam had acquired for pennies were “shitcoins” whose value had been falsely inflated by Sam’s purchases. The Anthropic stake has wound up being worth billions. The Solana token, even without Alameda Research around to prop it up, popped back up from roughly $10 at the end of 2022 to $150 a year and a half later. To this day, Ray hasn’t spoken to Sam Bankman-Fried. It’s hard not to wonder, if they had simply called Sam, what else the lawyers running the FTX bankruptcy might have learned about the contents of his lair. Also, how much more money would be on hand if, for their first 18 months on the job, the bankruptcy lawyers had simply not shown up for work.

From the moment Sam Bankman-Fried’s empire collapsed, lots of people were obviously angry with him, and others found a ready market in the stoking of outrage. It was a decent rule of thumb that the people who got worked up in public about Sam Bankman-Fried were vulnerable to questions about their own behavior: owners of crypto exchanges, squirrelly financial people, dubious crypto Twitter journalists. If you had asked these people in late November 2022 why they were so angry, they would likely have said something like, “He stole people’s money.” If you had further asked them if they would feel any less angry if that money were repaid, with interest, a lot of these people would have said something like: “First, that’s nonsense. Claims on FTX are trading at 3 cents on the dollar. No way people are getting their money back. But if in some strange alternate universe all the money and more were found, well, of course I’d feel a bit differently. How could I not?” All the money and more has been found, and it’s not clear whether the people who were most outraged at the outset feel differently. The people who have made a living selling into the outrage don’t seem much affected.

One strange fact: No one guessed Sam’s crime before the market exposed it. Of course, there were plenty of people willing to say that there was something fishy about the relationship between FTX and Alameda Research. That doesn’t count, especially in crypto, where the best guess is always that something fishy is going on. No one — not one single person — said, “He’s got the customers’ deposits in his private trading firm.” There is a reason for this, I think: The crime made no sense. It still makes no sense. The crime was unnecessary to the business in a way that, say, Bernie Madoff’s was not (which is why people guessed Madoff’s crime before it was exposed). A corollary to this point is that there are many ways it might have been avoided and FTX might have survived. The most obvious of these came in June 2022, when the crypto banks that lent roughly $10 billion to Alameda Research asked for their money back. If someone had called them at that moment and said something like, “Sorry, Sam used your money to make billions of dollars’ worth of illiquid venture capital investments; you can either wait for us to sell what he bought or sue us — but if you sue us, you are less likely to get your money back,” Alameda Research possibly fails, but FTX survives, and the customers’ money is never in jeopardy.

That doesn’t mean I think that Sam Bankman-Fried is innocent. It merely informs how I feel about him. I think the truth is closer to “young person with an intellectually defensible but socially unacceptable moral code makes a huge mistake in trying to live by it” than “criminal on the loose in the financial system.” A lot of what I’ve written about is nearly as much an indictment of regulators and venture capitalists and crypto culture and the wider world that instantly gathers around huge piles of money without asking too many questions as it is of the founders of FTX.

Sam was always encouraged to think of himself as special — first by his parents and finally by Jane Street, the trading firm where he got his start. He took that thought and ran with it. The situation was complicated by the fact that he was special. His interactions with the world were invariably peculiar. These interactions, odd as they might be, often generated teachable moments. They told you something about the way the world works. But they also exposed his most unsettling trait: a willingness to subject others to risk without their permission. It expressed itself most obviously in his willingness to gamble with his customers’ deposits. But it’s also what allowed him to believe that it would be smart for him to flip a coin that might wipe out life on Earth.

His crime was of a piece with his character. The character wasn’t the character of a thief. It was the character of a person numb to risk. Unable to feel risk himself, he can’t really imagine other people feeling much at all about the risk he has subjected them to. It’s this absence in him that leads him, when cast in a certain light, to seem vulnerable. Easy to kidnap, easy to steal from. It’s this absence that, cast in a different light, makes him seem like a danger to society. I could be wrong: Mine is just one more theory of a case complicated enough to support many theories. And even if I’m right, it’s no excuse. In the end, some coins should never be flipped.

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