Breakingviews – Breakingviews: SBF’s guilty verdict will help crypto break free

NEW YORK, Nov 2 (Reuters Breakingviews) – Just over a year ago, Sam Bankman-Fried might have been counting his large stash of virtual coins. Soon, he may be counting bars in prison instead. A Manhattan jury on Thursday convicted the FTX founder of seven counts related to crimes he committed at the helm of the now-bankrupt cryptocurrency exchange. With some $8 billion in customer funds stolen, his misdeeds will go down as one of the biggest financial frauds on record. Bankman-Fried’s shot at redemption is all but over, yet for the broader cryptocurrency business it could provide a long-awaited chance to move forward.

The trial of the former billionaire widely known as SBF lasted roughly four weeks, but it took the jury just over four hours of deliberation to unanimously determine his guilt. Several ex-colleagues testified against him in court, saying he siphoned customer funds away from the exchange to finance personal investments, political contributions and even charitable donations. He didn’t garner much sympathy while on trial. Even the judge overseeing the case chided him for evasive answers on the witness stand.

The outlandish details of FTX’s collapse fueled broader mistrust of the cryptocurrency sector. Crypto and blockchain startups raised less money in the last four quarters combined than in the first quarter of 2022, when FTX was still riding high, according to research by digital asset investment firm Galaxy Digital. The failed firm’s tentacles seemed to extend to every corner of the sector, from lenders like Genesis to hedge funds like Three Arrows Capital. To be sure, the speculative bubble in crypto would probably have deflated even without Bankman-Fried. But his prominent role in promoting U.S. legislation to govern such assets meant that his downfall in some ways halted progress entirely.

Yet despite widespread predictions of cryptocurrency’s demise, there is still a market for virtual assets. The price of bitcoin has more than doubled this year as large financial institutions like BlackRock (BLK.N) seek to make the virtual currency more respectable. Even FTX may be set for its own rebirth. CEO John J. Ray III is working on a payout plan for customers who lost money. The bankrupt exchange is also negotiating with three bidders to help it relaunch trading services, Bloomberg reported last month.

Assistant U.S. attorney Nicolas Roos said in his closing statement before the jury, “this is not about complicated crypto, it’s about deception.” Even if Bankman-Fried appeals the verdict, his swift conviction should cause a collective sigh of relief from firms using blockchain technology to solve real problems like streamlining cross-border payments and remittances. Crypto enthusiasts argue that technology permits the creation of decentralized financial networks. It may take some old-fashioned U.S. justice to restore trust in the idea of a trustless system.

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CONTEXT NEWS

A jury in Manhattan federal court on Nov. 2 convicted Sam Bankman-Fried, founder and former CEO of cryptocurrency exchange FTX, of seven counts related to wire fraud and money laundering in connection with his role in its collapse.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

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