- On 2 November a New York jury found Sam Bankman-Fried, founder of FTX, guilty of fraud.
- The charges centred on the use of the platform’s customers’ funds, which were not used for what users expected.
- In any investment, custody, transparency and segregation of customer funds are the foundation, not a detail.
On 2 November 2023 a New York jury found Sam Bankman-Fried, founder of FTX, guilty of fraud over the use made of the platform’s customers’ funds. The verdict closed the criminal phase of one of the most closely followed cases in the crypto-asset sector.
Beyond the media interest, the case is a practical lesson in what happens when an institution that holds other people’s money fails to meet the expectations of those who trust it. Those who kept funds on the platform suffered serious harm, and the court ruling does not by itself return what was lost, but it does establish responsibility. The case, which had reached the courts after the platform’s collapse, illustrated how far the combination of a new technology, rapid growth and insufficient controls can end up harming thousands of people.
The verdict
The verdict rested on a specific charge: that customers’ funds were not used for what users expected. That is why the case is cited as an example of what can go wrong when the custody of other people’s money and the running of one’s own business are not clearly separated.
When a customer deposits money or assets with a platform, they expect them to be available when requested and not to be used for other purposes without their knowledge. The prosecution maintained that this expectation was not met. The jury found the facts proven, although the judicial process still includes possible later stages. A criminal trial with a jury has its own rules of evidence and procedure, and its outcome concerns the responsibility of specific individuals. It does not by itself settle what will happen to the affected funds, which is handled through separate channels.
A chapter closes
The case closed a chapter in the sector. The collapse of FTX had been one of the most serious episodes in the recent history of crypto-assets, and the trial served to establish responsibility through the criminal route, in addition to the civil and regulatory ones.
For the sector, it was a wake-up call about the need for clear rules and supervision. For users, a reminder that enthusiasm for an asset or a technology is no substitute for checking how the institution chosen to deal in them operates. And for regulators, one more argument for strengthening controls. The episode gave impetus to debates on supervision, auditing and segregation of functions in crypto-asset platforms, which in many cases combined activities that in traditional banking are kept strictly separate.
What it teaches for any investment
It reinforced a simple idea: in any investment, custody, transparency and segregation of customer funds are not details, they are the foundation. Before entrusting money or assets to a platform, bank or manager, it is worth knowing where they are held, who has access to them, what audits or controls exist and what happens if the institution fails.
These are basic questions, and anyone who does not get clear answers should think twice. It is not about distrusting everything, but about asking for the level of clarity that would be demanded of any other custodian. An adviser can help formulate these questions and interpret the answers before entrusting a third party with an important part of one’s wealth. It is wise to be wary of promises of returns far above the market’s, of opaque structures and of explanations that cannot be independently verified. These signs do not prove a problem, but they justify asking for more information.
Trust in an institution should rest on verifiable structures, not on reputation or narrative.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
