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Sam Bankman-Fried is guilty, and the industry he helped build wants to move on

After a monthlong trial, New York City jury found former FTX CEO Sam Bankman-Fried guilty of seven criminal counts, including securities fraud.
Michael M. Santiago
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Getty Images
After a monthlong trial, New York City jury found former FTX CEO Sam Bankman-Fried guilty of seven criminal counts, including securities fraud.

The highest-profile cryptocurrency trial is over, and the crypto industry is eager to move on. But that isn't going to be easy.

Earlier this month, a New York City jury found the disgraced crypto mogul Sam Bankman-Fried guilty of seven criminal counts, including money laundering and securities fraud.

As the co-founder and former CEO of the cryptocurrency exchange FTX awaits a sentencing hearing scheduled to take place in March, Bankman-Fried still casts a long shadow on the industry he helped make. FTX filed for bankruptcy exactly one year ago, on Nov. 11, 2022.

Bankman-Fried and FTX introduced millions of people all over the world to Bitcoin, Ethereum and other cryptocurrencies, and his company spent a lot of money — on sponsorships, endorsement deals and a Super Bowl ad — to make FTX a household name, and to promote crypto more broadly.

Today, the industry wants to rekindle interest in cryptocurrencies. But regulators and many retail investors remain deeply skeptical.

"It's very hard for the industry to really disassociate itself completely from FTX," says Yesha Yadav, an expert on digital assets at Vanderbilt Law School. "I think the FTX debacle tainted and diminished the cryptocurrency industry."

FTX's implosion and Bankman-Fried's subsequent downfall deepened a market downturn that is referred to as a "crypto winter." One year later, they are still having a chilling effect, but there is optimism among crypto businesses and boosters that there could be a thaw soon.

Here are where things stand in crypto on the anniversary of FTX's collapse.

Crypto players try to move on

Despite skepticism in large parts of the financial sector, the crypto industry is trying hard to isolate itself from Bankman-Fried's troubles.

Key players acknowledge the seriousness of the fraud he committed, and the charges against him, but they argue they were the actions of an individual bad actor.

"The industry moved on from SBF long before the verdict was read," says Kristin Smith, the CEO of a crypto trade group called the Blockchain Association. "Sam's crimes had nothing to do with the technology underpinning blockchain networks and digital assets. This is about a crook, not crypto."

Yadav says that as soon as the jury announced its verdict on Nov. 2, the industry began to argue that crypto post-SBF is safe, that it isn't "tainted by all this kind of fraud and misappropriation."

"I think there are a lot of people who are really, really happy and delighted he has been convicted," says Yadav, adding the verdict is a way for them to "showcase to customers that bad actors have been removed."

There are signs that strategy is working.

In recent weeks, the price of Bitcoin has started to climb again. Even a virtual currency Bankman-Fried created out of whole cloth, called the FTX Token, or FTT, has gained ground.

Bitcoin is now trading around $36,000, which is about half its all-time high, but more than twice as high as it was at the beginning of the year.

But other financial industry experts remain wary crypto can make a comeback.

Though crypto proponents like to tout their industry as the future of finance, many are dubious. By design, the crypto economy is supposed to be borderless, built to operate outside the boundaries of traditional finance.

According to Timothy Massad, the former chairman of the Commodity Futures Trading Commission (CFTC), the collapse of FTX did lessen some of the wild speculative bets that characterized the crypto market during the company's heyday.

But he isn't completely convinced by what he's seen so far.

"I don't think the use case for a lot of what's been developed in this sector has really been proven," says Massad, who now runs the Digital Assets Policy Project at Harvard University. "I do think it's an interesting technology that may have very useful applications, but there are a lot of things that don't really have that much utility."

Because their prices are so volatile, cryptocurrencies aren't useful as mediums of exchange, and the fraud at FTX only heightened fears about the safety of digital assets. The company funneled billions of dollars from customers without their knowledge.

And despite what Bitcoin's boosters claimed, that the cryptocurrency would be a hedge against high inflation, that hasn't proven to be the case. When the rate of inflation rose, Bitcoin's value plummeted.

Industry backers are playing up the potential uses of blockchain technology that underpins crypto trading. They say the blockchain, a decentralized, public ledger that records transactions, has wider applications. In the future, companies say, it will improve how hospitals store and share medical records, and how insurers track claims.

Chair Gary Gensler has cracked down on the crypto companies during his tenure as chair of the Securities and Exchange Commission.
Win McNamee / Getty Images
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Getty Images
Chair Gary Gensler has cracked down on the crypto companies during his tenure as chair of the Securities and Exchange Commission.

Massad says there is a need for clearer, crypto-specific regulations. As he surveys the crypto landscape, he still sees a lot of speculative activity, scams and frauds, and he believes that new regulations could remove some of that digital dreck.

Regulators remain deeply concerned

One of the main difficulties of the crypto industry is that it's still so new — Bitcoin was introduced in 2008 — and it operates in a regulatory gray area.

So far, Congress has failed to pass any meaningful legislation on cryptocurrency, and U.S. financial regulators have grown tired of waiting for it.

In recent months, the Securities and Exchange Commission (SEC) and the CFTC have brought more enforcement actions. In recent months, they've gone after other crypto exchanges, like Coinbase, Kraken and Binance.

As part of a broad crackdown on the crypto industry, the Securities and Exchange Commission has sued Binance, and its co-founder and CEO,  Changpeng Zhao.
Patrícia de Melo Moreira / AFP via Getty Images
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AFP via Getty Images
As part of a broad crackdown on the crypto industry, the Securities and Exchange Commission has sued Binance, and its co-founder and CEO, Changpeng Zhao.

The SEC has accused Binance of operating an unlicensed exchange, and says it sits atop a sprawling and shadowy web of corporate subsidiaries.

The SEC and the CFTC are using their existing law enforcement authority and decades-old laws to crack down on crypto companies.

But as the 2024 election approaches, it's less likely crypto legislation will be among Congress' top priorities.

At the same time, crypto isn't going anywhere

Despite tensions between regulators and lawmakers and industry, there are signs crypto is continuing to evolve.

On Wall Street, the major banks continue to take crypto seriously. Even though the size of the cryptocurrency market is a fraction of, say, the stock market or the commodities market, financial firms like Citigroup and JPMorgan Chase have analysts and strategists who are focused on crypto.

And cryptocurrencies have become more accessible.

Earlier this year, Fidelity announced it would allow customers to add Bitcoin to their retirement portfolios.

And after a recent court decision, there is new optimism among asset managers that the SEC will approve an exchange-traded fund that tracks the cryptocurrency's price.

For mom-and-pop investors who are interested in Bitcoin, but don't want to hold the asset itself, investing in a regulated, structured security could be appealing.

Twelve companies, including BlackRock, Invesco and Fidelity, have applications before the SEC to introduce crypto ETFs. Regulators there could decide whether to approve them any day now. Previous applications were rejected. The SEC said the market was too susceptible to manipulation.

And one year after FTX filed for bankruptcy, it is poised to make a comeback of sorts.

This week, The Wall Street Journal reported three companies are vying to purchase the remains of the defunct cryptocurrency exchange with the hope of rebooting it.

Copyright 2023 NPR. To see more, visit https://www.npr.org.

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David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.