Cautionary tale for investors after Bay Area native Sam Bankman-Fried charged with fraud, conspiracy

FTX founder was slapped with 8-count indictment for charges of fraud and conspiracy.

ByAmanda del Castillo KGO logo

Thursday, December 15, 2022

Cautionary tale for investors after Bay Area native charged with fraud

FTX founder and Bay Area native Sam Bankman-Fried was slapped with eight-count indictment for charges of fraud and conspiracy.

SAN JOSE, Calif. (KGO) -- The U.S. indicted former CEO of FTX, Sam Bankman-Fried on eight-counts of fraud on Tuesday. The crypto-owner was arrested in the Bahamas on Monday, at the request of the U.S. Government.

Bankman-Fried is a Bay Area native and son of two Stanford law professors. He was slapped with that eight-count indictment Tuesday, for charges of fraud and conspiracy.

He could face up to 115 years in prison if ultimately convicted on all eight counts, filed by the U.S. Department of Justice.

San Jose State professor and tech expert, Ahmed Banafa said cryptocurrency aside, this is a cautionary tale for those who invest on any level.

"Don't ever put your savings, your education, whatever- your retirement... Don't invest it in these kinds of promises," Banafa warned. "Because if somebody is promising you high returns, you have to understand that comes with high risk."

Bankman-Fried, 30, has yet to enter a plea. He is awaiting extradition to the U.S., accused of defrauding customers and investors of crypto-giant FTX out of billions of dollars.

Bankman-Fried was born on the campus of Stanford University. He attended Crystal Springs Uplands School in Hillsborough, and graduated from MIT in 2014.

On Tuesday, his alleged crimes were called, "One of the biggest financial frauds in U.S. history" by U.S. Attorney Damian Williams.

"It's exactly what happened with Enron in the 2000. It's exactly what happened with Bernie Madoff in 2008," Banafa added.

Tuesday's development comes one month after Bankman-Fried filed for a $32-billion bankruptcy, and only weeks after he sat down with ABC's George Stephanopoulos to address the fall of FTX.

"I wasn't spending any time or effort trying to manage risk on FTX," Bankman-Fried told Stephanopoulos.

"That's a pretty stunning admission," Stephanopoulos immediately replied.

Back in the Bay Area, tech expert Banafa referenced Elizabeth Holmes.

Holmes was recently sentenced to more than 11 years in prison for defrauding investors of the shuttered blood testing company, Theranos.

Banafa described similarities with Bankman-Fried.

Beyond allegations of fraud, both have Silicon Valley-ties and were once considered to be shining examples of innovation and young entrepreneurship.

He said, "Without transparency, without being honest and upfront and telling the truth, this is what we're gonna see. It's not, 'Fake it until you make it,' it's actually make it until you make it, and you make it, and you make it."