Taming fraud in crypto’s Wild West

The meteoric rise and sudden downfall of crypto exchange FTX, and its founder Sam Bankman-Fried, is likely to become an essential case study for fraud examiners seeking to understand the new Wild West of the financial markets. Here we look at what happened and lessons learned from possibly one of the largest U.S. financial frauds.

A little over a year before he was arrested on multiple fraud charges in November 2022, Sam Bankman-Fried, the then-29-year-old and ultra-popular CEO of the now-bankrupt crypto exchange FTX, implied in a 2021 interview that if Enron had had its financial books on a blockchain, corrupt executives would’ve had a much harder time fabricating them. The implication was that blockchain is a transparent and immutable technology that would’ve made it difficult for executives at the disgraced energy company to conceal the web of failed businesses and high leverage that ultimately led to its downfall in 2001. (See “Episode #1 Transcript: The $10 BILLION Man; He’s 29, and it’s all from Cryptocurrencies… with Sam Bankman-Fried,” The Jax Jones and Martin Warner Show, June 2, 2021.)