Photo illustration of Sam Bankman-Fried in front of a graphic background of tumbling crypto coins.
Photo Illustration by Cath Virginia / The Verge | Photo by Bloomberg, Getty Images

Cryptocurrency advocates might believe that FTX’s collapse was an anomaly — but they could have trouble convincing the public of the same.

During Sam Bankman-Fried’s monthlong fraud trial, prosecutors presented damning evidence that the fallen crypto founder knew full well what he was doing from the beginning. He knew that Alameda Research borrowed billions in customer funds from FTX. He knew his fellow executives fabricated balance sheets to send to lenders. He knew FTX wasn’t fine when he told customers it was.

In cryptoland, the response to these revelations was largely to condemn Bankman-Fried and FTX as an aberration. When the truth about FTX came out, Binance CEO Changpeng “CZ” Zhao slammed Bankman-Fried, saying he “lied to everyone.” Similarly, Coinbase CEO Brian Armstrong wrote on X (formerly Twitter) that “even the most gullible person should not believe Sam’s claim” that the missing funds stemmed from an accounting error.

But as Bankman-Fried awaits sentencing after being convicted on seven criminal counts, including wire fraud, the rest of the industry has been left to take stock of its future. FTX may have been one of the most brazen fraud operations in recent years, but it’s far from the only embarrassing crypto collapse. While some of the decisions Bankman-Fried made might have been unique to FTX, it’s one of the multiple cases where no one on the outside caught on until it was too late — and in the wake of Bankman-Fried’s trial, it may take work to convince the public he was an outlier.

Before his fall, Bankman-Fried was a poster child for an upstart industry. The 31-year-old power broker maintained the scruffy, somewhat quirky appearance of the kid in your computer science class that you would probably ask for help. (This particular look, according to his ex-girlfriend and former Alameda CEO, Caroline Ellison, was carefully crafted.) He became crypto’s golden boy, appearing on the cover of Fortune magazine and getting profiled in Forbes. He testified about his operation’s safety in front of Congress. While other firms collapsed last year, FTX appeared strong, with Bankman-Fried inviting comparisons to JP Morgan while bailing out other struggling firms.

Some media outlets continued to burnish his representation even after FTX crashed and burned. The Washington Post highlighted Bankman-Fried’s contributions to pandemic research (some of which apparently came from customer funds). Then, The Wall Street Journal focused on how Bankman-Fried’s “Plans to Save the World Went Down in Flames” and said FTX’s collapse “wiped out his wealth and ambitious philanthropic endeavors.” (The ambitions of FTX customers were presumably not headline material.) The information we know now lets us see past that persona — but it also gives the crypto-curious a lot to chew on.

Other crypto companies seem to think that picking out the one bad apple will be good for the rest of the industry. In a statement provided to CoinDesk, Paul Brody, the head of blockchain at financial consulting firm EY, calls the outcome of Bankman-Fried’s trial a “wonderful moment for crypto,” and Yat Siu, the chairman of blockchain gaming company Animoca Brands, says it marks a “new beginning” for the industry.

“Over the past year, our industry took a reputational hit in Washington, but Sam Bankman-Fried’s crimes had nothing to do with the technology underpinning digital assets,” Kristin Smith, the CEO of the Blockchain Association, tells The Verge. “The trial was about a crook — not crypto. And while the trial hasn’t been a net positive for the industry, it has refocused minds on the fundamental promise of decentralization.”

Indeed, a lot of Bankman-Fried’s misconduct is not inherently related to cryptocurrency — like falsifying his firm Alameda Research’s finances and spending other people’s money without permission.

But much of this appears to have been possible because there was so little meaningful oversight of the crypto industry and so much acceptance of companies playing fast and loose. It’s hard to say if the crypto companies left standing are free from all of FTX’s flaws, or how closely they’ve looked over their partners. And then there’s the simple, inconvenient fact that so many of them are under legal scrutiny.

Earlier this year, the Securities and Exchange Commission sued Terraform Labs, the crypto firm behind the stablecoin that vaporized billions in customer funds when it collapsed last year, for allegedly perpetuating “a fraudulent scheme.” After that, the Federal Trade Commission arrested the CEO of now-bankrupt crypto lending company Celsius over claims he made millions off the lies he spread about the firm’s token.

There’s also the crypto influencer Richard Heart, who the SEC accused of spending at least $12 million in customer funds to purchase sports cars, luxury watches, and a 555-carat black diamond. Other major firms, including Coinbase, Binance, Genesis, and Gemini, also face lawsuits from the SEC.

That I can so easily fill two paragraphs with an (incomplete) list of legal issues the crypto industry is facing doesn’t exactly inspire confidence. This uncertainty is already affecting regulations that the “good” companies in crypto want passed. The industry favors a bill that would limit the SEC’s oversight of the industry, for instance, while granting more power to the Commodity Futures Trading Commission. However, the outcome of Bankman-Fried’s trial could ultimately harm its success. Sen. Elizabeth Warren (D-MA) has told Politico that the industry “has serious problems with fraud, and the public no longer has confidence that it’s on the up and up.”

Witness testimonies and a plethora of evidence have revealed a whole range of things that can and could’ve gone wrong. What would’ve happened if CoinDesk never published the article that revealed the massive hole in FTX’s balance sheet? Would Bankman-Fried continue to go about his business — doling out billions in stolen funds to save sinking crypto companies, donating to politicians, and sponsoring sports teams? Would he have kept spending FTX customers’ funds until it either all crashed for some other reason, or until one of his bets — like an investment in the AI company Anthropic — hit big enough to clear the books? Alameda’s unlimited amount of credit makes it seem like a possibility.

Sam Bankman-Fried wanted to prove the world could trust the cryptocurrency industry. Now, the industry hopes to leave him behind. But he might be far from the last bad actor cashing in on crypto — and the crypto world has yet to prove it can spot them before catastrophe strikes.