Well folks, it’s that time of year again.
December 2023 is almost over, bringing a truly turbulent year to a close. Over the past 12 months, we witnessed the monumental rise of artificial intelligence (AI). Federal Reserve chairman Jerome Powell kept the financial community on its toes as everyone watched for interest rate updates. And Tesla (NASDAQ:TSLA) finally released the long-awaited Cybertruck to a truly mixed reception. But while certain markets boomed, crypto spent most of the year trending downward as investors waited for the trial of Sam Bankman-Fried.
We all know the story of the now-iconic fall of the world’s most powerful crypto exchange and the millennial millionaires it took down with it. But SBF isn’t the only crypto tycoon to see his empire crumble this year. A few of his peers are fighting legal battles of their own, some just as complicated as Bankman-Friend’s, albeit not as public.
Fallen Leaders of Crypto: Sam Bankman-Fried
We all know the biggest downfall in the history of crypto. In August 2022, Fortune reported that “30-year-old billionaire Sam Bankman-Fried has been called the next Warren Buffett. His counterintuitive investment strategy will either build him an empire — or end in disaster.” As 2023 winds to a close, we know two things for sure: Bankman-Fried is not the next Warren Buffett and his “counterintuitive investment strategy” has definitely ended in disaster.
Ever since the now-iconic Coindesk story exposed the deep corruption within his crypto empire, Bankman-Fried has been battling severe legal problems. One year after the story’s publication, a jury found him guilty of seven counts of fraud, including stealing billions of dollars from investors. Bankman-Fried hasn’t been sentenced yet but could face up to 110 years in prison. The fallen billionaire is scheduled to learn his full prison term length on March 28, 2024. Crypto markets have rebounded since the fall of FTX, which plunged them into turmoil, but the man behind the disaster is gone for good from the industry.
Changpeng Zhao
Bankman-Fried isn’t the only crypto entrepreneur to watch his empire crumble this year. In November 2023, Binance founder Changpeng Zhao stepped down from his position as CEO of the prominent crypto exchange. Often referred to as CZ, Zhao pled guilty to anti-money laundering charges and violations of U.S. sanctions. As part of his settlement with the U.S. Department of Justice, Zhao paid $200 million in fees. As WIRED reports:
“In court documents, Binance was charged with money-laundering violations, US sanctions violations, and conspiracy to conduct an unlicensed money-transmitting business. Binance admitted that it had failed to prevent and report suspicious transactions made by terrorist organizations, including Hamas’ al-Qassam Brigades, the Islamic State, and al Qaeda.”
Like SBF, Zhao hasn’t received his full sentence yet, though the hearing date is set for February 2024. The maximum sentence for his crimes is less severe at only 10 years. Price predictions for Binance (BNB-USD) remain generally positive, even in the wake of the scandal that almost took it down. Unlike FTX, this exchange has the opportunity to move forward under new leadership.
Fallen Leaders of Crypto: Do Kwon
Before the expose that took down FTX, many crypto investors were most angry about the actions that led to the Terra ecosystem crashing. In May 2022, the historic crash of Terra (LUNA-USD) and TerraClassicUSD (USTC-USD) shocked the world. Both cryptos were created by Terraform Labs. In February 2023, the U.S. Securities and Exchange Commission (SEC) alleged that the company had defrauded investors, bringing charges against founder Do Kwon. The South Korean crypto entrepreneur is currently being held in Montenegro until his trial in February. As The Wall Street Journal notes:
“Kwon — who has been jailed in the Balkan country since March — has been the focus of an international tug-of-war as both the U.S. and South Korea seek his extradition.”
It doesn’t bode well for Kwon that both the United States and his native South Korea want to charge him with serious financial crimes. As InvestorPlace contributor Alex Sirois states, the tragedy of Terra should serve as a cautionary tale for investors, especially given how poorly Terra 2.0, the team’s attempt to find redemption, is performing.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
