Who’s Rooting Hardest for a Sam Bankman-Fried Conviction? The Crypto Industry.

Travis Kling has spent a lot of time this year focusing on his mental, physical and spiritual health. That has been his coping mechanism since his cryptocurrency firm, Ikigai Asset Management, lost most of its assets from last year’s collapse of the cryptocurrency exchange FTX, where he was a customer.

Mr. Kling said he harbored no hatred for Sam Bankman-Fried, FTX’s founder. But as Mr. Bankman-Fried’s criminal fraud trial kicks off on Tuesday, Mr. Kling is eager to see the onetime crypto mogul — who is now viewed as its biggest villain — held accountable for his actions.

“That will be cathartic for the crypto ecosystem,” Mr. Kling said.

Eleven months after FTX’s implosion sent an already declining cryptocurrency market into a doom spiral, Mr. Bankman-Fried’s trial is set to reopen wounds that have barely had time to heal in the crypto industry. As painful as it may be to relive FTX’s downfall, the industry is united in its zeal to see Mr. Bankman-Fried held to account.

“Sam should get convicted because he’s a criminal,” said Sheila Warren, the chief executive of the Crypto Council for Innovation, a lobbying group. “The industry supports that because a lot of people felt burned by him.”

The distancing is partly a matter of self-interest. Mr. Bankman-Fried’s trial is seen as a referendum on the crypto industry, which has struggled for more than a decade to shake its associations with lawlessness and fraud.

And it may be convenient to point fingers at the FTX founder, even as some in the industry benefited from his rise. Through the boom times of 2020 and 2021, Mr. Bankman-Fried made venture capital investments in crypto companies at inflated valuations. When the market crashed last year, he initially bailed out struggling peers.

When Mr. Bankman-Fried drove up the valuations of other crypto companies, “no one was like, ‘This is ridiculous,’” said Kathleen Breitman, a founder of the crypto platform Tezos. “The industry often has a reputation that it deserves.”

A representative for Mr. Bankman-Fried declined to comment.

At the heart of Mr. Bankman-Fried’s case is whether he oversaw the misuse of FTX’s customer deposits to fund a network of political donations, tech investments and real estate purchases. Prosecutors have charged him with seven counts of wire fraud and conspiracy on behalf of FTX’s customers and investors, as well as groups that lent money to its sister firm, Alameda Research. Mr. Bankman-Fried, who has pleaded not guilty, could serve the equivalent of a life sentence in prison if convicted.

FTX’s bankruptcy in November, which incinerated $8 billion in customer deposits and damaged the reputations of famous and powerful people who were wooed by Mr. Bankman-Fried, set off a domino effect of crypto failures from which the industry has not recovered. It also incited a regulatory crackdown and soured the public on cryptocurrencies just as the asset class was going mainstream.

“The FTX fraud failure was a huge setback for the industry,” said David Pakman, an investor at CoinFund, a crypto investment firm. “That has tainted the market and made it harder to raise capital.”

Venture capital investments in crypto start-ups have steadily declined for five quarters in a row. In the three months ending in July, crypto companies raised $2.3 billion, down 71 percent from a year earlier, according to PitchBook, which tracks start-ups.

The crypto world has tried to separate itself from FTX since its collapse, echoing past high-profile tech scandals. When Elizabeth Holmes, the founder of the failed blood testing company Theranos, was accused of lying about her company’s technology and business performance, Silicon Valley investors brushed off her actions as not representative of the start-up industry. (Ms. Holmes was found guilty and went to prison in May.)

In the same way, the crypto industry has been among the fiercest critics of Mr. Bankman-Fried.

Changpeng Zhao, the founder of the rival crypto exchange Binance, helped incite a panic around FTX in November by expressing concern for its stability. Then the industry’s social media influencers relentlessly cheered on, investigated and made memes about Mr. Bankman-Fried’s comeuppance, with some calling him “Scam Bankman-Fraud.” In March, a crypto conference stocked its bathrooms with toilet paper depicting his face.

The crypto world’s anger was acute because Mr. Bankman-Fried had positioned himself as an industry leader, particularly when it came to regulatory and policy issues, said Ari Redbord, a former federal prosecutor who now leads policy at TRM Labs, a crypto analytics company.

“The crypto community more broadly felt the breach of trust,” he said.

The extraordinary speed at which the case has gone to trial — similar cases typically take years to do so — means that emotions are still raw for many of the people involved, Mr. Redbord added.

Qiao Wang, a founder of Alliance, a crypto start-up accelerator program, has been frustrated by all the bad actors in the industry who have gone unpunished. That lack of consequences has made people outside the industry skeptical of it and caused insiders to leave out of frustration, he said.

“It hurts the industry,” Mr. Wang said. “I can’t wait to see Sam get punished.”

Some insiders believe that a shakeout was necessary. The market had gotten too overheated in 2021, fueling greed, hype and bad ideas, insiders said. But they rued how Mr. Bankman-Fried’s actions destroyed trust in the entire industry.

Yury Lifshits, the founder of the crypto company Superdao, said the narrative connecting FTX’s fraud to the rest of the industry was deserved on some level, since so many crypto projects were guilty of similar shady behaviors. But plenty of legitimate businesses aren’t connected to the FTX situation at all, he said.

Ultimately, a guilty verdict for Mr. Bankman-Fried would make it easy for crypto companies and executives to move on from the whole ugly spectacle.

“It can’t be over soon enough,” Ms. Breitman said. “The only gift this man has given the industry is that he has self-immolated so aggressively.”

Mr. Kling’s firm, Ikigai, lost $65 million in FTX’s bankruptcy. In group chats, he has tried reminding other debtors that it’s unhealthy to hold on to their hatred. He has dealt with it by hitting the gym.

“I’m in some of the best physical shape of my life,” he said.

Mr. Kling’s belief in the potential of cryptocurrency technology has not changed — as long as the industry can figure out a way to stamp out the fraudsters.

“We have not been doing a very good job of that,” he said.

David Yaffe-Bellany contributed reporting.