Sam Bankman-Fried, the founding father of cryptocurrency exchange FTX who was convicted of stealing billions of dollars from customers, was sentenced to 25 years in prison on Thursday, ending a rare story that turned the cryptocurrency industry the other way up and have become a cautionary tale of greed and hubris.
Mr. Bankman-Fried’s sentence was lower than the 40 to 50 years in prison sought by federal prosecutors after a jury found him guilty of fraud, conspiracy and money laundering – charges that carry a maximum penalty of 110 years in prison. However, the sentence was much higher than the six and a half years requested by his defense lawyers.
Bankman-Fried, 32, didn’t visibly react as Judge Lewis A. Kaplan handed down the sentence in Federal District Court in Manhattan. His parents, law professors Joe Bankman and Barbara Fried, sat two rows from the front and stared at the ground.
“He knew it was wrong. He knew it was a crime,” Judge Kaplan said of Bankman-Frieda’s actions.
Before the decision was announced, Mr. Bankman-Fried, clean-shaven and dressed in a loose brown prison uniform, apologized to FTX customers, investors and employees.
“A lot of people feel really let down and they were very disappointed,” he said. “I’m sorry about this. I’m sorry about what happened at every stage.” He added that the selections he made “haunt him” day by day.
Bankman-Fried was also ordered to forfeit assets price roughly $11 billion.
During his sentencing, Judge Kaplan pointed to testimony from Mr. Bankman-Fried’s trial that showed the FTX founder’s enormous appetite for risk, saying it was in his “nature” to make colossally dangerous bets. “There is a risk that this man will be able to do something very bad in the future,” he said.
Judge Kaplan also said that Mr. Bankman-Fried lied on the witness stand and didn’t take responsibility for his crimes. “He regrets that he made a very bad bet on the probability of being caught,” he said. – But he won’t admit anything.
The judge said Mr. Bankman-Fried, now on the Metropolitan Detention Center in Brooklyn, could be committed to a low- or medium-security prison, most definitely near his parents’ home in the San Francisco Bay Area.
The verdict marked the top of a wide-ranging fraud case that exposed enormous volatility and risk-taking in the loosely regulated cryptocurrency world. In November 2022, FTX collapsed virtually overnight, depriving customers of $8 billion in savings. At trial last fall, he was convicted of seven counts of fraud, conspiracy and money laundering.
His sentence is one in every of the longest handed down to a mentally unwell defendant in recent years. Bernie Madoff, who organized the notorious Ponzi scheme that collapsed in the course of the 2008 financial crisis, was sentenced in 2009 to 150 years in prison. He was 70 years old and died 12 years later. Elizabeth Holmes, convicted of defrauding investors in her blood testing startup Theranos, was sentenced in 2022 to 11 years and three months.
A representative for Mr. Bankman-Frieda declined to comment. In an announcement, his parents said: “We are devastated and will continue to fight for our son.”
Ira Lee Sorkin, a defense attorney representing Mr. Madoff, said he was not surprised that Mr. Bankman-Fried received a harsh sentence, although a shorter one than his own client.
“He is 32 years old and will see the light of day,” Bankman-Fried said of Mr. “But he’s going to spend a lot of time in a cell.”
Just 18 months ago, Bankman-Fried was a company titan and one in every of the world’s youngest billionaires. With his face on billboards and magazine covers, he could seemingly raise money at will. He frolicked with actors, musicians and sports superstars, cultivating a picture as a nerdy do-gooder who intended to donate all his fortune to charity.
Bahamas-based FTX was one in every of the most important cryptocurrency markets, an easy-to-use platform where investors could exchange dollars or euros for digital coins equivalent to Bitcoin and Ether. Its valuation was around $30 billion.
However, in lower than per week in November 2022, a large depository drive exposed an $8 billion hole in FTX accounts. Mr. Bankman-Fried resigned, handing over to a legal team that promptly filed for bankruptcy. The following month, he was arrested at his luxury apartment in the Bahamas and accused of robbing clients to finance billions in political contributions, charitable donations and investments in other startups.
The investigation proceeded with surprising speed for such a posh case. Within months, three of Bankman-Fried’s top deputies, including his ex-girlfriend, pleaded guilty to fraud charges and agreed to cooperate with prosecutors. Mr. Bankman-Fried was initially granted house arrest, but a judge revoked his bail in August after ruling that he had tried to intimidate witnesses and sent him to a Brooklyn penitentiary.
At a trial in October, Mr. Bankman-Fried’s former associates testified for the prosecution, telling the jury that they conspired with him to plunder customer accounts. When Mr. Bankman-Fried took the witness stand, he appeared evasive at times, repeatedly maintaining that he didn’t remember key details of his tenure at FTX.
“When he wasn’t lying, he was often evasive, splitting hairs and dodging questions,” Judge Kaplan said Thursday. “I’ve never seen such a good performance.”
Following his conviction, Mr. Bankman-Fried’s lawyers and family began a long-term campaign to obtain a lenient sentence and alter the general public narrative about FTX’s failure. In a sentencing note, Marc Mukasey, one in every of the defense attorneys, argued that Mr. Bankman-Fried sometimes acted strangely in the course of the trial because he was autistic. He also cited the tycoon’s charitable initiatives, arguing that FTX was supposed to be a force for good in the world.
However, the defense arguments focused on the cash FTX users lost when the exchange collapsed. Since FTX’s bankruptcy, latest leaders have raised billions of dollars to return to customers, in part by liquidating digital coin stocks and selling Bankman-Fried’s stake in other firms. Mukasey argued that in the bankruptcy process, customers would ultimately be recovered and that losses brought on by Mr. Bankman-Fried’s actions could be “zero.”
Prosecutors rejected this argument. Although FTX’s latest management predicted that customers would eventually get their deposits back, the cash they’d receive could be equal to the dollar value of their assets in November 2022 – and is not going to bear in mind the recent surge in cryptocurrency markets which have sent Bitcoin to its highest ever price .
Bankman-Fried “showed brazen disregard for the rule of law,” prosecutors wrote in a sentencing note. “He knew what society considered illegal and unethical, but he ignored it based on pernicious megalomania.”
On Thursday, Judge Kaplan said of FTX victims: “Defendant’s assurance that they will be paid in full is misleading. It is logically wrong. This is speculation.”
Over the past few weeks, prosecutors have submitted a whole bunch of letters from FTX customers describing how financial losses have devastated their lives. One customer said the autumn led to “suicidal thoughts.”
“Bankman-Fried himself must think for the rest of his life about how many human lives he destroyed with his selfishness and superficiality,” the client wrote. “I really hope justice teaches him the difference between life and video games.”
Another FTX user, Sunil Kavuri, who lost $2 million in the corporate’s collapse, testified at trial that the implosion deprived him of cash he had planned to spend on his home and his kid’s education.
“I went through the FTX nightmare for almost two years,” he said.
When Mr. Bankman-Fried spoke, he offered an often disjointed set of thoughts, apologizing for his mistakes and insisting that FTX had enough assets to keep clients whole.
“I made a bunch of bad decisions,” he said, his leg shaking. “These weren’t selfish decisions. These were not selfless decisions. These were bad decisions.”
Bankman-Fried said he’ll appeal his conviction and has hired a lawyer from the Shapiro Arato Bach law firm to oversee the hassle. However, in his remarks, he seemed to accept that he would remain in prison for a while.
“Ultimately my useful life has probably come to an end,” he said.
Mateusz Goldstein reporting contributed.
