Sam Bankman-Fried, who was found guilty of taking $8 billion from customers of his FTX cryptocurrency exchange, could have been sentenced to a maximum of 110 years in prison.
Sam Bankman-Fried’s 25-Year Prison
On Thursday, Sam Bankman-Fried, once a big shot in the cryptocurrency world, was given a 25-year prison sentence for committing fraud. This marked the end of a wild story that shook up the multi-trillion-dollar crypto industry. It serves as a warning about being too greedy and overconfident.
Mr. Bankman-Fried got a shorter prison term than what the prosecutors wanted, but it was longer than what his defense lawyers asked for. The probation officer suggested 100 years, which is close to the maximum penalty of 110 years in prison.
Judge Lewis A. Kaplan at the Federal District Court in Manhattan gave the sentence. Mr. Bankman-Fried, who is 32 years old, was there in the courtroom. He was clean-shaven and wore a baggy brown jail uniform.
Before speaking, Mr. Bankman-Fried said sorry to FTX customers, investors, and employees. He acknowledged that many people felt disappointed and he felt sorry for that. He expressed regret for everything that went wrong. He also mentioned that his choices trouble him daily.
The trial marked the end of a big fraud case that showed how risky and unstable the world of cryptocurrencies can be due to lack of strict rules. In November 2022, Mr. Bankman-Fried’s crypto company, FTX, suddenly collapsed, causing customers to lose $8 billion. He was found guilty of seven crimes including fraud, conspiracy, and money laundering during a trial last autumn.
Bernie Madoff got a 150-year sentence in 2009 for his Ponzi scheme during the financial crisis. He was in his 70s then and passed away 12 years later. Elizabeth Holmes, for her part, got 11 years and three months in 2022 for defrauding investors in her Theranos blood-testing startup.
A spokesperson for Mr. Bankman-Fried did not reply right away when asked for a comment.
Just 18 months ago, Mr. Bankman-Fried was a big shot in the corporate world and one of the youngest billionaires around. You’d see his face everywhere, on billboards and in magazines, and he seemed to effortlessly gather funds whenever he needed. He hung out with famous actors, musicians, and athletes, presenting himself as a kind-hearted nerd who wanted to give away all his money to good causes.
FTX, headquartered in the Bahamas, was a major hub for cryptocurrency trading. It provided a user-friendly platform where people could swap dollars or euros for digital currencies like Bitcoin and Ether. With a valuation exceeding $30 billion, it was one of the largest players in the market.
In November 2022, within just a few days, there was a rush of people withdrawing their money from FTX, a financial company. This revealed that FTX had a shortfall of $8 billion in its accounts. As a result, Mr. Bankman-Fried, the person in charge, stepped down from his position. Lawyers took control and quickly filed for bankruptcy.
The following month, Mr. Bankman-Fried was arrested at his fancy apartment in the Bahamas. He was accused of taking customers’ money to fund political contributions, charity donations, and investments in other new businesses.
The investigation progressed surprisingly fast for such a complicated case. In just a few months, three of Mr. Bankman-Fried’s key assistants, one of whom was a former girlfriend, admitted to committing fraud and promised to help the prosecutors. At first, Mr. Bankman-Fried was allowed to stay at home, but in August, the judge changed his mind when he found evidence that Mr. Bankman-Fried had tried to scare witnesses. So, Mr. Bankman-Fried was transferred to Brooklyn’s Metropolitan Detention Center.
During the trial in October, Mr. Bankman-Fried’s ex-colleagues testified against him, saying they had worked together to steal from customers’ accounts. When Mr. Bankman-Fried testified, he appeared to dodge questions, often saying he couldn’t remember important things about his time at FTX.
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After being found guilty, Mr. Bankman-Fried’s legal team and relatives launched a challenging effort to push for a lighter punishment and change the public perception of FTX’s collapse. In a letter submitted for sentencing, Marc Mukasey, one of the defense attorneys, claimed that Mr. Bankman-Fried’s atypical behavior during the trial was due to his autism. Additionally, he highlighted the entrepreneur’s charitable work, arguing that FTX aimed to make a positive impact on society.
The defense argued that the main focus was on the money lost by FTX users when the exchange collapsed. Mr. Mukasey stated that customers were supposed to be fully compensated through the bankruptcy proceedings, effectively reducing the losses attributed to Mr. Bankman-Fried’s actions to “zero.”
The government didn’t agree with that idea. FTX’s new leaders think customers will eventually get their money back, but only at the dollar value of their holdings from November 2022. They won’t get any extra money from the recent rise in crypto prices, like Bitcoin hitting its all-time high.
Prosecutors wrote in a sentencing memo that Mr. Bankman-Fried showed blatant disregard for the law. They stated he knew what was considered illegal and unethical by society but chose to ignore it due to his harmful egotism.
On Thursday, Judge Kaplan stated that FTX’s promise to fully compensate its victims is misleading and based on flawed logic. He emphasized that such assurances are speculative and not reliable.
In recent weeks, prosecutors submitted many letters from victims of Mr. Bankman-Fried’s crimes. These letters described how the financial losses had severely impacted their lives. One customer even mentioned having “suicidal thoughts” due to the collapse of FTX.
The customer said, “Sam Bankman-Fried needs to realize how many lives he hurt because of his selfishness and carelessness. I hope he learns the importance of real life, not just treating everything like a game.”
During the sentencing hearing, Sunil Kavuri, an FTX customer who lost $2 million in the cryptocurrency exchange’s collapse, shared his experience. “For nearly two years, I’ve endured the nightmare of dealing with FTX,” he expressed.
Mr. Mukasey wanted to make it clear that his client wasn’t like other fraudsters. He said, “Sam isn’t someone who intentionally hurts people for financial gain. He’s more like a socially awkward math enthusiast.”
Mr. Bankman-Fried plans to challenge his conviction by hiring a lawyer from the Shapiro Arato Bach law firm to handle the appeal process.
On Thursday, Mr. Bankman-Fried acknowledged that he might be in prison for a while. He said, “In the end, I probably won’t be able to do much anymore.”
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