On Thursday, a judge sentenced Sam Bankman-Fried to 25 years in jail for stealing $8 billion from customers of the now-bankrupt FTX cryptocurrency exchange he established, marking the final stage in the erstwhile billionaire wunderkind’s stunning downfall.
One of the largest financial frauds in US history
U.S. District Judge Lewis Kaplan imposed the sentence at a Manhattan court session, dismissing Bankman-Fried’s argument that FTX customers did not lose money and accusing him of lying throughout his trial evidence. On November 2, a jury found Bankman-Fried, 32, guilty of seven fraud and conspiracy offenses arising from FTX’s 2022 collapse, which prosecutors described as one of the largest financial frauds in US history.
“He knew it was wrong,” Kaplan said of Bankman-Fried before handing down the sentence. “He knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught. But he is not going to admit a thing, as is his right.”
FTX consumers lost $8 billion
During his 20-minute speech to the judge, Bankman-Fried, dressed in a beige short-sleeve jail t-shirt, recognized that FTX customers had suffered and apologized to his former FTX colleagues.
The sentence represented the climax of Bankman-Fried’s journey from ultra-wealthy entrepreneur and prominent political donor to the largest trophy to date in a crackdown by US authorities on cryptocurrency market misbehavior. Bankman-Fried intends to appeal his conviction and punishment.
According to Kaplan, FTX consumers lost $8 billion, FTX equity investors lost $1.7 billion, and lenders to the Alameda Research hedge fund formed by Bankman-Fried lost $1.3 billion.
“The defendant’s assertion that FTX customers and creditors will be paid in full is misleading, it is logically flawed, it is speculative,” Kaplan said. “A thief who takes his loot to Las Vegas and successfully bets the stolen money is not entitled to a discount on the sentence by using his Las Vegas winnings to pay back what he stole.”
The judge also ruled that Bankman-Fried lied during his trial testimony when he claimed he was unaware that his hedge fund had spent customer deposits seized from FTX.
Federal prosecutors demanded a prison term of 40 to 50 years. Bankman-Fried’s defense attorney, Marc Mukasey, had contended that a sentence of less than 5-1/4 years was reasonable.
Sam Bankman-Fried admitted in his own defense that he made mistakes
Bankman-Fried told the judge, “Customers have been suffering…” I did not mean to belittle that. I also believe that something was lacking from what I said during this process, and I apologize for that.
Bankman-Fried informed the judge that his FTX colleagues put a lot of effort into it, and he threw it all away. “It haunts me every day.”
Three of his former close associates appeared as prosecution witnesses at trial, claiming that he directed them to utilize FTX customer funds to cover losses at Alameda Research.
Nicolas Roos, a prosecutor of the Manhattan U.S. Attorney’s Office, told the judge, “The criminality here is massive.” It permeated all elements of the business.”
During the hearing, Mukasey attempted to separate his client from infamous fraudsters such as Bernie Madoff.
“Sam was not a ruthless financial serial killer who set out every morning to hurt people,” Mukasey said, describing his client as an “awkward math nerd” who worked hard to get customers their money back after FTX’s collapse.
“Sam Bankman-Fried doesn’t make decisions with malice in his heart,” Mukasey added. “He makes decisions with math in his head.”
Bankman-Fried admitted in his defense that he made mistakes, such as failing to develop a risk management team, but denied intending to swindle anyone or steal consumers’ money.
Members of the US Marshals Service escorted him into the courthouse for the hearing. His parents, Stanford University law professors Joseph Bankman and Barbara Fried, attended.