FTX’s Sam Bankman-Fried sentenced to 25 years

By Alagbe Shenayon On Mar 29, 2024

Sam Bankman-Fried, co-founder of the collapsed crypto exchange FTX, has been handed a 25-year prison term for deceiving customers and investors of his now-insolvent company.

The judgment solidifies the decline of the once-billionaire, who rose to prominence as a prominent advocate of cryptocurrency before his company’s abrupt collapse in 2022.

He was discovered to have misappropriated billions from customers prior to the company’s demise.

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In court, the 32-year-old acknowledged that he was aware “many people feel deeply disappointed.”

“I’m sorry about that. I’m sorry about what happened at every stage,” he said, speaking quietly and clearly ahead of his sentencing.

FTX, once among the world’s largest cryptocurrency exchanges, elevated Bankman-Fried to business stardom and attracted millions of customers who utilized the platform for purchasing and trading cryptocurrencies.

Speculation about financial instability triggered a rush to withdraw deposits in 2022, leading to the collapse of the firm and exposing Bankman-Fried’s wrongdoings.

Following a trial that outlined how he had siphoned more than $8 billion (£6.3 billion) from customers, redirecting the funds towards real estate, political contributions, and other investments, Bankman-Fried was convicted by a New York jury last year on charges including wire fraud and conspiracy to commit money laundering.

Before delivering the sentence on Thursday, Judge Lewis Kaplan harshly criticized Bankman-Fried’s conduct, stating that he had lied during his testimony by claiming he was unaware until the eleventh hour that his companies were misappropriating funds entrusted to them by customers for safekeeping and utilizing them for alternate purposes.

“He knew it was wrong. He knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught but he’s not going to admit a thing,” the judge said.

Despite Bankman-Fried expressing “sorrow” over customer losses, there has been no indication of “remorse” for the commission of severe crimes, the judge remarked.

While a 25-year prison term is considerable, it falls short of the over 100 years that Bankman-Fried could have faced according to official government guidelines.

Federal prosecutors in New York informed the judge earlier this month that such an extended sentence was unnecessary. However, they urged for a minimum of 40 years, contending that Bankman-Fried had perpetrated an extensive fraud while displaying “bold disrespect” for the law.

Bankman-Fried’s legal team, who are expected to file an appeal, advocated for a lighter sentence ranging from approximately five to 6.5 years. They highlighted that he was a first-time, non-violent offender, emphasized mental health challenges, and argued that customers were on the brink of recovering substantial amounts through a plan currently under consideration in bankruptcy court.

“The victims want their money back and they should get it,” his lawyer, Marc Mukasey argued in court on Thursday morning. “Sentence him to work hard and give it all away.”

Mitchell Epner, a former federal prosecutor who currently practices law at Rottenberg Lipman Rich, expressed his astonishment at the verdict, pointing out that Bankman-Fried could potentially be released from prison in approximately 13 years.

Jennifer Taub, a law professor at Western New England University and a white-collar crime expert,

“It is the right balance between how old he is and what is the purpose of deterrence,” she said.

In his sentencing remarks, Judge Kaplan said what could amount to a life sentence was unnecessary but that Bankman-Fried must receive a punishment sufficient to prevent him from committing future crimes.

“There is a risk that this man will be in a position to do something very bad in the future and it’s not a trivial risk, not a trivial risk at all,” he said.

He additionally mandated Bankman-Fried to relinquish $11 billion, which can be allocated towards compensating victims.

Certain assets, including shares owned by Bankman-Fried in Robinhood, the trading app that garnered over $600 million when sold last year, have already been seized by the government.

Bankman-Fried displayed minimal outward response to the verdict.

In a media statement, his parents, who attended the nearly every moment of the trial, said: “We are heartbroken and will continue to fight for our son.”

Bankman-Fried has admitted to mistakes of mismanagement, but maintained that he was acting in good faith.

In his comments ahead of the sentencing, he stuck to his story that FTX had the holdings to repay customers at the time of its collapse and said he did not think that reasons behind customer suffering had been “properly told”.

“They’ve been failed by more people than I can count” including himself, he said, speaking of the exchange’s customers. “It’s been excruciating to watch.”

Bankman-Fried said he was sorry for disappointing not only customers but also former employees, including top lieutenants, Caroline Ellison and Gary Wang, formerly close friends who testified against him at trial and whom he praised in his remarks.

“They all built something really beautiful, they threw themselves into it and then I threw it all away,” he added. “It haunts me every day.”

Dozens of people, including former FTX customers, family, friends of his parents and complete strangers, had submitted letters to the court, trying to sway the outcome.

Louis Dorigny of California, who had been an FTX customer said it was a “bittersweet moment for creditors”.

“I don’t wish jail time on anybody, and 25 years is a very, very long time to be in prison, but it does nothing to compensate the victims for the loss of their cryptocurrency,” he said.

Samuel Hapak, chief executive of crypto trading fund Wincent, whose firm represented 200 investors with millions of dollars at FTX when it entered bankruptcy, told the BBC that he thought the ruling was “fair”.

“Twenty-five years is a lot and I believe that this sounds like a reasonable signal to the industry that it needs to step up the game,” he said.

Judge Kaplan stated that he would not recommend Bankman-Fried serve his sentence in a maximum-security prison, as there was no evidence to suggest he posed a threat of violence. Additionally, he considered concerns expressed by Bankman-Fried’s attorneys and parents regarding his social difficulties stemming from autism spectrum disorder, which could render him vulnerable in prison.

Bankman-Fried’s case has attracted significant attention from other cryptocurrency executives and companies facing charges. However, he is not the first individual in the industry to receive a sentence.

Karl Sebastian Greenwood, who collaborated with ‘Cryptoqueen’ Ruja Ignatova, was sentenced to 20 years in prison last year for his involvement in persuading millions of people to invest over $4 billion in a fraudulent currency, OneCoin.

This case has drawn parallels to Bernie Madoff, who was sentenced to 150 years in prison after being convicted of running a $64 billion Ponzi scheme. Former federal prosecutor Marc Litt, who was involved in the case against Madoff and is now practicing law at Wachtel Missry, noted significant distinctions between the two fraudsters. He highlighted that Madoff was older when sentenced, conducted his crimes over several decades, defrauded individuals he knew well, and lacked any character witnesses to testify on his behalf.

“The court implicitly took those sorts of differences into consideration and I believe that the resulting lower sentence was both warranted and is unlikely to be disturbed on appeal,” he said.

FTX Sam Bankman-Fried