Sam Bankman Fried, the founder of cryptocurrency exchange FTX, who was convicted of stealing billions of dollars from customers, was sentenced Thursday to 25 years in prison, upending the crypto industry and accusing him of greed. This brought to an end an unusual story that became a cautionary tale of desire. Overconfident.
Bankman Fried's sentence was shorter than the 40 to 50 years that federal prosecutors had sought after a jury found him guilty of fraud, conspiracy and money laundering. The charge carries a maximum sentence of 110 years in prison. However, the punishment was far higher than the six-and-a-half years in prison requested by his defense attorney.
Mr. Bankman Fried, 32, showed no visible reaction as Judge Lewis A. Kaplan handed down the sentence in U.S. District Court in Manhattan. His parents, law professors Joe Bankman and Barbara Freed, sat in the front two rows, staring at the floor.
“He knew it was wrong and he knew it was criminal,” Judge Kaplan said of Bankman-Freed's actions.
Before he was sentenced, Bankman Fried, clean-shaven and wearing a loose-fitting brown prison uniform, apologized to FTX's customers, investors and employees.
“I feel like a lot of people are really disappointed, and I'm very disappointed,” he said. “I'm sorry about that. I'm sorry for what happened every step of the way.” He added that his decision “haunts me” every day.
Bankman Fried was also ordered to forfeit $11.2 billion in assets.
At sentencing, Judge Kaplan pointed to Bankman Fried's trial testimony that showed the FTX founder's extreme risk appetite, saying it was in his “nature” to make very risky bets. “This guy risks being in a position to do some very bad things in the future,” he said.
Judge Kaplan also said Bankman Fried lied on the stand and did not take responsibility for his crimes. “He regrets taking such a bad bet on his chances of being caught,” he said. “But he's not going to admit anything.”
Bankman Freed, currently incarcerated at Brooklyn's Metropolitan Detention Center, will likely be sent to a low- or medium-security prison near his family home in the San Francisco Bay Area, the judge said.
The verdict marks the end of a major fraud case that exposed the rampant volatility and risk-taking in the lightly regulated world of cryptocurrencies. In November 2022, FTX collapsed virtually overnight, wiping out $8 billion in customer savings. At trial last fall, he was found guilty of seven counts of fraud, conspiracy and money laundering.
His sentence is one of the longest sentences handed down to a white-collar defendant in recent years. Bernie Madoff, who orchestrated the infamous pyramid scheme that was uncovered during the 2008 financial crisis, was sentenced to 150 years in prison in 2009. He was in his 70s at the time and died 12 years later. Elizabeth Holmes, who was convicted of defrauding investors at blood testing startup Theranos, was sentenced to 11 years and three months in prison in 2022.
A representative for Bankman Freed declined to comment. His parents said in a statement: “We are heartbroken but will continue to fight for our son.”
Ira Lee Sorkin, a lawyer who represented Mr. Madoff, said she was not surprised that Mr. Bankman Fried received a harsher, though shorter, sentence than her client.
“He's 32 years old and he's going to see the light of day,” he said of Bankman-Fried. “But he will spend a lot of time in solitary confinement.”
Just 18 months ago, Bankman Fried was a big businessman and one of the youngest billionaires on the planet. With his face plastered on billboards and magazine covers, he was able to raise money seemingly at will. He dated actors, musicians, and superstar athletes and cultivated an image as a nerdy do-gooder who intended to donate all his wealth to charity.
Based in the Bahamas, FTX was one of the largest marketplaces for cryptocurrencies, an easy-to-use platform that allows investors to exchange dollars and euros for digital coins such as Bitcoin and Ether. Its valuation was over $30 billion.
However, less than a week later in November 2022, it was revealed that there was an $8 billion hole in FTX's accounts due to a deposit run. Bankman Fried resigned, handed over authority to a team of lawyers, and immediately filed for bankruptcy. The following month, he was arrested at his luxury apartment in the Bahamas and charged with stealing from clients to finance billions of dollars in political donations, charitable contributions and investments in other startup companies.
The investigation into such a complex case progressed with astonishing speed. Within months, three of Bankman Fried's top members, including her ex-boyfriend, pleaded guilty to fraud charges and agreed to cooperate with prosecutors. Mr. Bankman-Fried was initially granted home detention, but a judge revoked his bail in August and sent him to a Brooklyn jail after ruling that he had attempted to intimidate a witness.
At the October trial, former colleagues of Bankman Freed testified for prosecutors and told jurors that they conspired with Bankman Freed to rob customer accounts. On the witness stand, Mr. Bankman-Fried appeared distracted at times and repeatedly claimed that he could not remember key details of his time at FTX.
“Even when he wasn't outright lying, he would often dodge questions, cut hair, and dodge things,” Judge Kaplan said Thursday. “I've never seen a performance like that.”
After his conviction, Bankman Fried's lawyers and family embarked on a long-term effort to secure a lenient sentence and rewrite the public narrative about FTX's failures. Mark Mukasey, one of the defense attorneys, argued in a sentencing memo that Bankman-Freed sometimes acted strangely on the stand because he was autistic. He also cited the mogul's philanthropic efforts, insisting that FTX should be a force for good in the world.
However, the defense's case centered on the money FTX users lost when the exchange collapsed. Mr. Mukasey claimed that the losses caused by Mr. Bankman Freed's actions were “zero” and that his customers were to be fully recovered in the bankruptcy proceedings.
Prosecutors rejected that argument. FTX's new management predicts that customers will eventually get their deposits back, but the amount customers will receive will be equivalent to the dollar equivalent of their holdings by November 2022, making Bitcoin world-class. The recent surge in the cryptocurrency market that has been introduced is not taken into account. Highest price ever.
Bankman Fried “showed a brazen disregard for the rule of law,” prosecutors wrote in a sentencing memo. “He knew what society deemed illegal and unethical, but he ignored it based on harmful delusions of grandeur.”
On Thursday, Judge Kaplan said for FTX's victims, “Defendants' assurances that they will be paid in full are misleading.” It's logically flawed. It's speculative. ”
Over the past few weeks, prosecutors have submitted hundreds of letters from FTX customers detailing how their financial losses have destroyed their lives. One customer said the collapse led to “suicidal thoughts”.
“Sam Bankman Freed will have to spend the rest of his life thinking about the many lives he destroyed with his selfishness and superficiality,” the customer wrote. “I really hope justice teaches him the difference between life and video games.”
Sunil Kavri, another FTX user who lost $2 million in the company's bankruptcy, testified at the hearing that the implosion wiped out money he had planned to use for housing and his children's education.
“I have been living the FTX nightmare for almost two years,” he said.
When Mr. Bankman Freed spoke, he occasionally rambled on and on, apologizing for his mistakes but insisting that FTX had enough assets to make its customers whole.
“I made a series of bad decisions,” he said, his legs shaking. “Those weren't selfish decisions. They weren't selfless decisions. They were the wrong decisions.”
Bankman Fried has vowed to appeal the conviction and hire attorneys from the law firm Shapiro Arato Bach to oversee that effort. However, in his remarks, he seemed to accept that he will be in prison for some time.
“My useful life may have come to an end after all,” he said.
Matthew Goldstein Contributed to the report.
