Sam Bankman-Fried, the founder of the now-bankrupt FTX cryptocurrency exchange, has been sentenced to 25 years in prison for embezzling a staggering $8 billion from the exchange’s customers. This marks a significant turn of events in the downfall of the once-prominent billionaire prodigy.
U.S. District Judge Lewis Kaplan has issued the sentence during a court hearing in Manhattan. This comes after Bankman-Fried’s claim that FTX customers did not suffer any financial losses was dismissed, and he was accused of lying during his trial testimony. Bankman-Fried, who is 32 years old, was found guilty on seven counts of fraud and conspiracy in relation to the collapse of FTX in 2022. Prosecutors have described this event as one of the largest financial frauds in the history of the United States.
“He was aware of the wrongdoing,” Kaplan stated as he delivered the sentence. “He recognized that it was a criminal act. He now regrets placing such a misguided bet on the odds of getting caught. However, he has the right to remain silent and will not admit to anything.”
Bankman-Fried, dressed in a beige short-sleeve jail T-shirt, admitted to the judge that FTX customers had experienced hardships. He took the opportunity to extend an apology to his former FTX colleagues.
Sam Bankman-Fried’s journey has reached a pivotal moment, as he transitions from a successful entrepreneur and influential political contributor to becoming the most significant target in the U.S. government’s efforts to combat wrongdoing in the cryptocurrency industry. Despite his conviction and sentencing, Bankman-Fried remains resolute in his determination to appeal the decision.
According to Kaplan, the losses incurred by FTX customers amounted to $8 billion. Additionally, equity investors of FTX experienced a loss of $1.7 billion, while lenders to the Alameda Research hedge fund, founded by Bankman-Fried, suffered a loss of $1.3 billion.
“The defendant’s claim that FTX customers and creditors will receive full payment is misleading and lacks logic. It is nothing more than speculation,” stated Kaplan. He further added, “Comparing it to a situation where a thief uses stolen money to gamble in Las Vegas and then uses the winnings to repay what was stolen does not entitle the thief to a reduced sentence.”
Is crypto real wealth? For many Black, Latino, and LGBTQ investors, investments like bitcoin represent more than just financial gain. They view it as a new path to achieving wealth and equity.
During the trial, the judge discovered that Bankman-Fried had been dishonest in his testimony. Specifically, he had claimed that he was unaware of his hedge fund’s use of customer deposits from FTX.
The federal prosecutors had requested a sentence ranging from 40 to 50 years, while Bankman-Fried’s attorney, Marc Mukasey, contended that a sentence of less than 5¼ years would be more fitting.
During his address to the judge, Bankman-Fried expressed his deep concern for the customers who have been facing hardships. He acknowledged that he had unintentionally overlooked the significance of their suffering in his previous statements and expressed remorse for this oversight.
Bankman-Fried expressed deep regret and remorse to the judge regarding his actions towards his FTX colleagues. He acknowledged the significant effort and dedication they had put into their work, and he admitted that he had carelessly disregarded their contributions. The weight of his decision weighs heavily on him, as he reflects on it daily, haunted by the consequences of his choices.
Three individuals who were once close to him testified as prosecution witnesses that he had instructed them to utilize funds from FTX customers in order to cover losses at Alameda Research.
According to Nicolas Roos, a prosecutor from the U.S. attorney’s office in Manhattan, the magnitude of criminal activity in this case is extensive. It was present in all areas of the business.
Mukasey made an effort during the hearing to separate his client from well-known fraudsters such as Bernie Madoff.
According to Mukasey, Sam was not a heartless financial predator who woke up every morning with the intention of causing harm. Instead, he describes his client as an “awkward math nerd” who diligently worked to ensure that customers received their money back following the collapse of FTX.
According to Mukasey, Sam Bankman-Fried is not driven by ill intentions when making decisions. Instead, he approaches decision-making with a logical and calculated mindset.
Timeline of events leading up to FTX founder Sam Bankman-Fried’s conviction
In May 2019, Bankman-Fried and former Google employee Gary Wang joined forces to establish FTX, a cutting-edge platform for trading cryptocurrency tokens and derivatives.
In October 2021, FTX secures $420 million in venture funding, placing the company’s valuation at $25 billion. Bankman-Fried makes a notable entrance on the Forbes billionaires list, with an estimated net worth of $22.5 billion. The magazine predicts that his wealth would increase to $26 billion by the year-end.
In February 2022, the NFL Super Bowl showcased a multitude of cryptocurrency advertisements, highlighting the immense popularity of this thriving asset class. FTX’s advertisement, titled “Don’t Miss Out,” prominently features actor Larry David, who humorously portrays skepticism towards the platform, drawing a parallel to an early human doubting the significance of the wheel.
In June and July 2022, Bankman-Fried stepped forward as the cryptocurrency industry’s “white knight” during a period of declining Bitcoin and digital asset prices. Alameda provided a $200 million credit facility to crypto lender Voyager Digital, while FTX offered a $250 million loan to lender BlockFi.
On November 2, 2022, an exclusive report by CoinDesk reveals a leaked balance sheet from Alameda Research, a prominent crypto news website. The document discloses that a significant portion of Alameda Research’s $14.6 billion in assets is held in FTT, FTX’s native token. Following this revelation, the market capitalization of FTT experiences a decline of approximately $400 million. In response, Binance, a competing exchange, announces its decision to divest its FTT holdings.
On November 11, 2022, FTX has filed for bankruptcy protection in the United States due to a surge in customer withdrawals. As a result, Bankman-Fried, the CEO of FTX, has resigned from his position.
On December 12, 2022, Bankman-Fried, who resides in the Bahamas and where FTX is headquartered, is apprehended. The U.S. Attorney’s office in Manhattan subsequently verifies that he has been indicted by a federal grand jury on charges of fraud and conspiracy.
On January 3-12, 2023, Bankman-Fried entered a plea of not guilty, and U.S. District Judge Lewis Kaplan set his trial for October. Following his arrest, Bankman-Fried took to his blog to assert his innocence, denying any involvement in the misappropriation of funds. He instead attributes FTX’s downfall to the overall decline in the cryptocurrency markets.
On October 3, 2023, the trial commenced in Manhattan federal court.
On October 28, 2023, Bankman-Fried took the stand to testify in his own defense. He acknowledged that the collapse of FTX had caused harm to many individuals, but vehemently denied any allegations of fraud or theft involving billions of dollars from customers.
On November 2, 2023, Bankman-Fried is found guilty of all seven charges brought against him.
On March 28, 2024, Bankman-Fried is scheduled to face sentencing for his conviction on charges of fraud.
