Key Takeaways:
Sam Bankman-Fried, the founder and former chief of collapsed cryptocurrency exchange FTX and orchestrator of the biggest financial crime in US history, has been sentenced to 25 years in prison for defrauding billions from customers and investors of his now-defunct company.
At its peak, FTX was a $32 billion crypto behemoth that was also considered to be the third-largest crypto exchange in the world by trading volume. The platform’s popularity turned Bankman-Fried into an overnight crypto mogul, which helped attract millions of customers who used it to purchase and trade cryptocurrencies, and celebrities who endorsed it.
Judge Sentences FTX Founder For Committing Largest Financial Crime in US History
However, in November 2022, a bombshell expose revealed that Bankman-Fried, along with his closed group of business partners, mismanaged over $10 billion in customer and investor funds, precipitating the exchange’s implosion that ultimately led to its bankruptcy and the 32-year-old’s arrest a month later.
US District Court Judge Lewis A. Kaplan delivered a blistering analysis of Bankman-Fried’s crimes before announcing the sentence that was half of what federal prosecutors sought and way below the 105 years recommended by the court’s probation officers.
Though Kaplan described the former billionaire as an “extremely smart” individual, the judge gave him a final blow by saying that his name at this moment “is pretty much mud around the world”.
The Judge also ordered him to forfeit the $11 billion in loss suffered by customers and investors of FTX.
He was convicted by a New York jury last November on charges including wire fraud, securities fraud, and conspiracy to commit money laundering. The trial detailed how he had taken more than $8 billion from customers and used the money to buy luxury properties, make political donations in the US to buy influence, and put toward investments outside of FTX.
Bankman-Fried Caused $11 Billion in Losses to FTX’s Customers, Investors, and Lenders
Before reading the sentence on Thursday, Judge Kaplan provided a harsh assessment of Bankman-Fried’s behavior, saying that he lied during the testimony by claiming that he did not know until the last minute that his companies – FTX and Alameda Research – were using money entrusted for safe keeping by customers for other purposes.
“He knew it was wrong, He knew it was criminal,” said the Judge before adding that the FTX co-founder regrets that he made a “bad bet” about the likelihood of getting caught, but is not going to admit that he was wrong.
This is a dramatic fall from grace for a company that was once a giant in the industry, had a Super Bowl advertisement, testified before Congress for pro-crypto regulations in the US, and received endorsements from stars like American football quarterback Tom Brady, basketball star Stephen Curry, comedian Larry David, and supermodel Gisele Bundchen.
Bankman-Fried never uttered a word of remorse for the “commission of terrible crimes”, the judge said.
SBF’s Sentence Reduced From More Than 100 Years to 25 Years
Even though he would have faced more than 100 years behind bars under official government guidelines for the crimes committed, federal prosecutors in New York told the judge earlier this month that such a long sentence was not necessary.
But still, they requested at least 40 years, arguing that Bankman-Fried showed “brazen disrespect” for the rule of law and had committed a massive fraud.
Bankman-Fried’s defense team argued for a lighter sentence of roughly five to six-and-a-half years. They claimed that he was a non-violent, first-time offender and pointed to his mental health struggles. His lawyers argued that FTX customers were poised to recover significant amounts they had lost under a plan currently being worked out through the US bankruptcy court.
The Judge agreed with prosecutors on Thursday that Bankman-Fried should not be credited because some of the investors and customers might recover a portion of their money. He also highlighted the amount that was embezzled: about $8 billion from customers, $1.7 billion from investors, and $1.3 billion shorted for lenders.
While the judge spoke, the crypto conman stood and apologized for what he had done and that he let down “a lot of people”.
The judge also ordered the MIT graduate to forfeit $11 billion that can be used to compensate victims. The US government has already seized some of SBF’s assets, such as luxury properties in the Bahamas, where FTX was based, and his $600 million worth of shares in the trading app Robinhood.
Former Business Partners Testified Against SBF
Three people from Bankman-Fried’s inner circle pleaded guilty to related crimes and testified at his trial. This included ex-girlfriend Caroline Ellison, who was the former CEO of Alameda Research – a crypto hedge fund, also founded by SBF, that was managing FTX’s assets, the exchange’s CTO Gary Wang and engineering lead Nishad Singh.
All three testified that they were directed by Bankman-Fried to commit the fraud.
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