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FTX founder gets TK years
Luc Cohen and Jody Godoy | Reuters
FTX founder Sam Bankman-Fried sentenced to 25 years for fraud
FTX founder Sam Bankman-Fried was sentenced to 25 years in prison on seven counts of fraud and conspiracy.
NEW YORK − Sam Bankman Fried was sentenced to 25 years in prison Thursday for stealing $8 billion from customers of the now-bankrupt FTX cryptocurrency exchange he founded, the latest step in the former billionaire wunderkind’s dramatic downfall.
U.S. District Judge Lewis Kaplan issued the ruling at a hearing in a Manhattan court after rejecting Bankman-Fried’s claim that FTX customers had not actually lost money and accusing him of lying during his testimony at the process. A jury found Bankman-Fried, 32, guilty Nov. 2 on seven counts of fraud and conspiracy stemming from the 2022 collapse of FTX in what prosecutors called one of the largest financial frauds in U.S. history.
“He knew it was wrong,” Kaplan said before handing down the sentence. “He knew it was a crime. He regrets having made a very bad bet on the likelihood of being caught. But he won’t admit anything, as is his right.”
Bankman-friedWearing a beige short-sleeved prison T-shirt, he acknowledged during a 20-minute speech to the judge that FTX customers had suffered and offered an apology to his former FTX colleagues.
The ruling marked the culmination of Bankman-Fried’s leap from ultra-wealthy entrepreneur and major political donor to the biggest prize to date in a crackdown by U.S. authorities on wrongdoing in cryptocurrency markets. Bankman-Fried has vowed to appeal her conviction and sentence.
Kaplan said he found that FTX clients lost $8 billion, FTX stock investors lost $1.7 billion, and lenders to the Alameda Research hedge fund founded by Bankman-Fried lost $1.3 billion of dollars.
“The defendant’s claim that FTX customers and creditors will be paid in full is misleading, it is logically incorrect, it is speculative,” Kaplan said. “A thief who takes his loot to Las Vegas and successfully gambles away the stolen money is not entitled to a discount on his sentence by using his Las Vegas winnings to repay what he stole.”
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The judge also said Bankman-Fried lied during her trial testimony when she said she didn’t know her hedge fund had spent customer deposits taken from FTX.
Federal prosecutors had sought a sentence of 40 to 50 years. Bankman-Fried’s lawyer, Marc Mukasey, had argued that a sentence of less than 5 1/2 years would be appropriate.
Addressing the judge, Bankman-Fried said, “Clients have suffered. … I didn’t mean to downplay that at all. I also think it’s something that was missing from what I said throughout this trial, and I’m sorry about that.”
Referring to her colleagues at FTX, Bankman-Fried told the judge: “They put a lot of themselves into it and I threw it all away. It haunts me every day.”
Three of his former close associates testified as prosecution witnesses that he had ordered them to use FTX client money to cover losses at Alameda Research.
Nicolas Roos, a prosecutor in the U.S. attorney’s office in Manhattan, told the judge: “The crime here is enormous in scale. It was pervasive in all aspects of the business.”
During the hearing, Mukasey tried to distance his client from known crooks like Bernie Madoff.
“Sam was not a ruthless financial serial killer who set out to hurt people every morning,” Mukasey said, describing his client as a “clumsy math nerd” who worked hard to get clients’ money back after the collapse of FTX.
“Sam Bankman-Fried doesn’t make decisions with malice in his heart,” Mukasey added. “He makes decisions with math in his head.”
Bankman-Fried testified in his own defense that he made mistakes such as failing to establish a risk management team, but denied intending to defraud anyone or steal clients’ money.
He was led into the courtroom by members of the U.S. Marshals Service. His parents, Stanford University law professors Joseph Bankman and Barbara Fried, were there.
Timeline of events leading to the conviction of FTX founder Sam Bankman-Fried
▶ 2017: Bankman-Fried, a graduate of the Massachusetts Institute of Technology, leaves his job as a quantitative trader at Jane Street Capital and launches Alameda Research, a cryptocurrency-focused trading firm.
▶ MAY 2019: Bankman-Fried and former Google employee Gary Wang found FTX as a new platform to trade crypto tokens and derivatives.
▶ OCTOBER 2021: FTX raises $420 million in venture funding, valuing company at $25 billion. Bankman-fried debuts on the Forbes Billionaires List, which estimates his net worth at $22.5 billion. The magazine’s valuation of his wealth would rise to $26 billion by the end of the year.
▶ FEBRUARY 2022: The NFL Super Bowl broadcast is packed with cryptocurrency ads, signifying the height of the craze for this booming asset class. FTX’s “Don’t Miss Out” commercial features actor Larry David, whose skepticism about the platform is described as similar to that of a primitive human doubting the importance of the wheel.
▶ JUNE-JULY 2022: Bankman-Fried emerges as the cryptocurrency industry’s so-called “white knight” amid plummeting prices of Bitcoin and other digital assets. Alameda gives cryptocurrency lender Voyager Digital a $200 million line of credit, while FTX gives lender BlockFi a $250 million loan.
▶ NOVEMBER 2, 2022: Cryptocurrency news website CoinDesk publishes a leaked balance sheet from Alameda Research showing that much of its $14.6 billion in assets are held in FTX’s token, called FTT. The token subsequently loses around $400 million of its market capitalization, and rival exchange Binance says it will sell its FTT holdings.
▶ NOVEMBER 11, 2022: FTX seeks bankruptcy protection in the US after a wave of customer withdrawals, and Bankman-Fried steps down as CEO.
▶ DEC. 12, 2022: Bankman-Fried is arrested in the Bahamas, where he lives and where FTX is headquartered. The U.S. attorney’s office in Manhattan later confirmed that a federal grand jury indicted him on fraud and conspiracy charges.
▶ DEC. 21, 2022: Bankman-Fried leaves the Bahamas after agreeing to be extradited to the United States. While in flight, prosecutors reveal that Wang and Alameda CEO Caroline Ellison pleaded guilty and agreed to cooperate with prosecutors.
▶ DEC. 22, 2022: Bankman-Fried makes his first appearance in federal court in Manhattan and is released to house arrest at his parents’ home in Palo Alto, California, on $250 million bail.
▶ GEN. 3-12, 2023: Bankman-Fried pleads not guilty and U.S. District Judge Lewis Kaplan sets trial for October. In a post-arrest blog post, Bankman-Fried denies stealing funds and attributes FTX’s collapse to a broader recession in cryptocurrency markets.
▶ AUGUST. 11, 2023: Kaplan revokes Bankman-Fried’s bail after finding reasonable grounds to believe he tampered with witnesses at least twice, including by sharing Ellison’s private writings with a New York Times reporter. Bankman-Fried is being held at the Metropolitan Detention Center in Brooklyn awaiting trial.
▶ OCT. 3, 2023: Trial begins in federal court in Manhattan.
▶ OCT. 28, 2023: Bankman-Fried testifies in his defense, saying “a lot of people were hurt” when FTX collapsed, but insisting that he didn’t defraud anyone or steal billions of dollars from customers.
▶ NOVEMBER 2, 2023: Bankman-Fried is convicted of all seven charges he faced.
▶ MARCH 28, 2024: Bankman-Fried will be convicted of fraud.