Sam Bankman-Fried, the former billionaire wunderkind and founder of the now-bankrupt FTX cryptocurrency exchange, has been sentenced to 25 years in prison. This comes after he was found guilty of stealing a staggering $8 billion from his customers. The downfall of this once-prominent figure in the crypto world has reached its final chapter with this sentencing.
U.S. District Judge Lewis Kaplan delivered the sentence during a court hearing in Manhattan, dismissing Bankman-Fried’s argument that FTX customers did not suffer any financial losses. The judge also accused him of dishonesty during his testimony at the trial. Bankman-Fried, aged 32, was convicted on seven counts of fraud and conspiracy related to the collapse of FTX in 2022. Prosecutors have referred to this event as one of the most significant financial frauds in American history.
“He was aware of the wrongdoing,” Kaplan stated as he delivered the sentence. “He understood that it was a criminal act. He now regrets his poor judgement in underestimating the chances of being apprehended. However, he has chosen to exercise his right to not confess to anything.”
Bankman-Fried, dressed in a beige short-sleeve jail T-shirt, expressed his remorse to the judge, acknowledging the hardships endured by FTX customers. Additionally, he extended his apologies to his former FTX colleagues during his 20-minute address.
Sam Bankman-Fried’s journey has taken a dramatic turn, going from a successful entrepreneur and influential donor in the political arena, to becoming the latest target in the U.S. government’s crackdown on misconduct within the cryptocurrency industry. Despite his conviction and sentencing, Bankman-Fried remains determined to appeal the decision.
According to Kaplan, the losses incurred by FTX customers amounted to a staggering $8 billion. Additionally, equity investors of FTX suffered a loss of $1.7 billion, while lenders to the Alameda Research hedge fund, which was founded by Bankman-Fried, faced a loss of $1.3 billion.
According to Kaplan, the defendant’s claim that FTX customers and creditors will receive full payment is misleading and flawed. He argues that comparing it to a thief who uses stolen money to win at a casino and then expects a reduced sentence is illogical.
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During the trial, the judge pointed out that Bankman-Fried had been untruthful in his testimony. He had claimed that he was unaware that his hedge fund had utilized customer deposits taken from FTX.
Federal prosecutors had initially requested a sentence ranging from 40 to 50 years, while Bankman-Fried’s lawyer, Marc Mukasey, contended that a more fitting sentence would be less than 5¼ years.
Bankman-Fried apologized to the judge, acknowledging the suffering that customers have endured. He expressed regret for not adequately addressing this issue earlier and apologized for any harm caused.
In a heartfelt statement to the judge, Bankman-Fried expressed his remorse for his actions towards his FTX colleagues. He acknowledged the dedication and hard work they had put into their work, while acknowledging that he had foolishly disregarded their efforts. He confessed that the weight of this decision haunts him on a daily basis.
Three individuals who were once closely associated with him testified as witnesses for the prosecution, stating 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 scale of criminal activity in this case is extensive. He emphasized that it was present in every aspect of the business.
Mukasey, during the hearing, made efforts to separate his client from well-known fraudsters such as Bernie Madoff.
According to Mukasey, Sam was not a merciless 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 relies on logical reasoning and analysis to guide his choices.
Bankman-Fried testified in his own defense, acknowledging that he had made mistakes, like not having a risk management team in place. However, he firmly denied any intention to defraud or misappropriate customers’ funds.
Accompanied by members of the U.S. Marshals Service, he entered the courtroom. His parents, Joseph Bankman and Barbara Fried, who are both law professors at Stanford University, were present as well.
Timeline of events leading up to FTX founder Sam Bankman-Fried’s conviction
In 2017, Bankman-Fried, a Massachusetts Institute of Technology graduate, made the bold decision to leave his job as a quantitative trader at Jane Street Capital and embark on a new venture. He founded Alameda Research, a trading firm with a specific focus on cryptocurrency.
In May 2019, Bankman-Fried and former Google employee Gary Wang came together to launch FTX, a brand new platform for trading crypto tokens and derivatives.
In October 2021, FTX secured $420 million in venture funding, resulting in a valuation of $25 billion for the company. Bankman-Fried made his debut on the Forbes billionaires list, with an estimated net worth of $22.5 billion. According to the magazine, his wealth would increase to $26 billion by the end of the year.
In February 2022, the NFL Super Bowl witnessed a surge in cryptocurrency advertisements, highlighting the immense popularity of this thriving asset class. FTX’s captivating commercial, titled “Don’t Miss Out,” stars the renowned actor Larry David. The ad cleverly portrays Larry’s skepticism towards the platform, drawing a parallel to an early human doubting the significance of the wheel.
In June-July 2022, Bankman-Fried takes on the role of the cryptocurrency industry’s “white knight” during a market downturn. Alameda provides a $200 million credit facility to crypto lender Voyager Digital, while FTX extends a $250 million loan to lender BlockFi.
On November 2, 2022, CoinDesk, a prominent crypto news website, releases a leaked balance sheet from Alameda Research. The balance sheet reveals that a significant portion of Alameda Research’s $14.6 billion in assets is held in FTX’s own token, known as FTT. As a result of this revelation, the market cap of FTT drops by approximately $400 million, and Binance, a competitor exchange, announces its intention to sell its FTT holdings.
On November 11, 2022, FTX, a company in the United States, has filed for bankruptcy protection due to a significant number of customer withdrawals. As a result, Bankman-Fried, the CEO of FTX, has decided to resign from his position.
On December 12, 2022, Bankman-Fried was arrested in the Bahamas, his place of residence and the location where FTX is headquartered. The U.S. Attorney’s office in Manhattan subsequently confirmed his indictment by a federal grand jury on charges of fraud and conspiracy.
On December 21, 2022, Bankman-Fried departs from the Bahamas after consenting to his extradition to the United States. Meanwhile, as he is in the air, prosecutors disclose that Wang and Alameda’s CEO, Caroline Ellison, have admitted their guilt and are willing to collaborate with the authorities.
On December 22, 2022, Bankman-Fried appeared in Manhattan federal court for the first time and was released to home detention at his parents’ residence in Palo Alto, California, after posting a $250 million bond.
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. In a blog post following his arrest, Bankman-Fried refuted allegations of stealing funds and attributed FTX’s downfall to a larger decline in the cryptocurrency markets.
On August 11, 2023, Kaplan decides to revoke Bankman-Fried’s bail due to finding probable cause that he tampered with witnesses on multiple occasions. This includes the act of sharing Ellison’s private writings with a reporter from the New York Times. As a result, Bankman-Fried is taken into custody and awaits trial at Brooklyn’s Metropolitan Detention Center.
On October 3, 2023, the trial commences 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 caused harm to many people but vehemently denied any allegations of fraud or theft of billions of dollars from customers.
On November 2, 2023, Bankman-Fried faced seven charges and was subsequently convicted for all of them.
On March 28, 2024, the day of reckoning arrived for Bankman-Fried as he faced the consequences of his fraudulent activities. The court was ready to deliver his sentence, holding him accountable for his actions.
FTX founder Sam Bankman-Fried has been sentenced to 25 years on crypto fraud charges, according to USA TODAY.
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