Sam Bankman-Fried was sentenced to 25 years in prison by a judge on Thursday for stealing US$8 billion from customers of the now-bankrupt FTX cryptocurrency exchange he founded, the last step in the former billionaire wunderkind’s dramatic downfall.
U.S. District Judge Lewis Kaplan handed down the sentence at a Manhattan court hearing after rejecting Bankman-Fried’s claim that FTX customers did not actually lose money and accusing him of lying during his trial testimony. A jury found Bankman-Fried, 32, guilty on Nov. 2 on seven fraud and conspiracy counts stemming from FTX’s 2022 collapse in what prosecutors have called one of the biggest financial frauds in U.S. history.
“He knew it was wrong,” Kaplan said of Bankman-Fried before handing down the sentence. “He knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught. But he is not going to admit a thing, as is his right.”
Bankman-Fried stood with his hands clasped before him as Kaplan read the sentence.
Bankman-Fried, wearing a beige short-sleeve jail t-shirt, acknowledged during 20 minutes of remarks to the judge that FTX customers had suffered and he offered an apology to his former FTX colleagues.
The sentence marked the culmination of Bankman-Fried’s plunge from an ultra-wealthy entrepreneur and major political donor to the biggest trophy to date in a crackdown by U.S. authorities on malfeasance in cryptocurrency markets. Bankman-Fried has vowed to appeal his conviction and sentence.
Kaplan said he had found that FTX customers lost $8 billion, FTX’s equity investors lost $1.7 billion, and that lenders to the Alameda Research hedge fund Bankman-Fried founded lost $1.3 billion.
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“The defendant’s assertion that FTX customers and creditors will be paid in full is misleading, it is logically flawed, it is speculative,” Kaplan said. “A thief who takes his loot to Las Vegas and successfully bets the stolen money is not entitled to a discount on the sentence by using his Las Vegas winnings to pay back what he stole.”
The judge also said Bankman-Fried’s lied during his trial testimony when he said he did not know that his hedge fund had spent customer deposits taken from FTX.
Federal prosecutors had sought a prison sentence of 40 to 50 years. Bankman-Fried’s defense lawyer Marc Mukasey had argued that a sentence of less than 5-1/4 years would be appropriate.
Addressing the judge, Bankman-Fried said, “Customers have been suffering… I didn’t at all mean to minimize that. I also think that’s something that was missing from what I’ve said over the course of this process, and I’m sorry for that.”
Referring to his FTX colleagues, Bankman-Fried told the judge, “They put a lot of themselves into it, and I threw that all away. It haunts me every day.”
Three of his former close associates testified as prosecution witnesses at trial that he had directed them to use FTX customer funds to plug losses at Alameda Research.
Nicolas Roos, a prosecutor with the U.S. Attorney’s office in Manhattan, told the judge, “The criminality here is massive in scale. It was pervasive in all aspects of the business.”
During the hearing, Mukasey sought to distance his client from notorious fraudsters like Bernie Madoff.
“Sam was not a ruthless financial serial killer who set out every morning to hurt people,” Mukasey said, describing his client as an “awkward math nerd” who worked hard to get customers their money back after FTX’s collapse.
“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 not implementing a risk management team, but denied he intended to defraud anyone or steal customers’ money.
He was led into the courtroom for the hearing by members of the U.S. Marshals Service. His parents, Stanford University law professors Joseph Bankman and Barbara Fried, attended.
CRYPTO BOOM
A Massachusetts Institute of Technology graduate, Bankman-Fried rode a boom in the values of bitcoin and other digital assets to a net worth of $26 billion, according to Forbes magazine, before he turned 30.
Bankman-Fried became known for his mop of unkempt curly hair and commitment to a movement known as effective altruism, which encourages talented young people to focus on earning money and giving it away to worthy causes. He also was one of the biggest contributors to Democratic candidates and political causes ahead of the 2022 U.S. midterm elections.
But prosecutors have said the responsible image he cultivated concealed his years-long embezzlement of customer funds.
Several FTX customers have written to Kaplan expressing dismay that they will be compensated based on the value of their cryptocurrency at the time of FTX’s bankruptcy, rather than the higher levels at which those assets currently trade.
Bankman-Fried has been detained at the Metropolitan Detention Center in Brooklyn since August 2023, when Kaplan revoked his bail after finding he likely tampered with witnesses at least twice.
