By KEN SWEET and LARRY NEUMEISTER (Associated Press)
Sam Bankman-Fried, a crypto entrepreneur, has been sentenced to 25 years behind bars as a result of a significant fraud that occurred when FTX, a once highly popular digital currency platform, collapsed.
The 32-year-old was found guilty of fraud and conspiracy in November, marking a striking downfall from his previous success, which included a Super Bowl ad and endorsements from celebrities such as Tom Brady, Stephen Curry, and Larry David.
U.S. District Judge Lewis A. Kaplan handed down the sentence in the same Manhattan courtroom where, four months earlier, Bankman-Fried had claimed that his goal was to revolutionize the emerging cryptocurrency market with his innovative and altruistic ideas, not to engage in theft.
Kaplan stated that the sentence reflects the potential danger Bankman-Fried may pose in the future, emphasizing that it is not a trivial risk and is intended to disable him from causing harm for a significant period of time.
Kaplan also instructed Bankman-Fried to forfeit over $11 billion and recommended that the Federal Bureau of Prisons place him in a medium-security prison near San Francisco due to concerns about his vulnerability in high-security locations because of his autism and social awkwardness.
Prosecutors had suggested a prison term of 40 to 50 years.
“The defendant victimized tens of thousands of people and companies, across several continents, over a period of multiple years. He stole money from customers who entrusted it to him; he lied to investors; he sent fabricated documents to lenders; he pumped millions of dollars in illegal donations into our political system; and he bribed foreign officials. Each of these crimes is worthy of a lengthy sentence,” prosecutors said in a court filing.
According to prosecutors, Bankman-Fried's actions resulted in losses of over $10 billion for customers, investors, and lenders, as he misused billions of dollars to assert his influence in the new industry and unlawfully used FTX depositors' money to cover personal expenses, such as purchasing luxury properties and private planes, as well as alleged bribes to Chinese officials.
On Thursday, Kaplan concurred with prosecutors that leniency should not be granted to Bankman-Fried just because some investors and customers may recover a portion of their lost funds, describing the argument as 'logically flawed' and 'speculative.' He specified that customers lost about $8 billion, investors lost $1.7 billion, and lenders were shorted by $1.3 billion.
Kaplan also pointed out three instances where he believed Bankman-Fried had committed perjury during his trial testimony, including a claim that he had only recently discovered customer funds were being diverted to a hedge fund affiliated with FTX just weeks prior to its bankruptcy.
When given the opportunity to speak, Bankman-Fried stood up and said sorry in a long statement, expressing regret for letting down many people and apologizing for what happened at each stage.
He also said, "I probably won't be able to do much more. This has been the case for a while, even before I was arrested.
The lawyer defending, Marc Mukasey, said his client was not understood.
Mukasey stated, "Sam wasn't a cruel financial serial killer who intentionally hurt people every day. He doesn't make decisions with bad intentions, but rather with logic."
Bankman-Fried’s lawyers, friends, and family had asked for mercy, claiming that he is unlikely to offend again. They also stated that FTX's investors have mostly recovered their funds. However, bankruptcy lawyers, FTX, and its creditors dispute this claim.
John Ray, the CEO of FTX, who has been working to fix the bankrupt company, wrote, "Mr. Bankman-Fried is still living in a false reality. The 'business' he left in November 11, 2022 was not financially stable or secure.
Two weeks ago, Mukasey criticized a probation office recommendation of 100 years in prison, calling it "grotesque" and "barbaric."
He recommended that the judge sentence Bankman-Fried to a term of five to 6 1/2 years in prison, which Mukasey believed was a fair interpretation of federal sentencing guidelines.
Bankman-Fried was valued at billions of dollars as the co-founder and CEO of FTX, which was the world's second-largest cryptocurrency exchange at one point.
FTX allowed investors to purchase several virtual currencies, from Bitcoin to more obscure ones like Shiba Inu Coin. With billions of dollars from investors, Bankman-Fried promoted his business with a Super Bowl ad and bought the naming rights to an arena in Miami.
However, the decline in cryptocurrency prices in 2022 affected FTX, ultimately leading to its downfall. FTX’s hedge fund affiliate, Alameda Research, had invested billions of dollars in various cryptocurrencies that lost significant value in 2022. Bankman-Fried attempted to cover the losses in Alameda’s financial records with FTX customer funds.
Three other individuals from Bankman-Fried’s inner circle pleaded guilty to related crimes and testified at his trial.
The most prominent among the three was Caroline Ellison, previously Bankman-Fried's girlfriend. Ellison described Bankman-Fried as a calculating individual who knew that he was likely committing crimes when he directed the use of customer funds. Two other former friends of Bankman-Fried, Gary Wang and Nishad Singh, also testified that they felt directed by Bankman-Fried to commit fraud.
