The Southern District of New York has sentenced FTX founder and former CEO Sam Bankman-Fried (SBF) to 25 years in prison.
He was also ordered to pay a fine of $11 billion. The entrepreneur was found guilty of seven counts related to multibillion-dollar fraud and the bankruptcy of his former companies.
Background to the collapse
In 2017, Bankman-Fried founded the trading company Alameda Research, and two years later launched the FTX exchange. Over the course of several years, his companies have become one of the leaders in the crypto industry. In 2021, FTX's revenue exceeded $1 billion, and in January 2022, the exchange's valuation reached $32 billion.
During the crypto winter, SBF companies announced their readiness to help firms and organizations that were on the verge of collapse. The entrepreneur assured that he had “several billions of dollars” to improve the industry.
FTX and Alameda Research have been active investors in distressed companies. Among the firms that received money were the landing platform BlockFi and the crypto lender Voyager Digital. These two companies alone received about $900 million from FTX and Alameda.
However, as the crisis developed, problems arose for Bankman-Fried himself. In May 2022, his companies faced liquidity shortages and other financial difficulties. For months, management at FTX and Alameda Research managed to hide the mounting problems. However, in November of the same year, the media learned about the crisis situation and presented all the details to the public.
The journalistic investigation sent the industry into shock. Within a short period of time, FTX and Alameda Research failed, and Bankman-Fried was forced to retire from the business.
The entrepreneur was arrested and accused of multibillion-dollar fraud. He refused to admit guilt and stated that investigators lacked the necessary evidence.
In December 2022, the court placed him in custody with bail of $250 million as a preventive measure. Later, the possibility of release on bail was canceled due to the businessman’s attempts to put pressure on witnesses.
Trial
The US Attorney's Office has charged SBF with seven counts. They concerned fraud, financial fraud, embezzlement of client funds, criminal conspiracy and money laundering. In March 2023, the ex-CEO of FTX was also accused of bribing foreign officials.
The businessman claimed that he did not want to deceive anyone and did not use user funds for personal purposes. According to Bankman-Fried, when he founded Alameda Research, he knew nothing about the crypto industry. As for FTX, the entrepreneur allegedly brought this company to the market to develop an ecosystem of digital assets.
The prosecutor's office, in turn, argued that the accused was involved in the theft of $8 billion of client funds and deliberately concealed the real state of affairs in the companies. According to the authorities, the founder of FTX disposed of user money at his own discretion, and his parents were also involved in the fraud.
In November 2023, the court found Bankman-Fried guilty of all charges. The jury reached a unanimous decision in the case.
The prosecution requested 40 to 50 years in prison for the former FTX CEO. The businessman’s lawyers did not agree with the demand. They argued that such calls "distort reality and portray him as a supervillain." According to the defense, the entrepreneur deserved no more than 6.5 years in prison.
Bottom line
On March 28, 2024, the court sentenced Sam Bankman-Fried to 25 years in prison. During the hearing, Judge Lewis Kaplan rejected the defense's request to consider the potential payment of compensation to victims as a mitigating factor.
He stated that SBF's lawyers are trying to distort data on losses of clients and creditors. In his opinion, the recent increase in the rate of crypto assets, as a result of which victims can receive large compensation, has nothing to do with the severity of the crimes committed.
According to the court, investors lost $1.7 billion, creditors lost $1.3 billion, and clients lost about $8 billion.
“A thief who took his loot to Las Vegas and made a successful bet is not entitled to a reduction in his sentence, even if he returned the money,” Judge Kaplan said.
In addition, the government representative believed that Bankman-Fried repeatedly lied during his testimony. In particular, the entrepreneur tried to convince the court that he did not know about the embezzlement of FTX client funds by Alameda Research.
At the beginning of the hearing, the judge said that on the charges announced, the maximum sentence that the defendant faces is 1,320 months or 110 years.
During the court hearing, one of the victims emphasized that the defense's claims of full compensation for losses were a hoax. According to Sunil Kavour, FTX sold billions of dollars of assets that actually belonged to clients. At the same time, the company sold them at a reduced price in order to pay off users in the future.
Even before the verdict was announced, representatives of the defense noted that they planned to appeal the court's decision. According to lawyer Mark Mukasey, his client is not a “serial financial killer.”
The lawyer described his client as a “clumsy nerd” and a man of outstanding intelligence. He made all his decisions based on a mathematical approach, and not “with malice in his heart,” the lawyer noted.
"He was a billionaire who didn't care about material wealth," said lawyer Mark Mukasey.
After this, Sam Bankman-Fried took the floor. He agreed with Sunil Kavour's allegations regarding the losses and difficulties faced by the clients.
SBF admitted it made a "series of bad decisions" as its companies were brought to the brink of collapse. According to him, FTX had a chance to avoid bankruptcy, unlike Alameda Research.
In addition, the businessman assures that the exchange had enough assets to compensate for all losses. However, they were not returned to users, Bankman-Fried noted. According to him, SBF knows people who prevented clients from returning money, but it is he who is responsible for what happened as the former CEO of the company.
“I can’t influence whether I get five or forty years. I know how the prosecutor’s office, the court, and the media see me. I understand it. […] I tried to help, but prosecutors and the media see things differently. That’s all,” Bankman-Fried said before the verdict was announced.
The representative of the prosecutor's office, in turn, noted that SBF stole $8 billion from clients and read letters from the victims. In them, users talked about the numerous difficulties they had to endure due to the bankruptcy of FTX and Alameda Research.
The prosecution pointed out that Bankman-Fried, during his speech, announced the possibility of restarting the exchange. According to the prosecutor's office, this indicated the defendant's unscrupulousness and his readiness to repeat criminal acts. For this reason, the prosecution asked for at least 40 years in prison.
Just before sentencing, the judge said SBF had outstanding marketing skills and extraordinary mental abilities. According to him, the entrepreneur understood the entire situation in which his companies were, and also consciously managed client funds.
After this speech, the judge announced the verdict. Sam Bankman-Fried was sentenced to 25 years in prison. The court also ruled that the defendant must pay a fine of $11 billion. The government can use this money to compensate the victims.
