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Former FTX CEO Sam Bankman-Fried Sentenced to 25 Years in Prison for Financial Fraud, Must Forfeit $11 Billion to Victims
A judge sentenced Sam Bankman-Fried to 25 years in prison on Thursday for orchestrating what prosecutors called a one of the biggest financial frauds in American history.
He will also have to forfeit $11 billion that the government can use to compensate victims, Judge Lewis Kaplan said.
“It was a very serious crime,” Kaplan said.
Bankman-Fried, 32, stood with his hands clasped in front of him, looking down, as the sentence was pronounced.
Bankman-Fried was sentenced last November He was convicted of two counts of wire fraud conspiracy, two counts of wire fraud and one count of conspiracy to commit money laundering, each carrying a maximum sentence of 20 years in prison. He was also convicted of conspiracy to commit commodities fraud and conspiracy to commit securities fraud, each carrying a maximum sentence of five years in prison.
He was accused of using customer deposits on cryptocurrency trading platform FTX, the company he founded, to cover losses at his hedge fund, repay loans and buy lavish real estate, among other personal expenses.
Prosecutors had said he deserved 40 to 50 years in prison because of “the enormous scale of the fraud,” although Kaplan said that was too excessive.
The judge determined that Bankman-Fried’s scheme defrauded FTX customers out of $8 billion and said the sentence was intended to “prevent” him from committing further fraud for an extended period of time.
“There is a risk that this man is in a position to do something very bad in the future and it is not a negligible risk. It is not a negligible risk at all,” Kaplan said.
“Mr. Bankman-Fried had long known that Alameda was spending significant amounts of FTX client funds on risky investments, political contributions, real estate in the Bahamas and other things in circumstances where FTX was seriously exposed to market downside, long-term call options and other risks,” Kaplan said. “He knew that FTX client funds were not to be used for these purposes. They were not his.”
Bankman-Fried admitted some of his own failings, but the judge appears to have found his statements insufficient.
“I thought one of his most powerful expressions was, ‘I did something stupid.’ But never a word of remorse for committing terrible crimes,” Kaplan said.
The judge also questioned the image Bankman-Fried cultivated among government officials.
“He presented himself as a good man who supported proper regulation of the cryptocurrency industry. In my opinion, that was an act,” Kaplan said.
FTX founder Sam Bankman-Fried leaves U.S. federal court in New York on February 16, 2023. Timothy A. Clary/AFP via Getty Images, FILE
After the sentencing, Attorney General Merrick Garland said those who defraud customers and investors face “serious consequences.”
“Anyone who thinks they can hide their financial crimes behind wealth and power, or behind some shiny new thing they claim no one else is smart enough to understand, should think again,” he said in a statement.
U.S. Attorney Damian Williams, whose office prosecuted the case, said the sentence would deter Bankman-Fried from committing fraud again and would also serve as “an important message to others who might be tempted to commit financial crimes that justice will be swift and the consequences will be severe.”
In response to the sentencing, Bankman-Fried’s parents said in a statement to ABC News that they were heartbroken and would continue to fight for our son.
Bankman-Fried, of Stanford, Calif., addressed the court before sentencing, standing at the defense table with his arms crossed in front of him, looking down and mumbling often.
He acknowledged that his “mismanagement” led to the closure of Alameda, his private hedge fund, after its initial success and said he had “let down everyone and everything I held dear as well.”
“I threw everything away. It haunts me every day,” he said. “I made a series of bad decisions. They weren’t selfish decisions, they weren’t altruistic decisions, they were bad decisions.”
Bankman-Fried also acknowledged that FTX customers have not been compensated. “The customers, the creditors, the lenders, they haven’t been reimbursed,” he said. “It’s caused a lot of damage.”
Sunil Kavuri, a London-based technology investor at Shomei Group, addressed the court on Thursday before the sentencing on behalf of 200 victims, he said.
“I suffered every day,” Kavuri said. “It’s a constant lie that we are all healed.” [through bankruptcy payments]He added that he had “been taken away the money I wanted to spend on a family home”.
Kavuri told the court he knew FTX victims who suffered from depression and he said some victims had committed suicide.
More than $8 billion in client money was embezzled, “placing this crime in a category of cases that can be counted on the fingers of one hand,” prosecutors said. In addition, Bankman-Fried “victimized tens of thousands of individuals and businesses, on multiple continents, over a period of years. He stole money from clients who entrusted it to him; he lied to investors; he sent falsified documents to lenders; he injected millions of dollars in illegal donations into our political system; and he bribed foreign officials.”
Judge Kaplan on Thursday immediately rejected Bankman-Fried’s claim that his fraud was not $8 billion as prosecutors had claimed.
“Defendant’s argument rests on what amounts to an assumption that FTX’s customers will be compensated in the bankruptcy,” Kaplan said before issuing the sentence. “Defendant’s assertion that FTX’s customers and creditors will be paid in full is misleading; it is logically flawed.”
Bankman-Fried resigned from his role at FTX in November 2022 following a rapid collapse that ended with the company – once valued at $32 billion at its peak – declaring bankruptcy.
Assistant U.S. Attorney Nicholas Roos said a harsh sentence for Sam Bankman-Fried was warranted because “the defendant may commit crimes again.”
The prosecutor stressed that Bankman-Fried had “not sworn not to do it again” when he addressed the court.
“A sentence of at least 40 years is necessary to ensure that the defendant cannot do this again,” Roos said.
The prosecutor spoke of victims who lost everything because they trusted Bankman-Fried when he told them, via social media or another platform, that their money was safe.
“The defendant is not a monster, but he committed very serious crimes,” Roos said. “The criminality here is very large, it is pervasive in every aspect of the company. This was not a great company that had problems at the end. It was overrun with fraud.”
Former FTX CEO Sam Bankman-Fried, who is charged with fraud following the collapse of the bankrupt cryptocurrency exchange, walks outside Manhattan federal court in New York, U.S., March 30, 2023. Amanda Perobelli/Reuters, FILE
Before sentencing Thursday, defense attorneys called the government’s request for 40 to 50 years in prison “barbaric” and argued that Bankman-Fried deserved about six years in prison because of his “deep regret for the pain he has caused.” They also said that “the harm to customers, lenders and investors is nil.”
Defense attorney Mark Mukasey insisted Thursday that Bankman-Fried possessed compassion, empathy and generosity and that “really, he’s a clumsy math nerd.”
“He loves video games and veganism,” Mukasey told the court. “He’s compassionate toward animals and children. He has a tireless work ethic. He has an intellect that is completely off the charts and mind-blowing.”
Although his fraud has been compared to Bernie Madoff’s Ponzi scheme, Mukasey said the 32-year-old was not a hard-core financial assassin.
“That level of depravity doesn’t exist in this case. I don’t think it’s present in Sam’s heart,” Mukasey said. “Sam is at the opposite end of the culpability spectrum.”
The lawyer added: “Sam never ran away with billions of dollars in a Swiss bank account or under his mattress.”
Prosecutors have given a different interpretation of the Bankman-Fried case.
“With all the advantages of a comfortable education, an MIT education, a prestigious early career in finance, and a valuable idea for a start-up, Bankman-Fried could have pursued the rewarding, productive, and altruistic life he outlined in his sentencing motion. But instead, his life in recent years has been one of unparalleled greed and arrogance, ambition and rationalization, risk-seeking and repeated gambles with other people’s money,” prosecutors said.