Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, convicted of stealing billions of dollars from customers, was sentenced to 25 years in prison Thursday, capping an extraordinary saga that has rocked the cryptocurrency industry and become a warning about greed and arrogance.
Bankman-Fried's sentence was less than the 40 to 50 years that federal prosecutors had sought after a jury found him guilty of fraud, conspiracy and money laundering — charges that carried a maximum sentence of 110 years behind bars . But the sentence was well in excess of the six and a half years requested by his defense lawyers.
Mr. Bankman-Fried, 32, did not visibly react when the sentence was handed down by Judge Lewis A. Kaplan in Federal District Court in Manhattan. His parents, law professors Joe Bankman and Barbara Fried, sat two rows in front, staring at the floor.
“He knew it was wrong, he knew it was criminal,” Judge Kaplan said of Mr. Bankman-Fried's actions.
Before the sentence was handed down, Mr. Bankman-Fried, clean-shaven and wearing a loose-fitting brown prison uniform, apologized to FTX's customers, investors and employees.
“A lot of people feel really disappointed, and they were very disappointed,” he said. “I am sorry. I am sorry for what happened at every stage.” He added that her decisions “haunt” him every day.
Mr Bankman-Fried was also ordered to seize $11.2 billion in assets.
During sentencing, Judge Kaplan referenced Bankman-Fried's trial testimony showing the FTX founder's extreme appetite for risk, saying it was in his “nature” to make colossally dangerous bets. “There is a risk that this man is in a position to do something very bad in the future,” he said.
Judge Kaplan also said Mr. Bankman-Fried lied on the witness stand and did not take responsibility for his crimes. “He regrets having made a very wrong bet on the probability of being discovered,” he said. “But he won't admit anything.”
Mr. Bankman-Fried, currently incarcerated at the Metropolitan Detention Center in Brooklyn, will be sent to a low- or medium-security prison, the judge said, most likely near his parents' home in the San Francisco Bay Area.
The ruling marked the end of a sprawling fraud case that exposed rampant volatility and risk-taking in the loosely regulated world of cryptocurrencies. In November 2022, FTX imploded virtually overnight, wiping out $8 billion in customer savings. At a trial last fall, he was convicted of seven counts of fraud, conspiracy and money laundering.
His sentence is considered one of the longest given to a white-collar defendant in recent years. Bernie Madoff, who orchestrated a notorious Ponzi scheme exposed during the 2008 financial crisis, received a 150-year sentence in 2009. He was in his 70s at the time and died 12 years later. Elizabeth Holmes, convicted of defrauding investors in her blood testing startup, Theranos, was sentenced to 11 years and three months in 2022.
A representative for Mr. Bankman-Fried declined to comment. In a statement, his parents said: “We are heartbroken and will continue to fight for our son.”
Ira Lee Sorkin, the defense lawyer who represented Mr. Madoff, said he was not surprised that Mr. Bankman-Fried had received a harsh sentence, even if shorter than that of his own client.
“He is 32 years old and will see the light,” he said of Mr. Bankman-Fried. “But you will spend a lot of time in cell.”
Just 18 months ago, Bankman-Fried was a corporate giant and one of the youngest billionaires on the planet. With his face plastered on billboards and magazine covers, he could raise money seemingly at his leisure. He dated actors, musicians and superstar athletes, cultivating the image of a nerdy do-gooder who intended to donate all his wealth to charity.
Based in the Bahamas, FTX was one of the largest cryptocurrency exchanges – an easy-to-use platform where investors could exchange dollars or euros for digital coins like Bitcoin and Ether. Its valuation was over $30 billion.
But in less than a week in November 2022, a run on deposits exposed an $8 billion hole in FTX's accounts. Mr. Bankman-Fried resigned, handing power to a team of lawyers who promptly filed for bankruptcy. The following month, he was arrested at his luxury apartment in the Bahamas and accused of stealing from clients to fund billions in political contributions, charitable donations and investments in other start-ups.
The investigations took place with surprising speed for such a complex case. Within a few months, three of Bankman-Fried's top deputies, including a former girlfriend, pleaded guilty to fraud charges and agreed to cooperate with prosecutors. Mr. Bankman-Fried was initially granted home detention, but the judge revoked his bail in August after determining that he had attempted to intimidate witnesses, and sent him to the Brooklyn Detention Center.
At the October trial, Bankman-Fried's former colleagues testified for the prosecution, telling the jury that they conspired with him to plunder client accounts. When he took the stand, Mr. Bankman-Fried seemed evasive at times, repeatedly claiming not to remember crucial details of his FTX warrant.
“When he wasn't outright lying, he was often evasive, quibbling, dodging questions,” Judge Kaplan said Thursday. “I've never seen a sight like it.”
Since her conviction, Bankman-Fried's lawyers and family have waged a long-term campaign to secure a lenient sentence and rewrite the public narrative about FTX's failure. In a sentencing memo, Marc Mukasey, one of the defense lawyers, argued that Mr Bankman-Fried had sometimes behaved strangely on the witness stand because he was autistic. He also cited the tycoon's charitable initiatives, arguing that FTX should be a force for good in the world.
But the defense case centered on the money FTX users lost when the exchange failed. After FTX's bankruptcy, its new leaders pooled billions of dollars to return to customers, in part by liquidating digital coin stocks and selling Bankman-Fried's stakes in other companies. Mr. Mukasey said those customers would eventually be rehabilitated through the bankruptcy process, bringing the losses caused by Mr. Bankman-Fried's actions to “zero.”
Prosecutors rejected that argument. While FTX's new leadership has predicted that customers will eventually get their deposits back, the money they receive will be equivalent to the dollar value of their holdings in November 2022 — and won't take into account the recent surge in cryptocurrency markets that sent Bitcoin at its highest price ever.
Mr. Bankman-Fried “demonstrated a blatant disregard for the rule of law,” prosecutors wrote in a sentencing memo. “He knew what society considered illegal and unethical, but he ignored what was based on pernicious megalomania.”
Judge Kaplan said of FTX's victims on Thursday: “The defendant's assurance that they will be paid in full is misleading. It is logically flawed. It's speculative.
In recent weeks, prosecutors have filed hundreds of letters from FTX customers explaining how financial losses had devastated their lives. One customer said the collapse led to “suicidal thoughts.”
“Sam Bankman-Fried will have to think for the rest of his life about the multitude of lives he destroyed with his selfishness and superficiality,” the client wrote. “I really hope justice teaches him the difference between life and video games.”
Another FTX user, Sunil Kavuri, who lost $2 million when the company collapsed, testified at the hearing that the implosion had wiped out money he had planned to spend on a home and his children's education. children.
“I've been living the FTX nightmare for almost two years,” he said.
When Mr. Bankman-Fried spoke, he offered an assortment of sometimes rambling thoughts, apologizing for his mistakes and insisting that FTX had enough resources to make customers whole.
“I made a series of bad decisions,” he said, his leg shaking. “They weren't selfish decisions. They were not altruistic decisions. They were bad decisions.”
Mr. Bankman-Fried has vowed to appeal his conviction, hiring a lawyer from the law firm Shapiro Arato Bach to oversee that effort. But in his remarks to him, he seemed to accept the fact that he would remain in prison for some time.
“At the end of the day, my useful life is probably over,” he said.
Matthew Goldstein contributed to the reporting.