Crypto entrepreneur Sam Bankman-Fried was sentenced Thursday to 25 years in prison for a massive fraud that unraveled with the collapse of FTX, once one of the world’s most popular platforms for exchanging digital currency.
Bankman-Fried, 32, was convicted in November of fraud and conspiracy — a dramatic fall from a crest of success that included a Super Bowl advertisement and celebrity endorsements from stars like quarterback Tom Brady, basketball star Stephen Curry and comedian Larry David.
U.S. District Judge Lewis A. Kaplan imposed the sentence in the same Manhattan courtroom where, four months ago, Bankman-Fried testified that his intention had been to revolutionize the emerging cryptocurrency market with his innovative and altruistic ideas, not to steal.
Kaplan said the sentence reflected “that there is a risk that this man will be in position to do something very bad in the future. And it’s not a trivial risk at all.” He added that it was “for the purpose of disabling him to the extent that can appropriately be done for a significant period of time.”
Kaplan further ordered Bankman-Fried to forfeit over $11 billion. He also he would advise the Federal Bureau of Prisons to send him to a medium-security prison or less near the San Francisco area because he’s unlikely to be a physical threat to other inmates or prison staff, and his autism and social awkwardness would make him vulnerable to other inmates in a high-security location.
Prosecutors had recommended a prison sentence 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.
Prosecutors said Bankman-Fried had cost customers, investors and lenders over $10 billion by misappropriating billions of dollars to fuel his quest for influence and dominance in the new industry, and had i llegally used money from FTX depositors to cover his expenses, which included purchasing luxury properties in the Caribbean, alleged bribes to Chinese officials and private planes.
Kaplan agreed with prosecutors Thursday that Bankman-Fried should not get leniency just because some investors and customers might get some of their lost money back. He called the argument “logically flawed” and “speculative.” He said customers lost about $8 billion, investors lost $1.7 billion and lenders were shorted by $1.3 billion.
Kaplan also cited three instances where he concluded that Bankman-Fried committed perjury during his trial testimony, including when Bankman-Fried testified that he didn’t know until just weeks before FTX collapsed into bankruptcy that customer funds were being diverted to a hedge fund offshoot of FTX.
Given a chance to speak, Bankman-Fried stood and apologized in a rambling statement, saying: “A lot of people feel really let down. And they were very let down. And I’m sorry about that. I’m sorry about what happened at every stage.”
He added, “My useful life is probably over. It’s been over for a while now, from before my arrest.”
Defense lawyer Marc Mukasey said his client was misunderstood.
“Sam was not a ruthless financial serial killer who set out every morning to hurt people,” Mukasey said. “Sam Bankman-Fried doesn’t make decisions with malice in his heart. He makes decisions with math in his head.”
Bankman-Fried’s attorneys, friends and family had urged leniency, saying he was unlikely to re-offend again. They also said FTX’s investors have largely recovered their funds — a claim disputed by bankruptcy lawyers, FTX and its creditors.
“Mr. Bankman-Fried continues to live a life of delusion,” wrote John Ray, the CEO of FTX who has been cleaning up the bankrupt company. “The ‘business’ he left on November 11, 2022 was neither solvent nor safe.”
Two weeks ago, Mukasey attacked a probation office recommendation of 100 years in prison, saying a sentence of that length would be “grotesque” and “barbaric.”
He urged the judge to sentence Bankman-Fried to a term of five to 6 1/2 years in prison, which Mukasey said was a fair reading of federal sentencing guidelines.
Bankman-Fried was worth billions of dollars on paper as the co-founder and CEO of FTX, which was the second-largest cryptocurrency exchange in the world at one time.
FTX allowed investors to buy dozens of virtual currencies, from Bitcoin to more obscure ones like Shiba Inu Coin. Flush with billions of dollars of investors’ cash, Bankman-Fried took out a Super Bowl advertisement to promote his business and bought the naming rights to an arena in Miami.
But the collapse of cryptocurrency prices in 2022 took its toll on FTX, and ultimately led to its downfall. FTX’s hedge fund affiliate, known as Alameda Research, had bought billions of dollars of various crypto investments that lost considerable amounts of value in 2022. Bankman-Fried tried to plug the holes in Alameda’s balance sheet with FTX customer funds.
Three other people from Bankman-Fried’s inner circle pleaded guilty to related crimes and testified at his trial.
The biggest name among the three was Caroline Ellison, once the girlfriend of Bankman-Fried. 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 onetime friends of Bankman-Fried, Gary Wang and Nishad Singh, also testified they felt they were directed by Bankman-Fried to commit fraud.
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