Sam Bankman-Fried: The mastermind of the FTX cryptocurrency platform, sentenced to 25 years in prison for fraud

Neither the more than one hundred years theoretically attributable to the sum of all his crimes nor the 6.5 that his lawyers requested at most. The mastermind of the FTX cryptocurrency platform, Sam Bankman-Fried, was sentenced this Thursday in New York to 25 years in prison for his responsibility in the collapse of the company and the theft of $8 billion from its clients, made by those who had been convicted in November. The life of luxury and delusions—in the definition of the prosecutors, but also of the current CEO of FTX, who has not spared criticism against his predecessor—led Bankman-Fried, 32, to run the firm like someone who plays to Monopoly, an expression used by prosecutors to define the entrepreneur’s crazy management. Bankman-Fried, better known by his initials SBF, deceived everyone: he lied to the investors who entered FTX, the lenders who pumped money into him, and the clients who traded on his exchange platform. He also financed political campaigns of representatives of both parties in Washington, committed legal fraud and deception and irregularly attempted to unlock 1 billion from his hedge fund frozen by Beijing, in addition to making investments in other companies and luxurious real estate purchases, such as the chalet. from the Bahamas where with his small group of intimates he speculated in cryptocurrencies.

Federal Judge Lewis Kaplan described him before reading the sentence as someone “extremely intelligent. And he suffers from autism,” pointing out his understanding of the disease. According to Kaplan’s plea, “SBF is capable of great achievements,” while he noted that he has “a way of interacting with people that is unusual and sometimes unpleasant.” The judge agreed with the allegation that Bankman-Fried “wanted to be a very, very influential person politically in this country,” and that that fueled his financial crimes. That is why when passing sentence he did not exclude the possibility that he could reoffend in the future. “There is that risk, and it is not a trivial risk.”

“A lot of people feel really let down, and they felt really let down, and I’m sorry,” Bankman-Fried said in court before hearing the sentence. “I regret what happened at all times. And there are things I should have done and things I shouldn’t have done,” he apologized in his first explicit expression of responsibility since he was arrested in 2022, although not of remorse, as Kaplan clarified. “I threw it all away. That torments me every day and is unbearable, but it’s not me that matters: what matters are the clients, who don’t deserve any of this pain.”

Although the sentence was lower than expected, SBF noted: “My useful life is probably over. It’s been over for a long time.” His lawyer, Marc Mukasey, tried to win the judge’s sympathy by stating that “Sam was not a ruthless financial serial killer who went out every morning to hurt people.” “His true motivations were misinterpreted and misunderstood,” the lawyer said. “He’s actually a clumsy math nerd…he loves video games and veganism, and he’s compassionate to animals,” he added with typical disney speech so American taste.

Two weeks ago, prosecutors asked for a sentence of 40 to 50 years in prison for the former executive because, far from showing any sign of repentance, he insisted that his activity at the head of FTX was not criminal at all and, at most, he admitted to some management failures. “His life in recent years has been a [vida] of unparalleled greed and arrogance; of ambition and rationalization; courting risk and repeatedly gambling with other people’s money,” Manhattan federal prosecutors wrote to Judge Kaplan on March 15. “And even now Bankman-Fried refuses to admit that what he did was wrong.” The agent overseeing the conditions of his parole recommended a sentence of 100 years, just 10 years short of the maximum.

Before announcing the sentence, Kaplan noted that Bankman-Fried’s crimes caused a loss for investors of $1.7 billion, red ink for Alameda Research’s lenders of $1.3 billion and for FTX clients of $1.3 billion. 8 billion dollars. The defense argued instead that there were no losses for any of the victims, also alleging that they will be compensated in the bankruptcy process being carried out in Delaware. “I totally reject that there were no real losses,” Kaplan said.

Precisely the restructuring process of the firm, subject to Chapter 11 or bankruptcy law, has generated new controversy in recent weeks. In documents filed last week in Delaware bankruptcy court, current FTX CEO John Ray claimed that Bankman-Fried had misrepresented the company’s recent statements about its ability to refund lost money to customers, saying ensure that the damage to them, as well as to lenders and investors, was “zero.” “All of these statements are reckless and false,” Ray wrote. “Even the best outcome imaginable in the Chapter 11 proceeding will not result in a true and complete economic recovery for all creditors and equity investors, that is, a full recovery as if the fraud had never existed,” he said. Bankman-Fried made those “reckless and false” statements according to Ray to defend why, in his opinion and that of his attorneys, he would deserve a light prison sentence.

Bankman-Fried was convicted last November on seven counts of fraud and conspiracy, nearly a year after he was extradited from the Bahamas to New York to stand trial. Applauded in his days of success as the guru of cryptocurrencies, his companies – FTX and the hedge fund Alameda Research, in reality communicating vessels of plunder – collapsed in November 2022, less than a year after the young executive reached the top. The manifestation of his success included a Super Bowl ad, celebrity endorsements and an appearance before Congress. But as dazzling as his rise was his fall. Last August, he saw his house arrest revoked for trying to tamper with witnesses—including his ex-girlfriend, head of Alameda Research—and had to enter a crowded Manhattan prison, far from the comforts of his parents’ mansion. where he spent the first months on parole after posting bail of 250 million dollars. At the trial, his three closest collaborators, including his ex-partner, declared that they chose to collaborate with justice.

Exemplary sentence

The implosion of FTX and the subsequent arrest and conviction of its main architect were considered a warning to sailors, in an insufficiently regulated sector. Although regarding the laxity of the sector, it is worth remembering the statements of Damian Williams, federal prosecutor for the Southern District of New York, after the November verdict: “The crypto industry may be new, but this type of fraud, this type of corruption, is so old. Like the time”. The precedent of FTX as a paradigm of corruption has been consecrated by the sentence imposed on the guru crypto while the prices of most digital assets continue to skyrocket, in the path of bitcoin. The process against Bankman-Fried put the spotlight on the emerging and poorly regulated cryptocurrency industry and on the group of young entrepreneurs in their twenties who cohabited in a luxurious mansion in the Bahamas while dreaming of becoming leading actors in a new niche in finance. .

The fortunes of SBF, with a growing public and even political presence – it tried to gain influence in Washington by financing candidates from both parties and flirted with the idea of ​​a possible run for the presidency – definitively hit rock bottom during the trial. Caroline Ellison, his ex-girlfriend and the prosecution’s star witness, testified that Alameda took several billion dollars of FTX clients’ money and used it for his own investments and to pay off debts he owed. Also to cover the excesses of a life of luxury in which Bankman, according to the biography of Michael Lewis published on the occasion of the trial, was unable to appoint three of his lieutenants in the firm, since he hired them only to sign documents to anyone. time of day (or early morning).

In addition to the criminal sentence, the final point of his flight forward, Bankman-Fried’s discredit continues to increase, judging by the harsh disqualifications of his successor at the head of FTX. Last week, Ray also wrote a letter to Judge Kaplan, asserting that Bankman’s claim that clients, lenders and investors were not harmed by his deranged management was radically false and that the convicted man lived a “life of deceit.” . “Mr Bankman-Fried continues to live a life of delusion. He business which he left on November 11, 2022 [cuando se produjo el colapso de FTX] It was neither solvent nor secure. Vast sums of money were stolen by Mr. Bankman-Fried, and he was rightly convicted by a jury,” the company’s current CEO wrote to the federal judge.

According to Ray, the fact that the bankruptcy code dictates that each of the victims’ claims must be valued retrospectively, dated November 11, 2022, when the value of cryptocurrencies was 400% lower than today, further aggravates plus Bankman’s deceptions—or delusions.