As of: March 28, 2024, 5:15 p.m
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Sam Bankman-Fried is the founder of the cryptocurrency exchange FTX. Here last summer leaving the federal courthouse in Manhattan. © Bebeto Matthews/AP/dpa
Just two years ago, Sam Bankman-Fried was celebrated as a financial genius and figurehead of a future world of digital money. Now he is expected to spend more than two decades behind bars as a fraudster.
New York - Former cryptocurrency entrepreneur Sam Bankman-Fried, convicted of fraud, will be sentenced to 25 years in prison. New York judge Lewis Kaplan announced his decision on Thursday, as US media reported from the courtroom. Lawyers for the 32-year-old founder of the digital money exchange FTX have been considering an appeal since his conviction in November.
Kaplan's sentence was between the prosecutors and the defense's ideas. The public prosecutor's office had requested 40 to 50 years in prison, while Bankman-Fried's lawyers had suggested around six years in prison. If Kaplan had exhausted the proposed penalties on all charges, it would have been more than 100 years in prison.
Arrested in the Bahamas
FTX, one of the largest trading venues for cryptocurrencies such as Bitcoin, collapsed spectacularly at the end of 2022. Bankman-Fried was arrested in the Bahamas and extradited to the United States.
While the cryptocurrency business can be complicated, Bankman-Fried ended up being charged with classic fraud: embezzlement of client assets. Bankman-Fried was also behind a hedge fund called Alameda Research that made risky trades and borrowed funds from FTX. Actually, collateral should have been deposited. There were also computer systems that were supposed to take care of this. But this software made a secret exception for Alameda. This allowed the hedge fund to go as deep as it wanted on FTX. When the Alameda deals went wrong, there was a billion-dollar hole in FTX's coffers.
Potential sentence of up to 110 years
Bankman-Fried said in the trial that he only partially understood the financial situation of his companies. But former confidants at FTX and Alameda accused him of pressuring them to violate the law. Prosecutors accused Bankman-Fried of “unsurpassed greed” and emphasized that the sentence should be appropriate given the “historic” dimension of the crime. This should also “promote respect for the law”. Prosecutors also accused Bankman-Fried of repeatedly lying under oath in court. The judge found so too - increasing the potential sentence to up to 110 years.
Bankman-Fried, who wore a prison uniform, showed more remorse at the sentencing hearing than at trial. According to the financial service Bloomberg, he knew that many felt abandoned. He regrets that - and every step that led to it.
Lawyers point to autism diagnosis
The 32-year-old's lawyers pointed out, among other things, that Bankman-Fried had been diagnosed with autism. They also highlighted that some investments from FTX and Alameda have performed well and could be monetized. This would allow many investors to be compensated. Among other things, the value of holdings of Bitcoin and other cryptocurrencies has risen sharply since the FTX collapse. And some investments, such as the share in the AI start-up Anthropic, also gained significantly in value. Just a few days ago, FTX administrators announced plans to sell a large portion of Anthropic's stake for around $900 million.
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But cheated FTX customers pointed out in letters to the court that they would definitely suffer financial damage. Because even if you get back the value of your crypto money holdings at the time as of autumn 2022, the strong price increases in Bitcoin, for example, will pass you by.
FTX emergency manager charges Bankman-Fried
John J. Ray, who was appointed FTX emergency manager, also sharply rejected the representation made by Bankman-Fried's lawyers. When he took over the leadership in November 2022, only 105 Bitcoin remained at FTX - while customers were entitled to almost 100,000 Bitcoin, Ray recently wrote in his letter to the court. He pointed out that jurors had undoubtedly concluded that Bankman-Fried had stolen them and spent them on other things. Therefore, it will not be possible to return the Bitcoin holdings to those affected.
Judge Kaplan also did not see the investors' potential compensation as a mitigating circumstance. He compared Bankman-Fried to a thief who won with his loot while gambling in Las Vegas, as the US broadcaster CNBC reported from the sentencing announcement. That doesn't make the crime any less serious, emphasized Kaplan.
Low point after a rapid fall
For Bankman-Fried, the long prison sentence is the low point after a rapid case. Until the FTX collapse, he was hailed as the face of a new financial world. Before the collapse, the platform was one of the largest trading venues for cryptocurrencies such as Bitcoin. On paper, it was temporarily valued at $32 billion. Celebrities like football star Tom Brady promoted FTX, Bankman-Fried spoke at conferences about the future of the financial system, donated a lot of money to the Democratic Party and was photographed at the prestigious Super Bowl event with singer Katy Perry and actor Orlando Bloom. Some investors pointed out in letters to the court that the celebrities had made FTX more credible in their eyes. dpa