Sam Bankman Fried, co-founder and former CEO of cryptocurrency exchange FTX and trading company Alameda Research, was sentenced to prison in the Southern District of New York (SDNY) about five months after his conviction. He was sentenced to 25 years in prison by Judge Lewis Kaplan. During his trial he was charged with all seven counts related to fraud and money laundering.
“When he wasn't lying, he was tearing his hair out, making excuses and trying to get prosecutors to rephrase their questions,” Kaplan said Thursday, according to Inner City Press. “I've been doing this job for almost 30 years. I've never seen a performance like that.”
The total sentence for the seven charges, two counts of fraud and five counts of conspiracy, could be up to 110 years.
Earlier this month, Justice Department prosecutors asked for the “required” 40 to 50 years in prison. “The scale of Mr. Bankman Freed's fraudulent activities warrants severe punishment,” the notice states. “Losses are at least $10 billion, making this one of the largest financial frauds in history.” Kaplan said Thursday that the scope “will be wider than necessary.” In late February, Bankman Freed's lawyers recommended a 63- to 78-month prison term for their client, citing his “personal considerations,” “remorse,” and “minor negligence.” A notice has been filed.
Regardless of what both parties had hoped for, this decades-long sentencing could lead to how one of the world's once largest crypto exchanges and its sister trading company collapsed in November 2022. This is the result of Bankman Freed's five-week trial, which delved into the matter.
His ruling could also send a signal to the entire crypto industry. While Judge Kaplan will need to consider the “need for a sentence that provides an adequate deterrent,” that is, a sentence that deters other white-collar defendants and bad actors in the crypto industry more generally. , Josh Naftalis, a former federal prosecutor who now works at Paras Partners, York told TechCrunch. “In other words, the court is allowed to consider what message a sentence imposed on SBF would send to the crypto industry.”
Mark Bini, a former federal and state attorney and now a partner in Reed Smith's digital asset group On Chain, agrees. He said the verdict represents a “real market in the crypto space,” adding that the outcome “could serve as a measuring stick for future sentencing related to crypto fraud.”
And in the federal system, there is no parole. But defendants like Bankman-Freed can get credit for “time well spent” under the First Step Act, potentially reducing their sentences for good behavior while in prison. Both lawyers pointed out. Bini said there are many opportunities for reduced sentences for nonviolent first-time offenders. “This could result in a defendant's sentence being reduced by up to 15% of the originally imposed sentence,” Naftalis added.
Bankman Freed has been living in the Metropolitan Detention Center in Brooklyn, New York, since losing bail prior to trial. Other notorious past inmates at the correctional facility include Jeffrey Epstein's accomplice Ghislaine Maxwell and “pharmaceutical associate” Martin Shkreli.
Looking back at SBF and FTX
Before going to prison, Bankman Fried interacted with celebrities like Katy Perry and trophy-winning athletes like Tom Brady, and had his company's products featured on Major League Baseball umpire shirts and the Miami Heat's arena. Because he put his name into it, he reigned at the top of the virtual currency world. Before the collapse, FTX was one of the top cryptocurrency exchanges in terms of trading volume, just behind Coinbase and Binance.
Before its collapse, FTX grew users to “millions” and revenue grew from $10 million to $20 million in 2019, $80 million in 2020, and $1 billion in 2021. Bankman Freed said in his testimony that daily revenue in 2021 was $3 million.
However, after Alameda's flawed balance sheet was exposed by crypto media publication CoinDesk in November 2022, Bankman Freed's popularity and trust across the crypto community rapidly declined, and the industry as a whole This caused ripple effects and concerns regarding FTX and its liquidity. Within days, the exchange filed for bankruptcy and Bankman Fried resigned as CEO.
His trial and the months leading up to it revealed that the problem was much larger than originally thought, as Bankman Fried and other executives misappropriated more than $8 billion in customer funds. became. Bankman Fried testified that Alameda did not defraud FTX customers or use the funds, but that Alameda “borrowed” the funds from the exchange.
Mark Cohen, Bankman Freed's lead attorney, also said the government has filed a Hallmark-movie-like lawsuit against Bankman Freed, accusing Bankman Freed of making “bad business decisions.” , said the government “tried to make Sam into some kind of villain, some kind of villain.” monster. “
In the end, the jury didn't buy that story. Prosecutors contended that Bankman Fried was responsible for making numerous false promises both internally and externally, causing billions of dollars in losses for thousands of FTX investors. They emphasized how wrong it is to use FTX customers' funds without their knowledge or approval.
As a result, Bankman Freed will spend a significant amount of time in prison.