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Tuesday, April 23, 2024

Judge Sentences FTX Fraudster Bankman-Fried

'My useful life is probably over...'

(Headline USA) Crypto entrepreneur Sam Bankman-Fried was sentenced Thursday to 25 years in prison for a massive fraud on hundreds of thousands of customers that unraveled with the collapse of FTX, once one of the world’s most popular platforms for exchanging digital currency.

U.S. District Judge Lewis A. Kaplan delivered a blistering analysis of Bankman-Fried and his crimes before announcing a sentence that was half of what prosecutors sought and less than a quarter of the 105 years recommended by the court’s Probation officers.

“There is absolutely no doubt that Mr. Bankman-Fried’s name right now is pretty much mud around the world,” Kaplan said of the 32-year-old man who once seemed atop the cryptocurrency world before his businesses collapsed in November 2022, leaving customers, investors and lenders short over $11 billion, which the judge ordered him to forfeit.

He 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.

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. The judge said Bankman-Fried repeatedly committed perjury when he told lies from the witness stand.

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 said he also would advise the Federal Bureau of Prisons to send Bankman-Fried to a medium-security prison near San Francisco because his notoriety, his association with vast wealth, his autism and social awkwardness are likely to make him especially vulnerable at a high-security facility.

Assistant U.S. Attorney Nicolas Roos had recommended a prison sentence of 40 to 50 years, saying it was the only way to ensure “the defendant doesn’t do it again.”

“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 had said in a court filing.

Prosecutors said Bankman-Fried misappropriated billions of dollars to fuel his quest for influence and dominance in the new industry, and had illegally used money from FTX depositors to cover his expenses, which included purchasing luxury properties in the Caribbean, 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 losses 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.

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.”

Bankman-Fried, wearing his khaki-colored prison uniform and chained at the ankles, seemed to briefly get emotional as he spoke for about 20 minutes, expressing regret about “a lot of mistakes” but casting some of the blame onto others. His trademark messy and bushy hair had returned from the trimmer look he displayed at trial.

The judge later criticized those remarks, saying he expressed “never a word of remorse for the commission of terrible crimes.”

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 105 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.

Adapted from reporting by the Associated Press

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