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The former head of FTX has been sentenced to 25 years’ imprisonment, bringing to an end the largest criminal fraud case in the US since the conviction of Bernie Madoff.
On Thursday (March 28), FTX co-founder and former CEO Sam Bankman-Fried was handed a custodial sentence plus $11bn in forfeitures at a federal court in New York.
Bankman-Fried, 32, was convicted in November last year of seven counts in total, including wire fraud and conspiracy to commit securities fraud, commodities fraud and money laundering.
“I know a lot of people feel really let down, and they were right, they were very let down,” he said in a statement to court.
“I’m sorry about that. I’m sorry about what happened at every stage. It haunts me every day.”
Judge Lewis Kaplan, sentencing, said Bankman-Fried had expressed little remorse for his crimes during the trial and had lied, “dodged” and “split hairs” throughout.
On two occasions last year, Bankman-Fried entered a plea of not guilty on all counts, making him the only FTX executive to protest his innocence until the end.
"He knew it was wrong," said Kaplan. "He knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught. But he is not going to admit a thing, as is his right."
The court recommended that Bankman-Fried be imprisoned in a medium-security facility, due to his “notoriety, his association with vast wealth, his autism and social awkwardness”.
Once behind bars, these factors are likely to mean that Bankman-Fried is “more than usually vulnerable”, the court noted.
It was also recommended that Bankman-Fried be imprisoned as close to the San Francisco Bay area as possible.
This will mean that the crypto kingpin will be close to his parents’ home in Palo Alto, California, where he spent much of his pre-trial detention.
A case ‘too complex’ for restitution
Alongside the custodial sentence, Judge Kaplan also signed a preliminary order of forfeiture.
The order requires that Bankman-Fried forfeit a sum of $11.02bn to the US, which is what the court deemed “traceable to the commission of said offenses”.
Among the list of eight specific assets included in the order are RobinHood shares that were purchased by FTX and deposits held by FTX in Farmington State Bank and Silvergate Bank.
Five of the eight assets have already been seized by the US Department of Justice, while the remaining three — a trio of Binance accounts that were used by FTX for proprietary trading — are yet to be seized.
In the minutes of the sentencing hearing, the court noted that due to the “complexity of the case and the number of victims”, a forfeiture order was favoured over restitution.
The order authorises the US to compensate victims using Bankman-Fried’s forfeited assets, on the grounds that direct restitution would be “impractical in this case”.
FTX victims rue their losses
One day before the sentencing hearing, the court also published 145 pages of victim impact testimony.
Many of the victims say they came to trust the FTX platform due to the celebrity endorsements of athletes such as Tom Brady and Steph Curry and actors such as Larry David.
“How could this site afford to pay this level of stars unless they were financially sound?” wrote Michael Livieratos, a former customer.
“These factors together led me to believe the site was safe, so I began moving even more of my crypto-assets on to FTX. This was my mindset.”
One victim, Bakul Badwal, describes himself as a crypto analyst who worked in the industry for two years prior to the FTX collapse, but who now campaigns against it.
In addition to his FTX losses, Badwal lost money to the bankruptcy of crypto lending platform Voyager, and he lost almost six figures to a stablecoin hack.
“My shift from an ex-industry advocate to a vocal critic is a testament to the industry’s systemic failings and moral bankruptcy,” he said.
“The human toll of these crimes, including suicides among FTX victims, signals a crisis that demands immediate, substantive action given the inevitability of larger FTX, and far worse next time.”
Other victims, such as Sin Han Tang, also mentioned suicidal thoughts among either themselves or their loved ones following the FTX bankruptcy.
“The emotional toll of the FTX fraud has been profound and debilitating,” said Tang.
“The burden of financial ruin weighs heavily on my shoulders, leading me to grapple with constant thoughts of suicide and significantly impairing my ability to perform at work.”
Tang said the value of the assets in his FTX account was $85,000 at the time of the collapse, but would now be worth $346,000.
Another customer, Arush Sehgal, said he lost $4m to the collapse of FTX, which was his entire life savings.
“Beyond the money, I lost my happiness, my ability to get out of bed, my desire to continue living,” he said.
“My wife is suicidal and depressed. I know we can never make that kind of money back ever again.”
With victim testimonies such as these in mind, Dennis Kelleher, co-founder and CEO of financial reform lobby group Better Markets, said the harsh sentence for Bankman-Fried was appropriate.
“Today’s sentencing of Bankman-Fried to 25 years in prison sends a message to the entire industry, especially the crypto kingpins, that the law applies to them,” he said, “and that even crypto crooks will do hard time for their crypto crimes.”
