Cryptocurrencies

Sam Bankman-Fried, Once Crypto Royalty, Awaits Sentence in Fraud Case

Author: Editors Desk Source: WSJ:
March 28, 2024 at 07:50
Sam Bankman-Fried arriving at the courthouse in New York City last year. TIMOTHY A. CLARY/AGENCE FRANCE-PRESSE/GETTY IMAGES
Sam Bankman-Fried arriving at the courthouse in New York City last year. TIMOTHY A. CLARY/AGENCE FRANCE-PRESSE/GETTY IMAGES

Prosecutors said FTX founder deserves up to 50 years in prison, while his defense argued for no more than six

Less than two years ago, FTX founder Sam Bankman-Fried was the crypto king. The moptop millennial hobnobbed with heads of state, soaked up Caribbean views from his $30 million penthouse and vowed to use his wealth to better humanity.

Now dethroned, Bankman-Fried is set to be sentenced Thursday in a New York federal court for crimes connected to the collapse of the crypto exchange. Last year, a jury found the 32-year-old guilty of stealing billions of dollars from FTX customers and defrauding investors and lenders to his crypto investment firm Alameda Research. 

Federal prosecutors say Bankman-Fried committed one of the greatest financial frauds in U.S. history. Fueled by greed and hubris, he used other people’s money to fund his lavish lifestyle, make risky investments and pursue his political agenda, according to prosecutors. 

They asked U.S. District Judge Lewis Kaplan, who is presiding over the case, to sentence Bankman-Fried to 40 to 50 years in prison.

“There is a significant likelihood that if the defendant is released back into society at a young enough age he will have the opportunity to engage in another fraud,” prosecutors said in a court filing. 

Bankman-Fried’s lawyers said a sentence of no more than six years in prison was more appropriate, arguing he still had much to offer to society. They pointed to his autism, his deep remorse and his charitable works as reasons for a lenient sentence. They argued that customers, lenders and investors would get back any money they lost.

“Sam is not the ‘evil genius’ depicted in the media or the greedy villain described at trial,” his lawyers wrote, but rather “a brilliant, complex and humane person. "Thursday's hearing starts at 9:30 a.m. and is expected to last at least several hours. The prosecution and defense will have a final chance to pitch to the judge what each side thinks is an appropriate prison term. Bankman-Fried and at least one victim are expected to speak in court before the judge hands down the sentence. 

Prison Sentences Compared

Sentences in some prominent white-collar fraud cases

 

*Initial sentence of 24 years Sources: U.S. Department of Justice; news reports
*Initial sentence of 24 years
Sources: U.S. Department of Justice; news reports

 

The sentencing caps the meteoric rise and fall of Bankman-Fried. The son of Stanford Law School professors started FTX in 2019 with a fellow Massachusetts Institute of Technology graduate. The company had a quick takeoff, riding a tide of growing popularity in crypto trading. 

Millions of customers joined his exchange, drawn to Bankman-Fried’s image as a shaggy-haired genius and to FTX commercials starring NFL star Tom Brady and comedian Larry David. As the exchange soared in value, Bankman-Fried crisscrossed the globe on private jets and hosted dinners with guests such as Bill Clinton and Tony Blair. He became a top political donor in Washington, holding himself out as a trustworthy figure seeking legislation to clarify the rules around crypto.

That world came crashing down in early November 2022 after the crypto website CoinDesk published what purported to be a leaked Alameda balance sheet, causing a run on FTX customer funds. Soon after, the exchange filed for bankruptcy protection. The Manhattan U.S. attorney’s office charged Bankman-Fried a month later. 

 

Caroline Ellison, a former deputy and onetime romantic partner of Sam Bankman-Fried, arriving for his trial in New York last year. PHOTO: STEPHANIE KEITH/BLOOMBERG NEWS
Caroline Ellison, a former deputy and onetime romantic partner of Sam Bankman-Fried, arriving for his trial in New York last year. PHOTO: STEPHANIE KEITH/BLOOMBERG NEWS

 


During a monthlong trial in the fall, jurors heard testimony from three of Bankman-Fried’s top lieutenants, including his ex-girlfriend, who said the FTX founder directed them to commit crimes alongside him. Bankman-Fried took the unusual step of testifying in his own defense. He told jurors that he never committed fraud, yet he struggled under cross examination, saying dozens of times that he didn’t recall specifics.

In the weeks before the sentencing, Bankman-Fried’s supporters wrote letters to the judge, saying that his struggles with depression, autism and anhedonia—the inability to feel happiness—weigh in favor of a lighter sentence.

In letters to the judge, his supporters, ranging from his mother to an ex-police officer who said he befriended Bankman-Fried while incarcerated, argued for leniency.

Carmine Simpson, the ex-police officer, said that the FTX founder was a selfless person who adhered to his beliefs, even in jail. “Even though twelve out of every fourteen of Sam’s weekly meals are just undercooked rice, a scoop of disgusting-looking beans and week-old brown lettuce, Sam has stayed true to his commitment to not participate in the maltreatment of animals,” he wrote. Simpson pleaded guilty last year to sexual exploitation of a child, according to court records.

 

Sam Bankman-Fried, the founder of FTX, was convicted in a New York federal court of stealing billions of dollars from customers. Prosecutors have called it one of the biggest financial frauds in U.S. history. Photo: Amr Alfiky/Reuterss


Bankman-Fried’s mother, Barbara Fried, said in her letter to Kaplan that her son had sought to do good in the world from a young age. When he was 4 years old, she said, he tried to help a fallen toddler. He was precocious as well, she said, independently reading complex moral and philosophical literature in middle school. In high school, he counseled classmates who were depressed, despite battling depression himself, she said.

“But this is not just a personal tragedy,” she wrote to the judge. “The ease with which we consign young lives with so much promise to the trash heap is a societal tragedy as well.”

Prosecutors said Bankman-Fried’s fraud amounted to $10 billion in losses, placing him alongside the country’s most notorious white-collar criminals. They likened him to Bernie Madoff, the Manhattan financier who orchestrated a Ponzi scheme that led to $13 billion in losses. Madoff received a sentence of 150 years and died in prison at 82 in 2021

While the financial loss in Madoff’s case was higher, prosecutors said, Bankman-Fried’s fraud had a further reach because he had tens of thousands of victims from around the world. 

“We were brought to the brink of losing our home, struggling to meet mortgage payments and maintain a semblance of normalcy for our child,” one victim wrote in a letter to Kaplan.  

 

Joseph Bankman and Barbara Fried attended their son’s trial in New York last year. PHOTO: JOHN TAGGART FOR THE WALL STREET JOURNAL
Joseph Bankman and Barbara Fried attended their son’s trial in New York last year. PHOTO: JOHN TAGGART FOR THE WALL STREET JOURNAL

 

Lawyers for Bankman-Fried argued that the sentence handed down to Madoff, who was 71 at the time, was largely symbolic.  

Current FTX Chief Executive John Ray said in a filing to the judge that customers are expected to be repaid the value of their claim on the date the exchange filed for bankruptcy protection. However, many cryptocurrencies have surged in value since that time, meaning customers will miss out on the financial gain, he said. 

“Customers still will never be in the same position they would have been had they not crossed paths with Mr. Bankman-Fried and his so-called brand of ‘altruism,’” Ray said.

Write to James Fanelli at james.fanelli@wsj.com and Corinne Ramey at corinne.ramey@wsj.com

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