THE DAILY BEAST
U.S. District Judge Lewis Kaplan excoriated FTX founder Sam Bankman-Fried during his sentencing hearing on Thursday, declaring that the convicted fraudster had perjured himself on the stand and attempted to commit witness tampering. Kaplan then sentenced Bankman-Fried to 25 years in prison, capping a stunning downfall for the former public face of crypto.
Bankman-Fried, who was convicted on seven fraud and conspiracy counts in November, has been locked up since August, when Kaplan got fed up with his pretrial antics and remanded him into custody.
During Thursday’s hearing, Kaplan rejected Bankman-Fried’s claim that he deserves a lighter sentence because many of his victims may be made whole on their lost investments. That may happen, the judge noted, but only because cryptocurrencies have skyrocketed in value. He offered an analogy to explain why Bankman-Fried is still culpable: If a thief steals money, takes it to Las Vegas, and earns a handsome profit by gambling, he is still a thief, even if the funds are repaid.
The son of two Stanford professors, Bankman-Fried, 32, was once worth more than $20 billion, thanks to his stakes in cryptocurrency platform FTX and an affiliated hedge fund called Alameda Research. He graced magazine covers, schmoozed with A-Listers like Tom Brady and Bill Clinton, lived with employees in a Bahamian penthouse, and showered politicians and sports teams with hundreds of millions of dollars in donations and sponsorship deals.
Then, in the fall of 2022, FTX abruptly collapsed, and Bankman-Fried was arrested that December. Prosecutors alleged that he had pilfered customer assets to prop up losses at Alameda and to fund venture capital investments in other companies.
Three of Bankman-Fried’s executives—Caroline Ellison, Nishad Singh, and Gary Wang—pleaded guilty to their role in the collapse and testified against their former boss at trial.
Ellison, who had an on-again, off-again relationship with Bankman-Fried, skewered him from the witness stand. After acknowledging her role in committing fraud and money laundering, among other charges, she declared that Bankman-Fried “directed me to commit these crimes.”
“The scale of wrongdoing was enormous,” Singh added during his testimony.
Bankman-Fried opted to take the stand in his defense. He appeared combative and denied knowledge about most of the company’s financial misconduct, though he admitted that “there were significant oversights.”
The jury evidently did not find him believable and convicted him on all seven counts in a matter of hours.
Following his conviction, prosecutors requested a sentence of 40 to 50 years in prison. Neama Rahmani, a former federal prosecutor and president of West Coast Trial Lawyers, told The Daily Beast he thought that proposed punishment seemed high. “People who commit murders sometimes get less than that,” he said. Still, he expected a substantial sentence given that Bankman-Fried had committed “one of the biggest and most brazen frauds in American history.”
Prosecutors echoed that point in pre-sentencing memos to the judge. “This need for deterrence is especially important in the area of cryptocurrency, where some individuals have operated under the misimpression that they are unregulated, not subject to criminal laws, or can avoid scrutiny or significant jail time,” they wrote.
They noted that Bankman-Fried’s companies were enormously lucrative and “could have been successful without fraud.” Nevertheless, they continued, he “chose to abandon honest work to pursue profit and influence through crime, and he used the proceeds of those crimes to enjoy his own lifestyle of affluence.”
Meanwhile, Bankman-Fried’s parents, former Stanford law professors Barbara Fried and Joseph Bankman, pleaded for leniency. (Neither parent has been charged with a crime, though both were involved in elements of Bankman-Fried’s operations. Bankman was included in group chats with FTX leaders as the company was imploding and they were trying to determine what to tell the public; Fried ran a political nonprofit that received funds from FTX. The couple also allegedly received millions of dollars in gifts.)
“It is easy to be cynical about others’ professed motives to do good in the world,” Fried wrote in a letter to Judge Kaplan. “It is even easier in Sam’s case, because the only thing the world knows about him is his connection to what has been described relentlessly in the media over the past year as ‘the fraud of the century,’ and his portrayal as a cartoonish villain driven by greed.”
She added that her son’s “moral character is demonstrated by his commitment to veganism even in custody,” despite the Metropolitan Detention Center’s alleged lack of nutritious vegan options. Fried claimed he lost 30 pounds during his first six months behind bars. (Bankman-Fried was originally confined to his parents’ home in California before the trial, until he was accused of trying to tamper with Ellison’s testimony by leaking private documents to The New York Times, among other infractions.)
In a separate letter, Bankman alluded to his son’s Autism Spectrum Disorder and claimed that a long sentence “would put Sam in an environment where his responses to social cues will sometimes be seen as odd, inappropriate and disrespectful,” which could place him in “significant physical danger.”
Bankman-Fried’s attorneys had requested a maximum sentence of 6.5 years, arguing that “Sam is not the ‘evil genius’ depicted in the media or the greedy villain described at trial.”
Clearly, Judge Kaplan did not agree.
Emily Shugerman contributed reporting.
