Sunday, April 14, 2024

Sam Bankman-Fried: Disgraced ‘crypto king’ jailed for 25 years after stealing billions of dollars from FTX customers | Business News

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Disgraced crypto entrepreneur Sam Bankman-Fried has been sentenced to 25 years in prison after being convicted of stealing billions of dollars from his customers.

He was the chief executive of FTXwhich suddenly went bankrupt in November 2022 – leaving millions of users frozen out of their accounts and unable to make withdrawals.

The 32-year-old American could have faced up to 100 years behind bars – but last month, his lawyers argued such a sentence would have been “barbaric” and a five-year term would be more appropriate.

Initial reports said he had been sentenced to 20 years – but this has since been corrected to 25.

Prosecutors had asked the judge to jail Bankman-Fried for 40 to 50 years, arguing the public needed protecting from the fraudster and a harsh punishment would deter other criminals.

“The defendant victimised tens of thousands of people and companies, across several continents, over a period of multiple years,” prosecutors said in a court filing.

“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.”

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Prosecutors also said Bankman-Fried had cost customers, investors and lenders over $10bn (£7.9bn) by misappropriating funds 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, alleged bribes to Chinese officials and private planes.

At the sentencing hearing in Manhattan, Judge Lewis Kaplan said the businessman lied on the witness stand when he insisted he had no knowledge of customer funds being used this way.

The judge also described Bankman-Fried’s claim that victims will be paid back in full as “misleading and logically flawed”.

“A thief who takes his loot to Las Vegas and successfully bets the stolen money is not entitled to a discount on the sentence by using his Las Vegas winnings to pay back what he stole,” Judge Kaplan warned.

Crypto king’s jail term is end of an era

Sam Bankman-Fried was breathlessly described as a wunderkind – a boy wonder transforming the world of finance.

Renowned for his messy hair and unkempt appearance, he graced the covers of Forbes and Fortune, who pondered whether he could become the next Warren Buffett.

The 32-year-old was the founder of FTX, which had quickly become the world’s second-largest cryptocurrency exchange – a place where investors could buy and sell digital assets like Bitcoin.

Star-studded adverts featuring the tennis player Naomi Osaka and the comedian Larry David added to its allure – with eye-watering sums spent on sponsorship deals.

But in November 2022, Bankman-Fried’s crypto empire came crashing down after it emerged that customer funds worth $10bn (£7.9bn) was missing.

Read the full analysis here

The judge said that the sentence reflected “a risk that this man will be in a 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”.

Before he was sentenced, Mr Bankman-Fried apologised in a rambling statement.

FILE PHOTO: Indicted FTX founder Sam Bankman-Fried leaves the United States Courthouse in New York City, U.S., July 26, 2023. REUTERS/Amr Alfiky/File Photo
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Sam Bankman-Fried leaving court last July. Pic: Reuters

“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 said.

“My useful life is probably over. It’s been over for a while now, from before my arrest.”

Judge Kaplan said he would advise the Federal Bureau of Prisons to send him to a medium-security prison or less near the San Francisco area because he’s unlikely to be a physical threat to other inmates or prison staff, and his autism and social awkwardness would make him vulnerable to other inmates in a high-security location.

Read more:
The meteoric rise and even sharper fall of Sam Bankman-Fried

Why industry may never recover from downfall of ‘crypto king’

It took just five-and-a-half hours for a jury in New York to convict him of two counts of fraud and five of conspiracy last November.

Three people from Bankman-Fried’s inner circle – including his former girlfriend Caroline Ellison – pleaded guilty to related crimes and testified at his trial.

Sam Bankman-Fried's colleague and on-off girlfriend Caroline Ellison testified against him. Pic: Reuters
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Sam Bankman-Fried’s colleague and on-off girlfriend Caroline Ellison testified against him. Pic: Reuters

Bankman-Fried’s conviction followed a dramatic fall from grace from his time as chief executive of FTX – the second-largest cryptocurrency exchange in the world at one time – when he was worth billions of dollars on paper.

FTX allowed investors to buy dozens of virtual currencies, from Bitcoin to more obscure ones like Shiba Inu Coin.

FTX logo is seen in this illustration taken March 31, 2023. REUTERS/Dado Ruvic/Illustration
Image:
Pic: Reuters

Flush with billions of dollars of investors’ cash, Bankman-Fried rode 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.

But after the collapse of cryptocurrency prices in 2022, Bankman-Fried tried to plug the holes in the balance sheet of FTX’s hedge fund affiliate, known as Alameda Research.

Bankman-Fried’s victims – an estimated 80,000 of whom are based in the UK – remain out of pocket, with some losing their life savings.

Prosecutors described his crimes as one of the biggest financial frauds in US history.

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