Former cryptocurrency billionaire Sam Bankman-Fried, 32, has been sentenced to 25 years in prison for his involvement in a major financial scam related to the collapse of the FTX crypto exchange. He was found guilty in November on seven counts, including fraud, conspiracy, and money laundering.

How Sam Bankman-Fried pulled off the scam

Bankman-Fried got into the world of cryptocurrency at the age of 25. He founded a company called Alameda Research and soon realised he could make a lot of money by exploiting differences in Bitcoin prices between different countries.

This strategy, called arbitrage trading, earned him $20 million in just three weeks, according to BBC. He launched FTX in 2019, a crypto exchange in Hong Kong that attracted investors due to his charismatic personality and promises of big returns.

His ex-girlfriend, former CEO of Alameda Research, Caroline Ellison, described him as an extreme risk taker, saying, “He would be happy to flip a coin, if it came up tails and the world was destroyed, as long as if it came up heads, the world would be more than twice as good.”

Read | Sam Bankman-Fried Deserves 40-50 Years In Prison For FTX Fraud: Prosecutors

Bankman-Fried, known for his casual dressing style and disorganisation, had a loyal following within FTX, prompting some to compare their loyalty to him as almost cult-like. Even external observers, like venture capital firm Sequoia Capital, saw him as a visionary striving to make a positive impact.

But cracks began to appear in Mr Bankman-Fried’s empire when reports revealed conflicts of interest between his companies, raising doubts about their integrity. The confidence in Bankman-Fried’s ventures further dropped when a rival announced plans to sell off holdings in FTX’s crypto token.

Despite claiming to have altruistic motives, Mr Bankman-Fried was slammed when it was revealed that Alameda, his company, had a large investment in FTT, the token issued by FTX. This sparked concerns about conflicts of interest between the two companies.

FTX ultimately collapsed in November 2022.

Sam Bankman-Fried’s downfall

The downfall began on November 7, 2022 when a rival executive tweeted about FTX’s financial stability, triggering panic among customers and sparking a massive bank run that drained billions from the platform. Despite efforts to stem the bleeding, the damage was irreversible, resulting in over $8 billion in missing customer funds and the bankruptcy of the company.

Read | From Sam Bankman-Fried To Do Kwan, Crypto Kings Humbled By Law

During Mr Bankman-Fried’s trial, two conflicting narratives emerged about his involvement, with some calling him a brilliant but unwitting CEO, while others accusing him of knowingly siphoning billions of dollars of customer money.

Regardless, the collapse revealed the extent to which FTX’s fortunes were tied to its founder.

Sam Bankman-Fried was sentenced to 25 years in prison by a judge on March 28 for stealing $8 billion from customers of the now-bankrupt FTX cryptocurrency exchange he founded, the last step in the former billionaire wunderkind’s dramatic downfall.

U.S. District Judge Lewis Kaplan handed down the sentence at a Manhattan court hearing after rejecting Bankman-Fried’s claim that FTX customers did not actually lose money and accusing him of lying during his trial testimony. A jury found Bankman-Fried, 32, guilty on November 2 on seven fraud and conspiracy counts stemming from FTX’s 2022 collapse in what prosecutors have called one of the biggest financial frauds in U.S. history.

“He knew it was wrong,” Mr. Kaplan said of Bankman-Fried before handing down the sentence. “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.”

Bankman-Fried stood with his hands clasped before him as Mr. Kaplan read the sentence.

Bankman-Fried, wearing a beige short-sleeve jail t-shirt, acknowledged during 20 minutes of remarks to the judge that FTX customers had suffered and he offered an apology to his former FTX colleagues.

The sentence marked the culmination of Bankman-Fried’s plunge from an ultra-wealthy entrepreneur and major political donor to the biggest trophy to date in a crackdown by U.S. authorities on malfeasance in cryptocurrency markets. Bankman-Fried has vowed to appeal his conviction and sentence.

Mr. Kaplan said he had found that FTX customers lost $8 billion, FTX’s equity investors lost $1.7 billion, and that lenders to the Alameda Research hedge fund Bankman-Fried founded lost $1.3 billion.

“The defendant’s assertion that FTX customers and creditors will be paid in full is misleading, it is logically flawed, it is speculative,” Mr. Kaplan said. “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.”

The judge also said Bankman-Fried lied during his trial testimony when he said he did not know that his hedge fund had spent customer deposits taken from FTX.

Federal prosecutors had sought a prison sentence of 40 to 50 years. Bankman-Fried’s defence lawyer Marc Mukasey had argued that a sentence of less than 5-1/4 years would be appropriate.

Addressing the judge, Bankman-Fried said, “Customers have been suffering… I didn’t at all mean to minimise that. I also think that’s something that was missing from what I have said over the course of this process, and I’m sorry for that.”

Referring to his FTX colleagues, Bankman-Fried told the judge, “They put a lot of themselves into it, and I threw that all away. It haunts me every day.”

Three of his former close associates testified as prosecution witnesses at trial that he had directed them to use FTX customer funds to plug losses at Alameda Research.

Nicolas Roos, a prosecutor with the U.S. Attorney’s office in Manhattan, told the judge, “The criminality here is massive in scale. It was pervasive in all aspects of the business.”

During the hearing, Mukasey sought to distance his client from notorious fraudsters like Bernie Madoff.

“Sam was not a ruthless financial serial killer who set out every morning to hurt people,” Mukasey said, describing his client as an “awkward math nerd” who worked hard to get customers their money back after FTX’s collapse.

“Sam Bankman-Fried doesn’t make decisions with malice in his heart,” Mukasey added. “He makes decisions with math in his head.”

Bankman-Fried testified in his own defense that he made mistakes such as not implementing a risk management team, but denied he intended to defraud anyone or steal customers’ money.

He was led into the courtroom for the hearing by members of the U.S. Marshals Service. His parents, Stanford University law professors Joseph Bankman and Barbara Fried, attended.

Crypto boom

A Massachusetts Institute of Technology graduate, Bankman-Fried rode a boom in the values of bitcoin and other digital assets to a net worth of $26 billion, according to Forbes magazine, before he turned 30.

Bankman-Fried became known for his mop of unkempt curly hair and commitment to a movement known as effective altruism, which encourages talented young people to focus on earning money and giving it away to worthy causes. He also was one of the biggest contributors to Democratic candidates and political causes ahead of the 2022 U.S. midterm elections.

But prosecutors have said the responsible image he cultivated concealed his years-long embezzlement of customer funds.

Several FTX customers have written to Kaplan expressing dismay that they will be compensated based on the value of their cryptocurrency at the time of FTX’s bankruptcy, rather than the higher levels at which those assets currently trade.

Bankman-Fried has been detained at the Metropolitan Detention Center in Brooklyn since August 2023, when Kaplan revoked his bail after finding he likely tampered with witnesses at least twice.

New York:

Sam Bankman-Fried, founder of the collapsed cryptocurrency exchange FTX, plans to make another high-stakes gamble and testify in his own defense at his criminal fraud trial.

Sam Bankman-Fried’s decision to take the stand comes after three weeks of devastating testimony for the 31-year-old accused of stealing billions of dollars from clients.

Prosecutors told Judge Lewis Kaplan that they will wrap up their case on Thursday and hand over to the defense, which said it plans to call four witnesses, including Sam Bankman-Fried.

Sam Bankman-Fried’s lawyer, Mark Cohen, did not say in which order he planned to present his witnesses but his client could testify as early as Thursday.

Sam Bankman-Fried, once one of the most respected figures in crypto, has been charged with seven counts of fraud, embezzlement and criminal conspiracy.

If convicted, he could face a de facto life sentence of more than 100 years in prison.

The Massachusetts Institute of Technology graduate had, in just a few years, turned his FTX platform into the world’s second biggest crypto exchange — making him a tech-world billionaire wunderkind.

But his empire began to crumble last November when a news report pointed to unhealthy ties between FTX and Alameda Research, Sam Bankman-Fried’s personally owned trading company.

Amid growing revelations, major investors pulled their money out of FTX, sinking it swiftly into bankruptcy.

Some $8.7 billion was still unaccounted for after the dust settled, according to the receiver appointed to manage the liquidation.

Sam Bankman-Fried has denied taking other people’s money, blaming former colleagues for the situation.

But key witnesses in recent weeks, all former FTX or Alameda employees, refuted his account.

Supported by internal documents compiled by the prosecution, they said he was behind the breaches and did not lose sight of the financial situation of FTX and Alameda.

– Ex-girlfriend offers damning evidence –

Among those taking the stand was Caroline Ellison, Sam Bankman-Fried’s former business partner and girlfriend.

She offered damning evidence against him and delivered details on his management, saying he was involved in all major decisions.

Ellison, a Stanford University mathematics graduate, was appointed by Sam Bankman-Fried in 2021 to head Alameda, whose activities were largely financed by money from customers of FTX without their knowledge.

She has pleaded guilty to fraud charges and agreed to cooperate with the prosecution, as have two other close associates of Sam Bankman-Fried.

Sam Bankman-Fried’s decision to testify in his own defense is unusual in a country where criminal defendants generally decline to do so because they have to face cross-examination and run the risk of incriminating themselves.

Hollywood producer Harvey Weinstein, comedian Bill Cosby, singer R. Kelly and drug trafficker Joaquin “El Chapo” Guzman were among high-profile defendants who declined to testify at their recent trials.

A Cornell University study of hundreds of trials published in 2009 found that 77 percent of defendants who chose to testify were convicted while 72 percent of those who declined to take the stand were found guilty.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Sam Bankman-Fried’s lawyers have complained that prosecutors at his fraud trial are portraying the FTX cryptocurrency exchange founder as a “cartoon of a villain”.
| Photo Credit: AP

Sam Bankman-Fried’s lawyers have complained that prosecutors at his fraud trial are portraying the FTX cryptocurrency exchange founder as a “cartoon of a villain,” but have done little to counter unflattering depictions of him offered to the jury by his former colleagues.

In cross-examining former members of his inner circle who have pleaded guilty and testified for the prosecution, defense lawyers generally has avoided challenging their accounts of Bankman-Fried angrily snapping at colleagues who questioned key company decisions. They also did not challenge testimony by one of the witnesses that his quirky persona was mostly an act.

Defense lawyers will have a chance to put forward a competing narrative when they present their case, beginning as soon as Thursday. But the testimony presented by the prosecution that has painted a negative portrait of the defendant’s character, if it remains unchallenged, could make jurors more willing to convict Bankman-Fried, according to experts.

“Even though it doesn’t go directly to guilt or innocence, it might create a bad impression,” said Jordan Estes, a former federal prosecutor in Manhattan who is now a partner at law firm Kramer Levin. “It’s easier to convict someone that you might not like as much.”

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Federal prosecutors in Manhattan have said Bankman-Fried looted billions of dollars in FTX customer funds to prop up his crypto-focused trading firm Alameda Research, make speculative venture investments and donate more than $100 million to U.S. political campaigns to burnish his image in Washington.

Bankman-Fried has pleaded not guilty to two counts of fraud and five counts of conspiracy. He could spend decades in prison if convicted.

In his Oct. 4 opening statement to the jury, defense lawyer Mark Cohen said Bankman-Fried “overlooked” risk management while building FTX and Alameda, which declared bankruptcy in November 2022 following a wave of withdrawals by customers. But Cohen said Bankman-Fried did not intend to steal the customers’ money.

A STRATEGIC CHOICE

Allowing specific unfavorable accounts by prosecution witnesses to go unchallenged on cross-examination could be a strategic choice by the defense, according to experts. That is because challenging such testimony could remind jurors of the negative anecdotes relayed by the witnesses.

“If they ask a lot of questions about it on cross, it’s giving more air time to an issue that isn’t necessarily helpful to them,” said Rachel Maimin, a former federal prosecutor in Manhattan who is now a partner at law firm Lowenstein Sandler.

Bankman-Fried’s best shot at establishing a positive impression of his character may be to take the witness stand himself, some experts said. His lawyers have said the defendant is considering doing so.

During opening statements, Cohen told jurors of the prosecutors: “They’d have you think he was quite the villain, or, more precisely, almost a cartoon of a villain. But the evidence will give you a very different context. The evidence will show that Sam was someone who worked very hard to try to build things, not harm them.”

The descriptions of Bankman-Fried by the prosecution’s three star witnesses contradict the 31-year-old former billionaire’s pre-arrest reputation as a nerdy do-gooder who wanted to be a responsible actor in the rough-and-tumble crypto space.

So far, two key prosecution witnesses have testified about instances in which Bankman-Fried disparaged colleagues who disagreed with him, particularly about financial issues at the heart of the criminal charges.

Nishad Singh, FTX’s former engineering chief, testified last week that when he confronted Bankman-Fried about marketing and venture spending that he found excessive, Bankman-Fried said it was “people like me sowing seeds of doubt in the company’s decisions that were the real insidious problem here.”

“It was pretty humiliating,” said Singh, who has pleaded guilty to fraud charges.

Caroline Ellison, Alameda’s onetime chief executive officer and Bankman-Fried’s former girlfriend, testified that when one employee raised objections to bribing Chinese officials to get Alameda funds in the country unfrozen, Bankman-Fried used a profanity in telling her to shut up.

Ellison, who has also pleaded guilty to fraud, said Bankman-Fried told her that his signature sloppy dress and wild mop of curly locks was an “important part of FTX’s image.”

Cohen has said outside the jury’s presence that prosecutors were presenting “cumulative evidence portraying our client as a very dirty person.”

Cohen also said prosecutors showed a document Bankman-Fried wrote to try to resolve a dispute between two colleagues only to imply that he is “some sort of crazy person.” In the document, Bankman-Fried 10 times in a row wrote the phrase, “Being aligned and always doing whatever you think is best for the company.”