In a downtown Manhattan courtroom on the morning of 28 March, tech wunderkind turned fraudster Sam Bankman-Fried, unrepentant even after trial and conviction, will finally learn his fate.
Bankman-Fried, who founded the cryptocurrency exchange FTX, was found guilty on 2 November 2023 of seven counts of wire fraud and conspiracy to launder money.
The fallen bitcoin booster was found to have siphoned billions in customer funds into FTX’s sister hedge fund, Alameda Research, to keep it solvent – and lined his pockets with hapless clients’ money, spurring the entities’ collapse.
“Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history – a multibillion-dollar scheme designed to make him the king of crypto – but while the cryptocurrency industry might be new and the players like Sam Bankman-Fried might be new, this kind of corruption is as old as time,” the Manhattan US attorney Damian Williams said after the conviction. “This case has always been about lying, cheating and stealing and we have no patience for it.”
Prosecutors have since asked Judge Lewis Kaplan to impose a sentence of 40 to 50 years. Decades of imprisonment, they said, is necessary to underscore “the remarkably serious nature of the harm to thousands of victims” and to “[prevent] the defendant from ever again committing fraud and [send] a powerful signal to others who might be tempted to engage in financial misconduct that the consequences will be severe”.
Prosecutors submitted victim impact statements in their push for a hefty sentence, which showed how individual and institutional investors were harmed by Bankman-Fried’s actions.
“In 2022, at the age of 24, I lost my entire life savings, which amounted to more than $20,000” one wrote, saying they hadn’t even been trying to invest in crypto, but simply to use an FTX-run, interest-bearing savings account.
Another victim, who said they had invested a “significant portion of savings with FTX”, said they are staring down an uncertain future: “It has caused immense anxiety, stress and uncertainty about how I will provide for myself and my family.”
The “disbelief and fear” this victim described upon learning of FTX’s financial woes reflected broader shock over the exchange’s collapse. Bankman-Fried had been a rising star in the crypto world for years, courting both investors and politicians with his trading platform. He had claimed his exchange was more secure – and carried less risk – than other such platforms. FTX shot to prominence on the back of his assertions, boosting Bankman-Fried’s public profile and his pockets.
FTX hits it big: SBF is a billionaire before age 30
Before Bankman-Fried was 30, he was worth billions; FTX and its top competitor, Binance, were processing most worldwide crypto trades.
Bankman-Fried, all the while, fostered a persona befitting the next tech impresario, with T-shirt-and-shorts uniform and high-minded philosophic pronouncements. His Stanford law professor parents had studied utilitarianism – effectively, the notion that moral action is that which achieves the greatest good for the greatest number of people – and he proclaimed to weigh business transactions through this context.
Bankman-Fried said he believed in effective altruism, a philanthropic practice beloved by big techies, who think that strategic donations to achieve the greatest number is a virtue. Some adherents to effective altruism have pushed an “earning to give mentality”, which means that accumulating extreme wealth is moral since it could be given away.
The former mogul’s apparent enthusiasm for giving to causes bled into politics. He contributed more than $40m into the 2022 election.
While most of Bankman-Fried’s donations went to Democrats and associated committees, he also plunked significant sums into “dark” donations for GOP candidates. Per CBS News, Bankman-Fried wondered whether he might have been the “second- or third-biggest” donor for the 2022 midterms.
When Bankman-Fried was at the top, he hobnobbed with high-profile figures such as Bill Clinton and Tony Blair during a 2020 crypto conference in the Bahamas. He had relocated FTX to the Caribbean nation as the platform employed a trading mechanism barred in the US, the New York Times reported.
In Bankman-Fried’s close circle of confidants was Alameda Research’s CEO, Caroline Ellison. Complicating their business relationship, Ellison and Bankman-Fried had a years-long, on-again-off-again romantic relationship.
Much like Bankman-Fried, Ellison offered lofty pronouncements. “Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is,” she said in a bombshell tweet.
The FTX team’s life in the Bahamas seemed to reflect eccentricities beloved by the tech world. Bankman-Fried, Ellison and eight other cronies lived together in a penthouse, where there was reportedly access to stimulants – and an in-house shrink happy to prescribe them.
Everything goes wrong: FTX goes bankrupt, SBF goes on trial
Bankman-Fried’s fortunes reversed in November 2022. That month, cryptocurrency trade publication CoinDesk reported that he held billions in FTT, FTX’s own cryptocurrency. The CEO had troublingly used FTT as collateral to back sizable loans. When the news broke about his company’s FTT holdings, the Binance CEO, Changpeng Zhao, said his firm would get rid of its $500m in FTT, citing “recent revelations that have come to light”. FTT nosedived, precipitating what was effectively a bank-run among its clients. FTX sought bankruptcy protection, as did Alameda Research.
An $8bn hole in FTX’s budget became visible to the outside world. The Manhattan US attorney’s office charged Bankman-Fried with financial crimes that December, contending that he had used customers’ and investors’ money to conduct risky trades and bolster Alameda Research.
At Bankman-Fried’s trial in late 2023, prosecutors alleged that he had engaged in pernicious fraud from 2019 until November 2022, when FTX imploded. They contended that Bankman-Fried “misappropriated and embezzled” FTX customers’ deposits and funneled “billions in stolen funds” to fatten his wallet and bankroll high-risk investments.
Prosecutors also said that Bankman-Fried shuffled funds to cover his high-rolling lifestyle. The “exorbitant spending unrelated” to FTX, they said, paid for Bankman-Fried’s personal expenses, such as more than $200m in Bahamas real estate, speculative investments and repayment to those who had loaned money to Alameda.
Over the course of Bankman-Fried’s month-long trial, members of his inner-circle took the stand against him. Some of the most damning testimony was from his ex-lover, Ellison, who served as the prosecution’s star witness.
“While you were working at Alameda, did you commit any crimes?” Ellison was asked. She answered: “Yes, we did … [Bankman-Fried] directed me to commit these crimes.”
Despite numerous revelations about FTX’s questionable inner workings, Bankman-Fried made the shocking decision to testify in his own defense. “I made a number of small mistakes and a number of large mistakes,” Bankman-Fried told jurors. “There were significant oversights.”
Bankman-Fried copped to managerial errors – including failure to institute a dedicated risk-management team. When attorney Mark Cohen asked whether he defrauded clients or pilfered their money, though, Bankman-Fried was defiant: “No, I did not.”
When it was time for the prosecution to cross-examine Bankman-Fried, attorneys questioned him on everything from his persona – Ellison had told jurors that his bedraggled, bed-headed appearance was an act and that he drove a Toyota Corolla as a branding play – to mismatches between FTX’s public and private pronouncements.
“Mr Bankman-Fried, would you agree that you know how to tell a good story?” prosecutor Danielle Sassoon asked. He wasn’t direct in responding, saying: “I don’t know, it depends on what metric you use.”
Sassoon asked about a colleague’s comment to the New York Times, which claimed that Bankman-Fried thought cutting his hair would have negative value because: “I think it’s important for people to think I look crazy.” Bankman-Fried said: “I don’t think I said that in that way.”
“You think of yourself as a smart guy?” Sassoon pressed.
“In many ways, not all ways,” Bankman-Fried said.
“And as CEO of FTX, you thought highly of yourself?”
“I did.”
An unrepentant SBF faces down decades in prison
During Bankman-Fried’s trial, his lawyers had pushed to portray him as a “math nerd who didn’t drink or party” who was in over his head. Prosecutors hit back against this babe-in-the-woods argument in their sentencing submission, noting that he’d hardly lived a hardscrabble life.
“With all the advantages conferred by a comfortable upbringing, an MIT education, a prestigious start to his career in finance and a worthy idea for a startup business, Bankman-Fried could have pursued the rewarding, productive and altruistic life he has sketched out in his sentencing submission,” they said.
“Instead, his life in recent years has been one of unmatched greed and hubris; of ambition and rationalization, and courting risk and gambling repeatedly with other people’s money.”
In response, Bankman-Fried’s team cast him as a victim, writing that prosecutors put forward a version of him that was “as a depraved supervillain [with] dark and megalomaniacal motives”.
“At age 32, the government wants to break Sam Bankman-Fried,” his lawyers wrote of prosecutors’ proposed 40- to 50-year sentence. “Crushing Sam in this way is unnecessary.”
They too cited his elite education in suggesting a sentence in the range of 63-78 months.
“Offenders with no criminal history, like Sam, are the least likely to re-offend,” they said. “And offenders with a college education are less likely to recidivate.”
Bankman-Fried claimed in his February petition for a lighter sentence that “the harm to customers, lenders and investors is zero … The company was solvent at the time of the bankruptcy petition … The money was there – not lost.”
John Ray, who was appointed CEO of FTX to oversee its bankruptcy, excoriated Bankman-Fried’s contention in a responding court filing.
“Mr Bankman-Fried continues to live a life of delusion. The ‘business’ he left on November 11, 2022, was neither solvent nor safe. Vast sums of money were stolen by Mr Bankman-Fried,” Ray wrote.
The chances of leniency seem slim.
Neama Rahmani, president of West Coast Trial Lawyers and a former federal prosecutor, said that Bankman-Fried is “going to be looking at a ton of time in prison”.
“He didn’t accept responsibility, he tried to shift the blame to others – it’s one of the biggest frauds in US history,” Rahmani said. “I think he’s going to get a massive, massive sentence – not necessarily 40 to 50 years, but if I had to guess, closer to 20 years.”
Ray agreed, writing: “The harm was vast. The remorse is non-existent.”
And this sentence could deter other would-be white-collar criminals, who might otherwise not have realized the ramifications for illegal antics.
“When they see someone like Samuel Bankman-Fried go down, people take notice,” Rahmani said. “It definitely sends a message in the white-collar crime community.”
