"I'm Sorry" - FTX Founder Sam Bankman-Fried Sentenced To 25 Years In Prison
Update (1145ET): And there it is - Bankman-Fried sentenced to 25 years in prison - more than Elizabeth Holmes, less than Bernie Madoff, same as Bernie Ebbers.
Also consider...
SBF stole billions of customers money, lied in court, and only got a 25 year sentence.
— Bitcoin Magazine (@BitcoinMagazine) March 28, 2024
Ross Ulbricht created a website and is still serving 2 life sentences in prison.
Injustice at its finest. pic.twitter.com/8t6NHLpJyA
SBF will also have to forfeit more than $11 billion.
Judge Kaplan did not hold back during his sentencing:
"When not lying, he was evasive, hair splitting, trying to get the prosecutors to rephrase questions for him. I've been doing this job for close for 30 years. I've never seen a performance like that."
Update (1105ET): Just before the federal judge was about to sentence Bankman-Fried in his fraud case, the former FTX founder said that he was “sorry.”
“I know a lot of people feel really let down,” he said at his sentencing hearing Thursday morning in lower Manhattan.
“I’m sorry about that. I’m sorry about what happened at every stage.”
“All of the company followed me across the earth, across continents, burning the midnight oil working until 2 a.m., 4 a.m., dedicated to FTX,” he said in a plea for leniency. “I remember so many of them.”
He said the staff “all built something really beautiful. They threw themselves into it and then I threw that all away. It haunts me every day. I made a series of bad decisions. They weren’t selfish decisions, they were bad decisions.”
Bad decisions indeed Sam.
The long-running legal saga of Sam Bankman-Fried will come to an end on March 28 when Judge Lewis Kaplan announces the sentence of the FTX founder during a 9:30 a.m. hearing at the U.S. Courthouse in Lower Manhattan.
Before we get to the sentencing, @jconorgrogan lays out exactly what SBF did...
1. In January '22, Sam market sold $75M of stETH, leading to a massive depeg event which set off the Celsius bankrun and the daisy chain of events that included the blow-up of 3AC
2. Using Alameda + FTX customer funds, Sam:
-Bought 10M+ of NFTs
-$18k of Pebble, a fractionalized NFT of a picture of a rock
-$605 of CarolineDAO NFTs a "SimpDAO for Caroline Ellison"
~$20k of "TENDIES"
-Bought $270k of a token called "CUMROCKET"
3. Engaged in 10s of thousands of wash-trading transactions to boost visibility of his holdings
4. Created an NFT (and most likely bought it for 270k using customer funds)
5. Did this dozens of times
6. Sold locked tokens
7. Helped fan the flames for SHIB, built up a giant position, then dumped at the absolute top
8. Manipulated defi governance token distribution forcing an emergency intervention by the protocol
9. Wasn't that active onchain until the crime started. Here's a chart of the balance of Alameda Wallets (Jan '18- June '20) The blue dot is when Nishad Singh altered the codebase to enable Alameda to withdraw unlimited amounts of crypto from FTX
10. Publicly shilled/pretended to TWAP FTT
Oh btw he later claimed in court that at this time "things were tight" and he had ordered Caroline to put on hedges
11. Filling/shilling
Here SBF is telling a concerned holder that he didn't short or dump SUSHI. 3 days earlier, an SBF-connected wallet sent 35K SUSHI to the Alameda FTX deposit address. This happened a lot
12. (It was Alameda)
13. Messed up the Sollet bridge enabling him to account for 21k phantom SOL
After all that, in November 2023, as Michael Washburn reports via The Epoch Times, jurors decided to convict Mr. Bankman-Fried on all seven of counts of conspiracy and fraud with which government lawyers charged him.
Mr. Bankman-Fried and his attorneys have repeatedly argued that he didn’t intentionally do anything wrong and that he deserves no more than 6 1/2 years in jail. In his trial testimony in October 2023, Mr. Bankman-Fried insisted he used sophisticated analytics to try to keep track of the state of FTX’s finances and suggested that subordinates acting without his knowledge or imprimatur made costly mistakes.
But prosecutors, citing testimony from Alameda Research head Caroline Ellison, who was at times romantically involved with Mr. Bankman-Fried, vehemently disagreed with the more charitable view and are pressing for a sentence of half a century or longer.
The government’s tough stance has found support from the current CEO of FTX, John Ray III, the former chair of the recovery corporation in another high-profile insolvency: that of Enron, which imploded in December 2001. In a letter to Judge Kaplan, Mr. Ray denounced the “categorically, callously, and demonstrably false” claims that Mr. Bankman-Fried and his lawyers have put forth in the hope of getting a lighter sentence.
Occupying a middle ground between the defense position and the prosecutors, Jeffrey Hooke, a senior lecturer at Johns Hopkins Carey School of Business in Maryland and former investment banker, said that Mr. Bankman-Fried’s transgressions are serious but nowhere near on par with those of convicted fraudster Bernie Madoff, for instance, who received a 150-year sentence for his $65 billion Ponzi scheme and died in prison in 2021.
Mr. Bankman-Fried deserves a lighter sentence than either Mr. Madoff or the senior Enron executives responsible for the calamity of December 2001, Mr. Hooke said.
“Now, stuck with a guilty verdict, an appropriate sentence seems to me to be at least 10 years. The Enron guys essentially got 12 years after appealing longer sentences, and I might argue that they were truly aware of their crimes, whereas Bankman-Fried might have been somewhat less aware or deliberate,” Mr. Hooke told The Epoch Times.
Dominoes Fall
The verdict in November 2023 came exactly one year after a Nov. 2, 2022, report in the cryptocurrency publication Coindesk began to stoke wide concern about the state of FTX’s finances. The report cited a leaked balance sheet of FTX’s hedge fund trading affiliate, Alameda Research.
According to Coindesk’s analysis, a bulk of Alameda’s $14.6 billion of assets was in the form of FTX’s own crypto token, FTT, rather than a fiat currency. This not only suggested that Alameda’s wealth was potentially less fungible than many had assumed but also pointed to extensive commingling of FTX customer deposits with the hedge fund affiliate.
Whether or not Coindesk was correct to impute instability and weakness to FTX on the basis of its position in FTT, the reaction in the market was swift. On Nov. 6, 2022, Changpeng Zhao, then-CEO of Binance, one of the other leading cryptocurrency exchanges, sent out a sharply worded post on Twitter.
Mr. Zhao alluded to the fact that Binance had been distancing itself from FTX over the past year and had received the equivalent of about $2.1 billion in U.S. dollars in the form of both cash and the FTT token.
“Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books. We will try to do so in a way that minimizes market impact,” Mr. Zhao wrote.
Despite that assurance, Binance’s move, and forthright public announcement, immediately helped fuel a run on the bank during which customers pulled $6 billion from FTX in three days.
The exchange would never recover; some $9 billion of customer funds are still lost through the commingling of funds and Bankman-Fried’s lavish spending.
Damian Williams, US attorney for the Southern District of New York, details the indictment of Samuel Bankman-Fried in New York City, on Dec, 13, 2022. (Stephanie Keith/Getty Images)
The Feds Move In
U.S. federal prosecutors were quick to take action. On Dec. 13, 2022, the Department of Justice announced that a federal grand jury had returned an indictment charging Mr. Bankman-Fried with wire fraud, conspiracy to commit wire fraud, securities fraud, money laundering, campaign finance violations, and fraud against the Federal Election Commission.
The last allegation relates to Mr. Bankman-Fried drawing upon customer deposits to make large donations to both Democrats and Republicans with whom he wanted to curry favor.
But it was mainly Democrats who benefited from Mr. Bankman-Fried’s largesse, including a reported $5.2 million donation to then-candidate Joe Biden in 2020. According to The Wall Street Journal, this gift made Mr. Bankman-Fried second only to Michael Bloomberg among top-spending backers of President Biden.
Government lawyers briefly dropped the campaign finance charges on the technical grounds that Bahamas authorities hadn’t included them among their stated grounds for extraditing Mr. Bankman-Fried from the Bahamas to New York to face trial in December 2022. Then, in August 2023, prosecutors did an about-face and announced that Mr. Bankman-Fried was still on the hook for campaign finance violations.
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“The Justice Department has filed charges alleging that Samuel Bankman-Fried perpetrated a range of offenses in a global scheme to deceive and defraud customers and lenders of FTX and Alameda, the defendant’s crypto hedge fund, as well as a conspiracy to defraud the United States government,” Attorney General Merrick Garland said.
Michael J. Driscoll, assistant director of the FBI’s New York office, was blunt about Mr. Bankman-Fried’s misuse of FTX deposits to pay Alameda’s expenses and to make other investments.
“If you deceive and defraud your customers, the FBI will be persistent in our efforts to bring you to justice,” Mr. Driscoll said.
In this courtroom sketch, Sam Bankman-Fried watches as defense lawyer Mark Cohen makes his opening remarks in Mr. Bankman-Fried's fraud trial over the collapse of FTX, at Federal Court in New York, on Oct. 4, 2023. (Jane Rosenberg/Reuters)
A Fatal Move
Bankman-Fried didn’t gain any sympathy from the media, the public, or prosecutors by situating himself and nine FTX colleagues in an 11,500-square-foot suite in a $35 million Bahamas mansion.
Mr. Hooke suggested that some people still may not fully appreciate the extent of the error that Mr. Bankman-Fried made in agreeing to waive his right to formal extradition hearings and undergo transfer to the United States.
“He should never have left the Bahamas. He could have dragged out the extradition request for years, and by the time he was back in New York, a lot of this controversy would have blown over, and he could cut a decent plea deal,” Mr. Hooke told The Epoch Times.
Once taken into custody in New York, Mr. Bankman-Fried underwent a lengthy ordeal, during which both a federal appeals court and Judge Kaplan repeatedly ruled against granting him pre-trial release.
Judge Kaplan said that, given the seriousness of the charges against him, Mr. Bankman-Fried posed a flight risk, and the judge overruled arguments from the defense team that his dietary needs went unmet in prison and he was unable to confer properly with his lawyers in preparation for trial.
Mr. Bankman-Fried’s personal life also became the subject of extensive media scrutiny in the weeks leading up to the trial’s commencement.
The Epoch Times reached out to Mr. Bankman-Fried’s legal team for comment but received none by press time.