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Sam Bankman-Fried gets 25 years in prison as judge cites lack of remorse

NEW YORK — A federal judge on Thursday sentenced former cryptocurrency mogul Sam Bankman-Fried to 25 years in prison, saying a man who once graced magazine covers and testified at congressional hearings in as the face of a booming new industry had in fact committed one of the greatest financial crimes in U.S. history.

The quarter century in prison ordered by U.S. District Judge Lewis Kaplan was less than prosecutors wanted for what they called his “massive” financial crimes, but far more than defense attorneys sought. Bankman-Fried was also ordered to pay more than $11 billion.

Bankman-Fried, co-founder of crypto exchange FTX and investment fund Alameda Research, did not take responsibility for the disaster he created, Kaplan said in handing down the sentence. “Mr. Bankman-Fried says mistakes were made…but never a word of remorse for committing terrible crimes,” Kaplan said.

Thursday’s hearing highlighted the precipitous fall of the man who turned FTX into a behemoth, with a Super Bowl ad naming the rights to a Miami stadium and a glowing ad for his cryptocurrency exchange. Jurors in November Bankman-Fried was convicted on charges related to wire fraud, conspiracy to commit fraud, and conspiracy to commit money laundering.

It wasn’t until FTX filed for bankruptcy in 2022 that investigators discovered what prosecutors described as a simple fraud disguised as revolutionary financial innovation. Bankman-Fried was accused of misappropriating FTX client funds and spending them lavishly on luxury real estate, investments and political donations.

Prosecutors request a sentence of at least 40 years in prison. Defense attorneys argued that a sentence of five to six years would be more appropriate.

Bankman-Fried and his top deputies, prosecutors said, took money from FTX customers and placed it in Alameda Research. At trial, former Alameda CEO Caroline Ellison, who pleaded guilty to conspiracy before cooperating with prosecutors, described Bankman-Fried telling her to use FTX funds.

“Crime here is massive,” prosecutor Nicolas Roos said on Thursday. “It was pervasive in every aspect.”

The possibility that Bankman-Fried might commit other crimes weighed in the sentencing decision, Kaplan said.

“There is a risk that this man will be in a position to do something very bad in the future and that is not a trivial risk,” the judge said. “This is not a trivial risk at all.”

Under federal rules, Bankman-Fried will serve more than 21 years in prison before being able to be eligible for release. Kaplan said he is expected to serve his sentence in a low- or medium-security facility near his parents’ home in the San Francisco Bay Area. Even though he ” blasted Bankman-Fried, the judge said the sentence requested by the prosecution was “considerably heavier than necessary”.

The 25-year sentence is longer than most sentences handed down for high-profile white-collar crimes, although Bernie Madoff received a 25-year prison sentence. 150 year sentence in 2009, for running a Ponzi scheme that cost victims an estimated $20 billion or more; he died in prison 12 years later. Elizabeth Holmes, who raised hundreds of millions from investors for blood testing startup Theranos, was sentenced in 2022 to over 11 years old in prison.

Defense attorney Marc Mukasey argued that his client should not be compared to Madoff because Bankman-Fried did not have harmful intentions. “This is obviously a serious offense, but Sam was not a ruthless financial serial killer who was out every morning to harm people,” Mukasey said Thursday. He described Bankman-Fried as a person who “doesn’t make decisions with malice in his heart.” He makes decisions with math in mind.

In arguing for leniency, Mukasey touted Bankman-Fried’s intelligence and lifelong interest in helping others, and described his client as “a beautiful puzzle.”

Bankman-Fried said that as FTX’s leader, he ultimately bore responsibility for the misfortunes that befell the company’s customers. “It must be an awful feeling to wait every day, not knowing what’s going to happen, feeling like they’ve lost everything,” he said, holding his elbows as a performer of the court drew it.

But Bankman-Fried, wearing a khaki-colored prison T-shirt, also gave a meandering account of events to try to justify some of his actions. “I made a series of bad decisions,” said Bankman-Fried, who spoke for about 20 minutes. “These were not selfish decisions. … They were bad decisions.

His lack of a frank confession or apology could have pushed Kaplan to a harsher sentence, said white-collar defense attorney Jack Sharman, who called Bankman-Fried’s testimony during the trial a performance “disastrous”.

“Would (taking responsibility) have reduced it significantly? I don’t know,” said Sharman, who was not involved in the case. “But I’ve seen enough convictions to feel a palpable difference when defendants do this and when they don’t.”

Federal officials have spoken out about the financial devastation suffered by FTX customers. Manhattan U.S. Attorney Damian Williams said in a statement that Bankman-Fried created “extraordinary harm” for victims, some of whom “saw their savings wiped out overnight.”

Bankman-Fried claimed Thursday that FTX still had the money, spread across various accounts and investments, to fully restore customer funds. “There are a lot of assets to make this happen,” he said. “There are billions more. This has always been true.

John Ray III, who is leading the company through the bankruptcy process as chief executive officer, had criticized this position in a letter to the court. The defense’s assertion that FTX customers and investors suffered no harm is “cruelly and patently false,” Ray wrote ahead of Thursday’s hearing.

Bankman-Fried disparaged this ongoing bankruptcy and said FTX’s problems amounted to a “liquidity crisis” that should have lasted only a few weeks. But Roos disputed this view. “It was not a liquidity crisis, nor an act of mismanagement or poor control from above,” the prosecutor said. “It was a theft of billions of dollars.”

Before Thursday’s hearing, some trial observers questioned whether the Justice Department had exaggerated in seeking at least 40 years in prison. Full recovery of FTX assets could counter prosecutors’ claim of “a dramatic and devastating personal loss” for investors, said Martin Auerbach, a white-collar defense attorney who has been involved in cryptocurrency cases but has not worked on the Bankman-Fried case.

“This is part of the theory as to why he should be punished,” Auerbach said before the hearing. “If it turns out to be wrong because these small investors were released or got a lot of their money back, I think the judge has the discretion to say, ‘I’m going to look at the loss in a different way.’ ‘”

Kaplan instead took a harder line.

“A thief who takes his loot to Las Vegas and successfully bets the stolen money is not entitled to a reduced sentence,” he said Thursday.

The judge concluded that Bankman-Fried defrauded investors out of $1.7 billion, his hedge fund’s lenders out of $1.3 billion, and FTX customers out of $8 billion. In an adjacent room of the court, from where many victims and other observers watched the proceedings, some let out light whistles as they heard each of the numbers.

If federal authorities follow Kaplan’s recommendation, Bankman-Fried would serve his sentence in a prison near the Bay Area, perhaps not far from where he grew up at Stanford University with his parents. On Thursday, at least one Stanford alumnus deemed the sentence fair.

FTX’s collapse was “really devastating” for its customers, said Tyler Benster, a startup founder with a doctorate in neuroscience from Stanford. Benster hopes the convictions of Bankman-Fried and Holmes, another tech entrepreneur associated with Stanford, could serve as a warning to the tech world.

“I want to see the return of the die-hard nerds, scientists and engineers,” Benster said. “I think we’re going to see a resurgence of looking at actual technical prowess and achievement rather than this vision and this environment that’s gone away.”

Bankman-Fried’s prison sentence will set an important example, said Sheila Warren, executive director of the trade group Crypto Council for Innovation. “This conviction is crucial,” Warren said. “What we don’t want to do is make people say, ‘Oh, just pay a big fine and do whatever you want.’ No, you go to jail if you lie, if you steal.

She said she blamed not only Bankman-Fried, but also the many people who adored him instead of questioning whether he was being honest. “A lot of institutions supported this kind of child prodigy mythology,” she said.

The case was affected the entire cryptocurrency industry. Carl Tobias, professor of law at the University of Richmond pointed to the collapse of FTX as motivation for the Biden industry’s efforts to regulate cryptocurrency companies: “This is Exhibit A to argue for regulating this while we regulate other activities, in particularly in the stock market. »

Lisa Bonos contributed to this report.

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