Sam Bankman-Fried received 25 years in prison for stealing billions from clients of the FTX cryptocurrency exchange

A court in New York sentenced a former entrepreneur on Thursday Sam Bankman-Fried to 25 years in prison for the theft of $8 billion from clients of the FTX cryptocurrency exchange he founded and later went bankrupt.

After a two-hour hearing in a Manhattan court, District Judge Lewis Kaplan rejected Bankman-Fried’s claims that his exchange’s clients had suffered no losses and ruled that his actions were criminal. Kaplan also pointed out that Bankman-Fried showed no remorse for his actions.

As a result, the 32-year-old former billionaire was found guilty of fraud, which is now called one of the largest in US history. Cryptocurrency exchange FTX was valued at $32 billion before it went bankrupt in 2022.

“He knew he committed a crime,” Kaplan said before handing down the sentence. “He knew he was a criminal.” He regrets that he miscalculated when he bet that he could get away with it. But he’s not going to admit anything, and that’s his right.”

Bankman-Fried, who arrived at the courthouse in a beige prison T-shirt, confirmed that clients of the FTX exchange had indeed suffered, and even apologized to his former work colleagues, but did not admit his guilt. He plans to appeal the verdict.

“His deliberate and relentless lies demonstrated a brazen disregard for his clients’ expectations and disrespect for the rule of law,” Manhattan U.S. Attorney Damian Williams said in a statement.

Judge Kaplan said FTX clients lost $8 billion, FTX stock investors lost $1.7 billion, and creditors of Alameda Research, a hedge fund founded by Bankman-Fried, lost another $1.3 billion.

The judge also said Bankman-Fried lied during his testimony when he said he didn’t know his hedge fund had spent client deposits taken from FTX.

Federal prosecutors had sought a prison sentence of 40 to 50 years. However, Bankman-Fried’s lawyer, Mark Mukasey, insisted that a sentence of more than five years in prison would be more appropriate.

“I’m sorry”

“Customers suffered, and I didn’t want to downplay that at all. I don’t think I said enough about this during the trial, and I want to apologize for that,” Bankman-Fried said at the trial.

“They put a lot of effort into this, and I threw it all away, and it haunts me every day,” he said of his colleagues on the exchange.

Three former colleagues of the billionaire, speaking as witnesses in court, said that he instructed them to use funds from FTX clients to cover losses at Alameda Research. All three pleaded guilty to fraud.

During the hearing, Mukasey’s lawyer tried to make sure that his client was not lumped in with such notorious fraudsters as Bernard Madoff.

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

Bankman-Fried himself said in his defense that he had indeed made a number of mistakes, in particular, he had not created a special risk management department, but he categorically denied that he intended to deceive anyone or steal client money.

An MIT graduate, Bankman-Fried amassed a $26 billion fortune before he was 30 during the cryptocurrency boom, according to Forbes magazine.

He was a faithful follower of the effective altruism movement, which encourages talented young people to earn a lot of money and give it to worthy causes.

He was also one of the largest donors to the US Democratic Party.

However, according to prosecutors, the image of a responsible person he cultivated was intended to hide years of theft of client funds.

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Original of this material

© News Agency “RBC”11/27/2023

Canned goods instead of cryptocurrencies. How Sam Bankman-Fried awaits sentencing in prison

Andrey Luzgin

Sam Bankman-Fried was convicted of swindling billions of dollars in the collapse of one of the largest crypto exchanges at the time, FTX, which triggered the collapse of the crypto market in November 2022. He himself is awaiting sentencing on seven felonies at the Metropolitan Detention Center in Brooklyn. Reporters from The Wall Street Journal (WSJ) talked with employees of the institution and lawyers, who spoke about the conditions in which Bankman-Fried remains until the court’s decision next year.

According to the publication’s interlocutors, Bankman-Fried is learning the basics of prison economics, living in the same cell with the former president of Honduras, who is awaiting criminal trial, and a recently convicted police officer from Mexico. The former head of the crypto exchange exchanged crypto assets for a new currency – canned mackerel, journalists ironically write.

Mackerel has replaced cigarettes as a means of payment in US prisons after authorities banned smoking there, and inmates sometimes use thrift store packets of canned fish to pay for services. According to one of the WSJ’s interlocutors, Bankman-Fried paid for a haircut in this way in anticipation of the court hearing.

The FTX founder has been in custody since a federal judge revoked his bail in August, finding it likely he would try to intimidate witnesses. In early November, it took a jury just hours to find him guilty of stealing billions of dollars from FTX clients and defrauding its investors and creditors. Sentencing is scheduled for March 28, after which Bankman-Fried will go to federal prison to serve his sentence.

At its peak, FTX was the second largest crypto market after Binance in trading volumes and was valued at $32 billion. The exchange collapsed in November 2022 after Coindesk published confirmation that the balance sheet of its affiliated fund Alameda Research, while claiming billions of dollars in assets, was in fact largely composed of exchange tokens FTX (FTT), which it itself issued as an issuer. The fund itself, as it turned out, contrary to Bankman-Fried’s statements, was directly connected with FTX and had direct access to the funds of the exchange’s clients.

Soon after it Changpeng Zhao, who was then the head of Binance, publicly stated that he refused Bankman-Fried’s offer to urgently buy back the troubled FTX, and that his exchange would sell all of its FTT tokens. After his statements, the token rate collapsed. Customers began withdrawing funds from FTX en masse, and within days, this resulted in FTX, Alameda, and various subsidiaries filing for bankruptcy, unable to repay users.

Later during the trial, former employees of the exchange, including Alameda Research manager Caroline Ellison, admitted to embezzling client funds and testified against Bankman-Fried.

“Safe and humane conditions”

Another WSJ interlocutor said that once a week, Bankman-Fried is allowed visitors in addition to lawyers and he has access to a special laptop that allows him to view legal materials. He and other inmates are allowed to use computers in a room where desks are separated by plastic partitions. The former head of FTX periodically distributes advice to security guards on investing in cryptocurrencies, the same source said.

Journalists also contacted representatives of the US Department of Justice for comment, but a representative of the department refused to give details about the conditions of Bankman-Fried’s detention, indicating only that the US Federal Bureau of Prisons “ensures the safety of prisoners while creating safe and humane conditions” .

“Sam is doing the best he can under the circumstances,” Bankman-Frida spokesman Mark Botnick told the WSJ. At the trial, Bankman-Fried stated that he regretted that his exchange did not have sufficient risk management, but he himself did not commit any fraudulent actions. His lawyers say he will appeal the conviction, which could lead to decades in prison.

Once transferred to a federal prison to serve his sentence, Bankman-Fried will likely have more freedom of movement, as well as access to educational programs and leisure activities, said lawyer Bill Baroni, who now advises on prison matters. He himself was convicted of conspiracy in the 2013 New Jersey scandal in which former Gov. Chris Christie’s allies were accused of deliberately causing traffic jams as a political revenge against a rival.

“When he is sentenced, he will feel better,” Baroni says. “He will not sit in prison alone with aggressive cellmates.” Other white-collar prisoners tend to serve time in prisons that are closer to their families or offer more relaxed conditions, the journalists write, with a reference to Theranos founder Elizabeth Holmes, who was convicted of defrauding investors and is serving time in a women’s correctional facility. maximum security camp in Bryan, Texas.

Cellmates

Currently at the Brooklyn Detention Facility, Bankman-Fried’s cellmates include Genaro Garcia Luna, the former Mexican public security minister convicted earlier this year of helping the Sinaloa cartel smuggle more than 50 tons of cocaine into the United States. Another prisoner in the unit is former Honduran President Juan Orlando Hernandez, who is awaiting trial on drug and firearms trafficking charges. Hernandez’s lawyer, Raymond Colon, told the WSJ that his client and Bankman-Fried “communicate warmly” with each other in prison.

According to one of Bankman-Fried’s lawyers, he initially ate only peanut butter, bread and water because the conditions of the detention center did not allow him to maintain a vegetarian diet. He also had trouble getting the required dose of his prescribed Adderall drug. Since then, the problems with his diet and the medications he takes for attention deficit hyperactivity disorder have been resolved. Another interlocutor of the journalists confirmed that vegetarian food is now available to him in prison.

Many prisoners buy food, clothing and toiletries from the prison store. Peanut butter costs $4.15, a pair of sneakers costs $79.95, and an MP3 player costs $88.40. The same pack of mackerel fillets that is used as currency costs $1.30. Prison consultant Baroni also predicts that when Bankman-Fried moves to federal prison, he’ll likely take packages of mackerel with him. This settlement system, he said, is “much more stable than any crypto.”

RBC news agency, 01/31/2024, “Hopeless deception.” FTX owners abandoned plans to restore the exchange”: The FTX crypto exchange, which went bankrupt in November 2022, abandoned attempts to resume operations, deciding to liquidate all assets and return funds to clients, Reuters writes, citing the words of a lawyer for a group of companies associated with the platform.

FTX’s current management, which has been dealing with its bankruptcy and recovery of surviving assets for more than a year, has been negotiating for months with potential buyers and investors, FTX attorney Andy Dietderich said at a hearing in the exchange’s bankruptcy court in Delaware. But none of them was ready to invest enough funds to restore the exchange. […]

At the peak of its popularity, FTX ranked second in the crypto market after Binance in terms of trading volumes and was valued at $32 billion. […] FTX has recovered more than $7 billion in assets to return money to customers and has reached an agreement with various government regulators, who agreed to wait until customers are fully compensated before attempting to recover about $9 billion in claims, Dietderich said. […]

Now FTX expects to pay all clients in full, but will calculate their payments based on cryptocurrency prices at the exchange rate for November 2022, when the collapse of the exchange led to the collapse of the entire crypto market […] (at a Bitcoin price of about $17 thousand) […] — Insert K.ru