SAM Bankman-Fried on Thursday (Mar 28) acknowledged at his sentencing hearing that customers of the now-bankrupt FTX cryptocurrency exchange he founded have been suffering, and said he apologised to those who thought he had minimised that.
The 32-year-old former billionaire wunderkind faces the prospect of decades behind bars after a jury found him guilty on Nov 2 on seven fraud and conspiracy counts for stealing US$8 billion from customers of FTX, which collapsed in 2022. Prosecutors have called it one of the biggest financial frauds in US history.
Bankman-Fried’s defence has urged leniency, arguing FTX customers would be made whole through the bankruptcy process. In a 20-minute statement to US district judge Lewis Kaplan, Bankman-Fried said he never meant to imply that there was no pain to customers.
“Customers have been suffering… I didn’t at all mean to minimise that,” said Bankman-Fried, dressed in a beige jail t-shirt and sighing frequently as he spoke. “I also think that’s something that was missing from what I’ve said over the course of this process, and I’m sorry for that.”
The hearing marks the final step in Bankman-Fried’s downfall from an ultra-wealthy cryptocurrency entrepreneur and major political donor to the biggest trophy to date in a crackdown by US authorities on malfeasance in digital asset markets.
In a potentially ominous sign for Bankman-Fried, Kaplan found that the defendant lied on the witness stand at his trial last year when he said he did not know that his hedge fund had spent FTX customer deposits.
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Kaplan also said he had found FTX customers lost US$8 billion, FTX’s equity investors lost US$1.7 billion, and that lenders to the Alameda Research hedge fund Bankman-Fried founded lost US$1.3 billion, rejecting Bankman-Fried’s argument that customers would be paid back in full through the bankruptcy process.
“The defendant’s assertion that FTX customers and creditors will be paid in full is misleading, it is logically flawed, it is speculative,” 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.”
Bankman-Fried has vowed to appeal his conviction and sentence.
He faces a statutory maximum of 110 years in prison, but will likely receive less. Prosecutors are seeking a prison sentence of 40 to 50 years.
“The criminality here is massive in scale, it was pervasive in all aspects of the business,” said Nicolas Roos, a prosecutor with the US Attorney’s office in Manhattan.
Mukasey has argued that a sentence of less than 5¼ years would be appropriate. He said Bankman-Fried was not a “ruthless financial serial killer” but rather an “awkward math nerd” who worked hard to get customers their money back after FTX’s unexpected collapse.
“Sam Bankman-Fried doesn’t make decisions with malice in his heart,” Mukasey said. “He makes decisions with math in his head.”
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.
One of those customers, London resident Sunil Kavuri, said at Bankman-Fried’s sentencing that he lost money he wanted to spend on a family home and his children’s education.
“Simply put, this is a continuous lie that we are all made whole,” Kavuri said.
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.
Bankman-Fried was led into the courtroom by members of the US Marshals Service before the hearing started. His parents, Stanford University law professors Joseph Bankman and Barbara Fried, arrived at the federal courthouse earlier.
‘Promise of false hope’
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 US$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 was one of the biggest contributors to Democratic candidates and causes ahead of the 2022 US midterm elections.
But prosecutors say the responsible image he cultivated concealed his years-long embezzlement of customer funds.
At trial, three of his former close associates testified that he directed them to use FTX customer funds to plug losses at Alameda Research.
Bankman-Fried testified in his own defence that he made mistakes such as not implementing a risk management team, but denied he intended to defraud anyone or steal customers’ money.
Roos said Bankman-Fried could commit fraud again if released at a young age, pointing to Mukasey’s description of him as a math nerd.
“While the line sounds good, it’s troubling,” Roos said, “because what it says is if Mr Bankman-Fried thought the mathematics would justify it, he would do it again.” REUTERS
