By Suzanne Cosgrove
U.S. District Judge Lewis Kaplan Thursday sentenced Sam Bankman-Fried, the 32-year-old founder of the cryptocurrency exchange FTX and cryptocurrency trading firm Alameda Research, to 25 years in prison and imposed penalties of more than $11 billion in forfeiture for his role in the perpetration of multiple fraud schemes.
As reported previously by Securities Regulation Daily, last November a Manhattan jury found Bankman-Fried guilty of seven criminal charges following a month-long trial: two counts of wire fraud, two counts of conspiracy to commit wire fraud, one count of conspiracy to commit securities fraud, one count of conspiracy to commit commodities fraud, and one count of conspiracy to commit money laundering.
Prosecutors reportedly asked Kaplan for a prison sentence of 40 to 50 years, while Bankman-Fried’s attorneys argued for a far more lenient sentence of no more than six years.
“Samuel Bankman-Fried orchestrated one of the largest financial frauds in history, stealing over $8 billion of his customers’ money,” said U.S. Attorney Damian Williams for the Southern District of New York, in a prepared statement. “His deliberate and ongoing lies demonstrated a brazen disregard for customers’ expectations and disrespect for the rule of law, all so that he could secretly use his customers’ money to expand his own power and influence.”
Launched in 2019, FTX filed for bankruptcy in November 2022. The U.S. Attorney’s Office indicted Bankman-Fried in December 2022 on charges of fraud, money laundering, and campaign finance offenses. Bankman-Fried was arrested in the Bahamas that month and extradited to the U.S. to face charges.
An eighth count in the original DOJ indictment, which charged the defendant with conspiracy to make unlawful campaign contributions and allegations of foreign bribery, would likely have been the focus of a second trial if it had gone forward.
Multiple charges considered. The DOJ’s criminal charges against Bankman-Fried came on top of similar filings last year by the SEC and CFTC. The FBI also investigated the case.
According to court filings and trial evidence, Bankman-Fried took FTX customer funds for his personal use, to make investments and political contributions in the millions of dollars to U.S. candidates from both parties, and to repay billions of dollars in loans owed by Alameda Research, its affiliated cryptocurrency trading fund.
Bankman-Fried defrauded Alameda lenders and FTX equity investors by providing them with false and misleading financial information that concealed his misuse of customer deposits, repeatedly telling customers, his investors, and the public that customer deposits into FTX were held in custody for the customers, that the deposits were kept separate from company assets, and that customer deposits would not be used by FTX.
Co-conspirators enlisted to help. Bankman-Fried also falsely claimed that Alameda did not have privileged access to FTX and did not receive special treatment from FTX. In fact, Bankman-Fried moved billions of dollars in customer deposits from FTX to Alameda, and then used those funds to make investments for his own benefit, including political contributions and real estate purchases.
To carry out these deceptions, Bankman-Fried directed co-conspirators to alter FTX’s computer code to allow Alameda to withdraw effectively unlimited amounts of cryptocurrency from the exchange.
Former FTX co-founder Gary Wang and former Alameda CEO Caroline Ellison entered guilty pleas in related criminal cases brought against them by the U.S. Attorney’s Office. Both testified for the prosecution during Bankman-Fried’s trial.
“The FBI will aggressively investigate individuals, like Samuel Bankman-Fried, who engage in fraudulent schemes at the expense of the American public and our financial systems,” said FBI Director Christopher Wray. “We are proud of the successful collaboration that ended this massive mismanagement and misappropriation of billions of dollars,” he said. “Today's sentencing should serve as a warning to others looking to use fraudulent means for personal gain.”
This is case No. 1:22-cr-00673-LAK-1.