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Former FTX CEO Bags 25 Years for Financial Fraud; To Pay $11 Billion to Scheme Victims

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Former FTX CEO Bags 25 Years for Financial Fraud; To Pay $11 Billion to Scheme Victims

Former FTX CEO Bags 25 Years for Financial Fraud; To Pay $11 Billion to Scheme Victims

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Sam Bankman-Fried, the former CEO of the cryptocurrency exchange and hedge fund company FTX, is facing 25 years in prison for his role in a defrauding scheme that prosecutors say is one of the biggest financial frauds in US history. As part of the sentencing, Bankman-Fried was also ordered to surrender $11 billion in funds for the victims.

The Sentencing

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Bankman-Fried’s sentencing took place Thursday, and Judge Lewis Kaplan presided. As the sentence was read aloud to him, he sat, hands folded and his eyes downcast. Kaplan read the sentencing terms, commenting on the severity of his actions. “This was a very serious crime,” Kaplan said.

The Conviction

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Bankman-Fried was found guilty in a November trial related to financial fraud. He was convicted on several charges, including two counts of wire fraud conspiracy, two counts of wire fraud, and one count of conspiracy to commit money laundering. At the time, some speculated Bankman-Fried could get up to 110 years in prison total for these charges.

A Young Entrepreneur

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The former CEO is now 32. He was barely 30 when FTX was thriving in 2022. Bankman-Fried founded FTX in 2019 along with Gary Wang. Before striking out on his own, he worked as a quantitative trader at Jane Street Capital. The company has since gone bankrupt after it was found guilty of fraud during the November trial.

What Happened?

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In November 2022, the crypto exchange platform run by FTX fell apart after a news report by CoinDesk revealed an extended affiliation with Almeda Research had been affecting the value of cryptocurrency tokens. This triggered a financial stampede as customers rushed to withdraw their investments, causing billions of dollars in market damage and pushing FTX and Alameda into bankruptcy.

How the US Government Responded

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Just a month later, in December, US authorities brought a slew of civil and criminal charges against Bankman-Fried and FTX's top executives. The government accused the group of misappropriating $8 billion in customer deposits and providing false financial statements to inflate cryptocurrency value. By falsifying financial records, investigators believe Bankman-Fried hoped to hide price shortfalls.

Bankman-Fried’s Claim of Innocence

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Despite the stack of evidence against him, Bankman-Fried has consistently maintained his innocence throughout the trial. While he admits that customers lost money, he tagged the whole ordeal as a mistake that was out of his control. “I’m sorry. That’s the biggest thing. I f—– up, and should have done better,” Bankman-Fried said in an X post in November 2022. “I also should have been communicating more very recently. Transparently–my hands were tied during the duration of the possible Binance deal; I wasn’t particularly allowed to say much publicly.  But of course, it’s on me that we ended up there in the first place.”

Prosecutors Are Unsatisfied 

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The prosecutors in the case seem to believe that the prison time Bankman-Fried received was much too low. They thought he deserved at least 40 to 50 years in prison due to the severity of the fraud discovered. However, the judge disagreed, determining that such a long sentence would be excessive. In 2009, Bernie Madoff received 150 years in prison in another famous financial fraud case.

The Reason for the Sentencing 

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Kaplan has explained the logic behind the sentencing decision. He intended to “disable” Bankman-Fried from being able to commit fraud in the future, or at least for a long time. However, he admits there is a risk that Bankman-Fried could try something again. “There is a risk that this man will be in a position to do something very bad in the future, and it’s not a trivial risk. It’s not a trivial risk at all,” Kaplan said.

Judge Believes Bankman-Fried Knew

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Judge Kaplan was convinced by the evidence that Bankman-Fried knew exactly what was going on despite claims to the contrary. “Mr. Bankman-Fried knew, for a protracted period, that Alameda was spending large sums of FTX customer funds on risky investments, political contributions, Bahamas real estate, and other things in circumstances in which FTX was seriously exposed to downside market deterioration, long calls, and other risks,” said Kaplan.

His Lack of Remorse

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The judge criticized Bankman-Fried for the lack of remorse he showed in the courtroom for the crimes that had been committed. “I thought one of his pithier expressions was, ‘I f—– up.’ But never a word of remorse for the commission of terrible crimes.” Judge Kaplan said. “He presented himself as the good guy all in favor of the appropriate regulation of the crypto industry. In my judgment, that was an act.”