Sam Bankman-Fried was sentenced Thursday for his role of the 2022 collapse of the FTX cryptocurrency exchange.
Southern District of New York Judge Lewis Kaplan on Thursday sentenced Bankman-Fried to 25 years in prison for defrauding customers and investors, CNN reported from the courtroom.
He also ordered a forfeiture of $11.2 billion but said there would be no restitution because it would be "impractical" with so many victims.
Judge Kaplan said he found that losses to victims exceeded $550 million, which was the high end of the range given by federal sentencing guidelines. Losses to investors were $1.7 billion, Alameda lenders lost $1.3 billion and FTX customers lost $8 billion, Kaplan found.
Judge Kaplan said Bankman-Fried committed witness tampering by communicating with the former FTX general counsel before being remanded. SBF also committed perjury when he falsely testified that he had no knowledge of Alameda spending FTX customer deposits before the fall of 2022, Kaplan said.
Recommended Sentence
Federal prosecutors on March 15 recommended Bankman-Fried, 32, receives a prison sentence of 40 to 50 years, the New York Times reported. Those recommendations noted sending him to prison for life was unwarranted because of his age, despite the severity of his crimes. Separately, the federal probation department recommended a 100-year sentence.
SBF's defense team argued against the Department of Justice's memorandum, calling it "disturbing."
"The memorandum distorts reality to support its precious 'loss' narrative and casts Sam as a depraved supervillain; it attributes to him dark and megalomaniacal motives that fly in the face of the record," the defense wrote in a March 19 filing reported by CoinDesk.
In addition, the former crypto mogul's attorneys in late February recommended a prison term of no more than six and a half years. The defense claimed customers and lenders will be "made whole" and "there were never losses," because "the money has always been available." The defense previously argued there was "zero" harm to investors, customers and lenders for similar reasons.
The maximum penalty was up to 110 years in prison.
Bankman-Fried: $13.7 Bil In Assets, $31.4 Bil In Claims
FTX's bankruptcy team, led by acting CEO John J. Ray III, on March 20 said it expects to negotiate the U.S. government's claims down to $3 billion to $5 billion, Reuters reported. Ray contradicted Bankman-Fried's defense that there was "zero" harm to FTX customers.
"All of these statements are both reckless and false," Ray wrote. He added, " the best conceivable outcome in the Chapter 11 proceedings will not yield a true, full economic recovery by all creditors and non-insider equity investors as if the fraud never happened."
Meanwhile, FTX estimates it has $13.7 billion in assets to pay $31.4 billion in claims, which include $9.2 billion from customers and $17 billion from the U.S. Commodity Futures Trading Commission and Internal Revenue Service, Reuters reported. The firm is working on a settlement that would allow it to repay its customers first and reduce the government claims to $3 billion to $5 billion.
FTX in January said it expects to pay customers "in full," based on November 2022 cryptocurrency prices. However, customers will not benefit from the recent crypto rally, leaving many of them "extremely unhappy," according to Ray.
The ruling comes near the conclusion of almost a two-year saga following the November 2022 collapse of the FTX cryptocurrency exchange. At the time, FTX was the fourth-largest crypto exchange in terms of volume, valued at upward of $32 billion. Founder Bankman-Fried in December was found guilty of seven criminal charges, including fraud, money laundering and conspiracy. During the trial, former executives testified that SBF orchestrated the scheme for FTX to misappropriate more than $8 billion in customer funds for investments, fund lavish lifestyles and to pay off lenders via sister hedge fund Alameda Research.
Other Major Convictions
Prior Wall Street scandals help put the scope of Bankman-Fried's crime and potential sentencing in perspective.
Bernie Madoff, the former chairman of the Nasdaq, in 2009 received a 150-year prison sentence and was ordered to pay back $170 billion in restitution for his five-decade-long Ponzi scheme, which defrauded investors of up to $65 billion.
Allen Stanford in 2012 was convicted of 13 fraud charges linked to a 20-year Ponzi scheme and to misappropriating $7.2 billion in funds through Stanford Financial Group. Stanford received a 110-year sentence and was ordered to repay $5.9 billion.
More recently, Elizabeth Holmes in November 2022 received an 11-year prison sentence for falsifying claims and misleading investors about the accuracy of medical results from her blood-testing startup Theranos. The court sentenced former Theranos President Ramesh "Sunny" Balwani in December 2022 to nearly 13 years in prison.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
