By 30, Sam Bankman-Fried had garnered the trust of a million people as a reliable guardian of their hard-earned money. However, his credibility took a hit when he found himself before a federal judge in a Manhattan courtroom, his typically confident demeanour replaced by a bowed head, as he failed to win the favour of the very person who would ultimately determine his fate – sentencing him to 25 years in prison.
Bankman-Fried, founder of FTX, had once been celebrated by influential personalities including former US president Bill Clinton and New York mayor Eric Adams. He had positioned himself as a force for good in the cryptocurrency industry, advocating for stricter regulation, a performance Judge Lewis Kaplan deemed as mere pretense.
Bankman-Fried’s past actions and statements played a crucial role in his downfall. During the two-hour hearing, his past remarks resurfaced, proving to be a self-incrimination of sorts. Even as the judge reminded those present in court of counter-arguments made by Bankman-Fried, he had previously dismissed his stance for stricter crypto regulations as a mere public relations move, even disrespecting regulators publically.
According to Rachel Maimin, former federal prosecutor associated with the FTX case, now at Lowenstein Sandler, the court was convinced of Bankman-Fried’s severe misunderstanding of the gravity of his crime evident by his many public statements prior to the trial.
Signs of Bankman-Fried’s downfall were evident hours before his cryptocurrency exchange company FTX crashed causing an $8 billion (€7.4 billion) financial dent in November 2022, due to what was introduced during the trial as substantial proof. Simultaneously, his damage control attempts seemed relentless with numerous assurance posts on Twitter and extensive media coverage urging everyone that all will be fine and that his company was on its way towards recovery.
Bankman Fried’s ill-advised decision to speak in his defence at trial, contrary to what many in white-collar law would suggest, only accelerated his judicial demise.
Despite his narrative about FTX’s downfall failing to persuade the jury – leading to his conviction for seven counts of fraud and money laundering after only a few hours of deliberation – Bankman-Fried was also determined by Judge Kaplan to have lied in his evidence concerning his knowledge of the 8 billion dollar deficit and illegal usage of customer funds, among other issues.
Judge Kaplan heavily referenced remarks Bankman-Fried had communicated to his ex-girlfriend and former coworker, Caroline Ellison, who testified in court. Ellison recounted memories of Bankman-Fried labelling himself as “risk neutral” and discussing “being prepared to gamble high stakes” with a possibility of gains, even if the world unraveled as a consequence of losing the bet.
Ellison also recollected Bankman-Fried indicating that he stood a “5 per cent chance” of one day becoming the US president. Judge Kaplan highlighted this claim as evidence of Bankman-Fried’s aspiration to become notably politically influential in the United States.
Private reflections of Bankman-Fried were also thrown back at him, to detrimental effect. Prosecutor Nick Roos referred to notes written by Bankman-Fried following FTX’s bankruptcy which had been presented to the court before his sentencing. “His personal records uncovered his intentions to resurrect FTX, or something similar, Roos said during the hearing. “Bankman-Fried would perform the same actions if he believed the mathematical justifications were right.”
Former federal prosecutor Widge Devaney, who has encountered Judge Kaplan in court, suggested that Kaplan viewed Bankman-Fried as having a cynical “Ayn Rand perspective on life” and considered him someone who needed to be isolated from the public for a while.
However, the public seemed indifferent. Bankman-Fried, during his brief yet impressive career, was an enduring promoter of cryptocurrency, intending to make the technology accessible to everyone through FTX. His legal indictment and the dramatic collapse of his company were seen by many as a critical strike to the industry. However, the crypto markets have since experienced a significant recovery, proving this belief wrong.
Despite Roos’ criticisms of Bankman-Fried in court over the alleged severe emotional and personal distress he caused, cryptocurrency remains unshaken. Bitcoin continues to hover near its peak value, while ‘meme’ tokens like Dogecoin, Shiba Inu and Pepe attract millions in investments. The crypto ETFs that were recently launched have now exceeded worldwide investments of $70 billion.
Sunil Kavuri, a former customer of FTX, had traveled from London to give an account of how the exchange’s fall impacted him and fellow investors. He appeared more upset about the inaccessibility of his crypto assets than regretful over his initial investments in the sector. “It’s our property, we are not unsecured creditors,” Kavuri emphasised to Kaplan during the Thursday hearing.
Many believers in cryptocurrency see Bankman-Fried as just one bad element within an overall flourishing sector. “This trial marks the end of an unfortunate chapter that the market has already moved past. The Enron scandal was not proof that all energy markets are corrupt, nor did [Bernie] Madoff represent all hedge funds.” blockchain hedge fund executive Michael Silberberg remarked after the sentencing. “We are confident in the solidity of the crypto market and back the pursuit of rogue elements.”
Bankman-Fried disagreed even with this judgement. The 32-year-old, who has been aiding prisoners in their pursuit of high school diplomas whilst awaiting his sentence, displayed a rare sign of emotion as he addressed the court in an extended speech: “I’m aware of people’s perception of me…and I comprehend the reasons.”
Ultimately, Kaplan summed up the situation in the final say, “In the mind of this mathematics genius…he was weighing the risk of punishment, adjusted for the probability or improbability…of escaping undetected. This was his gamble.” – Copyright The Financial Times.