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Disgraced billionaire FTX founder known as a ‘crypto genius’ before his fall from grace, was sentenced to 25 years in prison, culminating more than one year of trial since the collapse of the cryptocurrency exchange at the hands of fraud. He was accused of stealing 8 billion dollars in customer funds.

U.S. District Judge Lewis Kaplan handed down the sentence in a Manhattan court hearing. “He knew it was wrong. He knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught. But he is not going to admit a thing, as is his right.”

Why it matters

He was found guilty in November of fraud and money laundering charges. But his defense advocated for a sentence of five to seven years.

Judge Kaplan chose a harsher sentence of 25 years, chiding Bankman-Fried’s “apparent lack of any remorse,” and the massive loss to customers.

The big picture

FTX, Bankman Fried’s cryptocurrency exchange, was based in the Bahamas, and world leaders and A-list celebrities endorsed his billion-dollar crypto exchange. Over one million customers lost $8 billion when it was discovered he channeled customer funds in a hedge fund called Alameda Research, and could not recoup customers’ lost investment.

Bankman-Fried dispersed his altruism with monetary donations to charities throughout the Bahamas and donated to some politicians in the Bahamas and USA alike, hoping to persuade crypto legislature in his favor.

After the collapse of the empire in what prosecutors have called one of the biggest financial frauds in U.S. history, he was arrested and held at the Bahamas Department of Corrections, fighting extradition but later surrendered to the US to face charges.

What Bankman-Fried says

Bankman-Fried, in a beige short-sleeve jail T-shirt, apologized to his former FTX colleagues, however he did not admit any criminal wrongdoing.

He vows to appeal the sentence.

Though prosecutors in the United States have charged former FTX CEO Sam Bankman-Fried with fraud, conspiracy, money laundering, and violations of campaign finance law, the Bahamas has yet to convict the 30-year-old of a single crime.

Bankman-Fried lived in the Bahamas since 2021, after establishing the headquarters of his billion-dollar company in the country after the move from Hong Kong, China. He became a generous donor and was the face of the Bahamas’ future investment in the crypto industry.

The permanent resident was given the approval to set up the exchange here. But the alleged crimes were committed under the noses of the regulatory body, the Securities Commission Bahamas.

Three weeks ago, before the US charges were filed, Attorney General Ryan Pinder in a televised national address announced that the Commission and the Royal Bahamas Police Force were investigating Bankman-Fried’s handling of customer funds in FTX.

From that day to this, no charges have been filed. Neither has it been stated whether or not they found any sign of wrongdoing at the exchange.

However, unsealed court documents in the US, revealed that the former co-CEO at FTX Digital Markets Ryan Salame, tipped off the executive director of the Securities Commission of the Bahamas, Christine Rolle, and informed her that the fallen crypto-knight possibly committed fraud when he funneled billions of dollars from FTX to Alameda Research.

Rolle then alerted Bahamas Police Commissioner Clayton Fernander for an investigation into the matter. Still no word from the Commissions or the police force.

Bankman-Fried was arrested last week Monday in the Bahamas at the request of the US government based on an extradition treaty between the two countries. The US has since provided sufficient evidence that he committed a crime in their country.

Photo credit: Reuters

The people who worked with FTX CEO Sam Bankman-Fried were shocked at the empire’s rapid fall and tell of his “radio silence” in the midst of chaos at the second-biggest crypto exchange.

People familiar with the operation spoke to CoinDesk on anonymity citing ongoing harassment and death threats: “The whole operation was run by a gang of kids in the Bahamas.”

The 30-year-old crypto king lives in his Bahamas luxury penthouse with his nine housemates who include the company’s co-founder and Chief Technology Officer Gary Wang, FTX Director of Engineering Nishad Singh and Caroline Ellison of Alameda. The other 6 employees are former co-workers from quantitative trading firm Jane Street and others he met at his alma mater, Massachusetts Institute of Technology.

It is speculated that they were all paired up romantically and Ellison who is Alameda’s CEO, is Bankman-Fried’s on and off again girlfriend.

Alameda Research is a trading giant at the center of the company’s collapse which the Wall Street Journal reported got $10 billion of FTX customer money. This spurred allegations of FTX’s mishandling of funds when it tapped into customer accounts to fund risky bets in its trading company Alameda.

In the Bahamas, FTX and Alameda’s offices are also located steps apart in a coworking compound that also houses other crypto incubation projects.

“Gary, Nishad and Sam control the code, the exchange’s matching engine and funds,” the first person familiar with the matter said. “If they moved them around or input their own numbers, I’m not sure who would notice.”

A third person familiar with how the company operated said: “They’ll do anything for each other.”

FTX and Alameda employees told CoinDesk that they were kept in the dark regarding the events of the past week, stating that only Bankman-Fried’s inner circle may have had knowledge about the company’s dealings.

Bankman-Fried’s father, Stanford Law professor Joseph Bankman, also plays a role at the company. He is believed to be involved in the company’s charity and regulation-related projects.

“Some employees kept their life savings on FTX,” the second anonymous employee told CoinDesk. “We trusted that everything was fine.”