FTX founder Sam Bankman-Fried was sentenced Thursday to 25 years in prison on seven criminal charges – two counts of fraud and five counts of conspiracy – related to the collapse of his cryptocurrency exchange and an affiliated hedge fund.
The sentence was well below the maximum of 110 years and 40 to 50 years sought by prosecutors. Nevertheless, this is much longer than the few years that Bankman-Fried’s attorneys were looking for.
“Samuel Bankman-Fried orchestrated one of the largest financial frauds in history, stealing more than $8 billion of his clients’ funds.” he said Damian Williams, American attorney for the Southern District of New York. “His deliberate and constant lies demonstrated a brazen disregard for his clients’ expectations and a lack of respect for the rule of law, all so that he could covertly use his clients’ money to expand his power and influence,” Williams said.
In November, a jury convicted Bankman-Fried of all seven criminal charges against him. A Manhattan jury took just over 4 hours to determine that the disgraced FTX founder stole about $8 billion from customers on his cryptocurrency exchange.
Fall
The verdict is likely one of the final chapters in FTX’s epic collapse, which has rocked markets and turned Bankman-Fried from a miraculous white knight who was the savior of cryptocurrencies into a poster child for greed and hubris.
The collapse is the biggest startup and investor failure of all time.
For perspective, Theranos raised roughly $1.3 billion in funding and was valued at its peak at $10 billion before the partitions got here crashing down Elizabeth Holmes AND Sunny Balwani. Holmes was sentenced in 2022 to 11.25 years in prison, and Balwani to almost 12.75 years.
FTX Bankman-Fried cryptocurrency exchange and its American counterpart – FTX USA — raised a total of $2.2 billion at valuations of $32 billion and $8 billion, respectively, before all of it fell apart.
FTX’s problems got here to light on November 6, 2022, when Binance CEO Changpeng Zhao he tweeted that Binance will sell its holdings of FTX’s native token, FTT. Zhao said the decision was due to “recent reports that have come to light” about the token.
Earlier this month reports it turned out that it was the Bankman-Fried trading company Alameda Research it had a large portion of the PTF on its balance sheet, which likely helped increase its value.
FTT prices dropped like a rock in the face of the controversy, and FTX fell into chaos as payouts increased.
Bankman-Fried then closed its Alameda trading platform and looked for investors for emergency financing of FTX as faced an $8 billion shortfall.
When no one arrived, Bankman-Fried was exposed for the game he was playing with his clients and their money. FTX filed for bankruptcy on November 11, 2022.
Impact on enterprise investing
The complete and utter collapse of the stock market had a chilling effect on cryptocurrencies. This could possibly be expected, considering that investors in FTX include, among others: SoftBank Vision Fund, Capital of SequoiaSingapore Temasek Holding, Paradigm AND Partners of the Lightspeed enterprise.
Venture funding for cryptocurrency startups fell last 12 months to just $3.6 billion across 821 deals, down 78% from $16.2 billion across 1,544 deals accomplished in 2022. But so far in this 12 months, cryptocurrency investing has seen a rebound, just as Bitcoin prices have risen. So far in the first quarter, enterprise dollars have already surpassed $900 million, according to Crunchbase data. Last quarter, such financing amounted to just $443 million.