Crypto mogul Sam Bankman-Fried sentenced to 25 years behind bars
What's the story
Sam Bankman-Fried, the founder and former CEO of FTX, once a leading global cryptocurrency exchange, has been sentenced to 25 years in prison.
His conviction came over charges of orchestrating what US Attorney Damian Williams has termed "one of the biggest financial frauds in American history."
US District Judge Lewis Kaplan of New York, handed Bankman-Fried his sentence.
Journey
Bankman-Fried's rise in the crypto world
Bankman-Fried's foray into the crypto world began with Bitcoin arbitrage in 2017.
He capitalized on a 60% price difference across exchanges, buying Bitcoin cheaply on one platform and selling it at a higher price on another.
This venture led him to establish Alameda Research and later FTX.com, an international cryptocurrency exchange known for its innovative trading features.
Crash
The 2022 crypto crash and Bankman-Fried's downfall
The 2022 crypto market crash led to a significant drop in the value of stablecoin Luna and the bankruptcy of several lenders.
Alameda had borrowed from these lenders using FTT tokens minted by FTX as collateral.
When faced with margin calls due to falling prices, Bankman-Fried resorted to using FTX customers' deposits by mid-2022.
Bankruptcy
FTX's financial crisis and bankruptcy
On November 2, 2022, CoinDesk revealed details of Alameda's balance sheet showing $14.6 billion in assets, over $7 billion of which were either FTT tokens or coins backed by Bankman-Fried like Solana or Serum.
This disclosure led to investors withdrawing their holdings from FTX, causing a liquidity crisis for Alameda and FTX.
By November 11, FTX had filed for bankruptcy and Bankman-Fried stepped down as CEO of FTX and associated entities, losing 94% of his personal wealth in the process.
Aftermath
The aftermath: Losses and legal consequences
During his trial in December, Judge Kaplan found that Bankman-Fried lied when he claimed he did not know his hedge fund spent customer deposits taken from the FTX cryptocurrency exchange he founded.
Judge Kaplan also determined that FTX customers lost $8 billion, FTX's equity investors lost $1.7 billion, and lenders to Alameda Research lost $1.3 billion.
He rejected Bankman-Fried's argument that customers would be fully repaid through the bankruptcy process.
Sentencing
Bankman-Fried was released on $250 million bond
During the trial, a jury convicted Bankman-Fried on all seven criminal charges against him in just three hours.
This swift verdict came as a surprise to experts, given the numerous witnesses and extensive evidence.
Bankman-Fried, however, was released on a $250 million bond and was put under house arrest at his parents' house in California.
Finally, today, he is back behind bars again.