Sam Bankman-Fried Gets 25 Years: Is this Justified?

Former co-founder of FTX, Sam Bankman-Fried, has been sentenced to a total of 25 years in prison for fraud charges stemming from the collapse of his crypto exchange.

The charges are extensive but, in summary, include seven counts of conspiracy, four of which were given a 20-year sentence and a 5-year sentence for the remaining three.

The now-convicted felon will also have to forfeit more than $11 billion dollars, including any leftover properties, as recommended by the federal prosecutors pursuing this case.

Interestingly enough, this sentence was far shorter than the 40-50 years requested by those same prosecutors and much longer than the 6.5 years requested by Bankman-Fried’s lawyers. 

Overall, Bankman-Fried was given a fair compromise, given the range provided by both sides of the case.

However, here is where the controversy begins. 

Bankman-Fried’s lawyers were able to argue for a 5-6-year sentence because FTX can pay back all affected customers, given the recent crypto boom. At the time of the FTX collapse, it was believed that most customers would never recollect the billions of dollars that had systematically evaporated from the lightly regulated and unsecured crypto market. The crypto winter of 2022 has turned into a crypto spring in 2024, allowing FTX to recoup almost all of the losses suffered by its former customers. 

At the same time, however, Bankman-Fried was able to perjure himself three times while under oath, falsely testifying that he had no knowledge that his trading firm, Alameda, had spent FTX customer funds until the fall of 2022. With such blatant lies and a lack of visible remorse during the trial, the judge was able to justify the 25-year sentence. 

This begs the moral question: if a person were to commit a financial crime but were to pay back his victims in full, does he deserve leniency?

The answer depends on who you ask.

One way to approach this dilemma would be to look at past sentences for similar financial crimes. 

Some believe Bankman-Fried should have gotten the same punishment that Bernie Madoff received for his infamous Ponzi Scheme. Another rebuttal is that Madoff was 71 years old, and the 150-year sentence was mainly symbolic as Madoff only served 12 of those years before passing away. Others, like Enron CEO Jeff Skilling and Theranos founder Elizabeth Holmes, received closer sentences of 24 years and 11 years.

It will be interesting to see if the justice system uses Bankman-Fried’s case as a future precedent for similar financial crimes in the crypto space.

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