FTX CEO Sentenced

Following his conviction for money laundering and fraud in November 2023, the former CEO of the collapsed FTX exchange, Sam Bankman-Fried, was today sentenced to 25 years in jail.

The rapid implosion of the exchange has been described as crypto’s ‘Lehman moment’, recalling the collapse that triggered the greatest damage of the 2008 financial crash. It’s worth remembering that FTX was a fraction of the scale of Lehman, with losses of 8.7bn as against Lehman’s 613bn. However, in the context of the crypto market this was substantial. It dented confidence in the assets and the infrastructure and a cold wind blew over the entire industry while the trial progressed. It is starting to recover, but the damage FTX inflicted cannot be understated.

Investors, too, suffered heavy losses. Although around 85% of the value of the lost FTX assets was recovered within a year of the crash (compared to 20% of Lehman’s over a long 12 years), there are reports of people who entrusted their life savings to a conman and have not yet received any settlement. The value of their investments has also been frozen at the market rates in November 2022, while a Bitcoin held in self-custody or in a regulated exchange would have appreciated fourfold by now.

There has been some comparison with Bernie Madoff, whose 18-year Ponzi scheme earned him a 150 year jail term. Is the sentence for the FTX CEO unduly lenient? The scale, intention and timeframe of Madoff’s fraud was extraordinary. FTX climbed to its apogee and crashed spectacularly in a much shorter period, inflicting fewer harms. However the underlying chaos and lack of governance of the whole FTX and Alameda group, and the refusal of Bankman-Fried to acknowledge the crimes committed and harms inflicted, show an utter lack of remorse.

There will be appeals and the unravelling of the final settlements will rumble on for some time. But this sentencing draws a line in the sand for the crypto industry. Now we have to pull together to build a more transparent and trusted industry that contributes fully to the rapidly changing technological landscape.

Read more about this story: FTX Bankruptcy News (2022), Live from the FTX meltdown (2022), Getting Started with Cryptocurrency: An introduction to digital assets and blockchain (2024)