The Journal. - 25 Years in Prison from “The Trial of Crypto’s Golden Boy”

Episode Date: March 29, 2024

Caitlin Ostroff and Rachel Humphreys attend Sam Bankman-Fried’s sentencing hearing and parse through the reasoning behind Judge Lewis Kaplan’s ruling and what a 25 year sentence could mean for the former CEO of FTX.  Further Listening: - The Trail of Crypto’s Golden Boy  Further Reading: - Sam Bankman-Fried Faces Lengthy Sentence-And Long Odds On Appeal  Learn more about your ad choices. Visit megaphone.fm/adchoices

so caitlin it's happened we have a sentence 25 years for sam bankman freed yeah after months of waiting the trial all of the pre-trial hearings we finally know how long sam bankman freed will be in prison and you know a reminder, this is 25 years for stealing billions of dollars from FTX customers and defrauding investors and lenders in what prosecutors have called one of the biggest financial frauds in U.S. history. And you'll remember at the start of this podcast, one of our earliest episodes, we noted how he set out to save the world through his FTX empire. And now instead, he's going to spend much of his adult life behind bars. We heard from Bankman Freed again today,

and one of the things that stuck out was he said, quote, my useful life is probably over. Yeah, that was a very powerful moment during the two and a half hours that we were in court today watching this sentencing unfold. And a lot happened. So we're going to break down just how Judge Lewis Kaplan got to that 25 years and what it's going to mean for Sam Bankman Freed. From The Journal, this is a trial of crypto's golden boy.

I'm Caitlin Ostroth. And I'm Rachel Humphries. Coming up, Bankman Freed's 25-year sentence. We'll see you next time. hidden gems in cities full of adventures, delicious food, and diverse cultures. You'll love it so much you'll want to extend your stay beyond the matches. Get the ball rolling on your soccer getaway. Head to visittheusa.com. As always in covering this trial, we got up at the glorious crack of dawn and headed to the court, and it was packed. It was busy today, which is why we had to get there early. There were tons of camera crews outside the courthouse, a long line of reporters, but we managed to get a spot in the courtroom,

a few rows behind Bankman Freed's parents, actually. Yeah, and it was striking that the last time we'd seen them was in the same room almost five months ago when they watched their son be found guilty on seven counts. And I noticed today in court that his mother, Barbara Freed, spent a lot of time looking out the window. And his father, Joe Bankman, was kind of hunched over looking at the floor. Yeah, at the start of this hearing, you know, they seemed to be having a hard time. Meanwhile, you know, in another part of the courtroom, prosecutors were quite jubilant. You know, they were laughing and cracking jokes with each other before things got underway.

I mean, obviously, they felt very confident. They got that victory back in November. This was a good day for them. Yeah. And then Bankman Freed walked in. And I think all of the reporters kind of started craning their necks to get a look. He was flanked by several court-martials. And the first thing I noticed is that his hair was kind of back to the mop top he had been known for, kind of that rough cut ahead of the trial. You hadn't seen him since sentencing, actually. Like, what did you think? Well, yeah, I mean, like you, I saw that the hair was back,

which is always noticeable with Bankman Freed. But overall, I was actually pretty shocked when he walked in by his appearance. He was in ankle cuffs, so he shuffled as he walked across the room. And he was in this crumpled khaki prison jumpsuit. It was just a very different image from the kind of confident guy in a suit that had showed up throughout the trial. Yeah, and then Judge Louis Kaplan walked in. And as always, we stood for his entry. And the proceedings got underway.

And we talked about the opposing arguments before that were made for Bankman-Fried's sentence. Today, we heard from his new lawyer, Mark Mukasey, who made the case for about a roughly six year sentence. And he said that Bankman-Fried isn't a stone-cold financial criminal like Bernie Madoff. Right. And he made the case that everything Bankman-Fried did wasn't with malice in his heart, but with math in his head. That's a direct quote for him, which I really wanted to get down because it was very striking. And he kept calling Bankman-Fried a beautiful, complicated puzzle. That was a strange way to describe someone. Yeah. And he asked Judge Kaplan to look on his client with the kindness

that Bankman-Fried had shown throughout his life to others. Yeah, McKaysey was very quotable, actually. But some of those quotes were later shot down by Nicholas Rose, who spoke for the government. He was basically not having it and reminded the court that Bankman-Fried stole billions of dollars. And he reiterated that word stole very loudly in the court. And he also said that line about malice and math is problematic because it speaks to Bankman-Fried's calculated thinking. And the prosecution believes that it's that kind of thinking that means it's likely he'll commit crimes again. Right. And Rose listed off things that Bankman-Fried has done,

including the attempted witness tampering while he was on bail, how he pitched his narrative to reporters after the collapse of FTX, and the sort of cost-benefit analysis that went into his decision-making. And Rose said, quote, if Mr. Bankman-Fried thought the mathematics would justify it, he'd do it again. Yeah, and Bankman-Fried, you know, in court took a gamble again today by deciding to address Judge Lewis Kaplan. He didn't take the stand, but he stood in in his shackles and he made what was really quite a rambling speech he spoke in a somber tone and early on he apologized saying he was sorry for what happened at quote every stage and he said a lot of things we've heard before about how he made

lots of mistakes and mismanaged Alameda. And he also talked about how he believes there are enough assets to make every FTX victim whole. He said several times that they should have been paid way back in 2022. And what I noticed was that throughout the speech, it felt like he was trying to deflect responsibility like how he did during the trial. And there was one portion where he said he made a series of bad decisions, but he said they weren't selfish decisions.

Yeah, and he spoke for around, I think it was 20 minutes. And towards the end, I could see he was beginning to shake. He was taking long pauses. And there was definitely a sense of resignation to all of this, you know, now that he's been found guilty. That Bankman-Fried that we saw fighting in court during the trial was gone. And towards the end of his speech, he said that it wasn't really about him. He said he's not the one who matters the most at the end of the day, FTX customers are. And Judge Kaplan was listening to all of this before he began his sentencing remarks.

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so today was all about how judge caplan was going to rule on bankman freed sentencing and so throughout the hearing we got some insight into how judge caplan has been thinking about everything that happened at trial yeah which is fascinating because when the trial concluded all i wanted to know was what was Judge Lewis Kaplan really thinking? And actually, we got a taste of what he'd been thinking from the very beginning of today's sentencing when he began by talking about how Bankman-Fried committed perjury. Basically, he lied under oath during the trial. And Kaplan said Bankman-Fried lied when he said he didn't know Alameda was using FTX customer funds. said Bankman-Fried lied when he said he didn't know Alameda was using FTX customer funds. He also said he lied when he learned that Alameda was paying loans with FTX customer money. And

Bankman-Fried also lied about when he found out about the missing $8 billion of customer money. Yeah, so right off the bat, it seemed like Bankman-Fried was on Judge Kaplan's bad side. And then it got worse. Judge Kaplan dismissed bad side. And then it got worse. Judge Kaplan dismissed defense arguments, including that customers would be made whole. He said that isn't relevant. And he used an analogy of, if someone steals money and takes it to Vegas and successfully bets with it,

they shouldn't get a lesser sentence when they're caught. Right. And then Judge Kaplan gave his summary of the Sam Bankman-Fried story as he sees it, essentially. And he started by talking about how privileged Bankman-Fried was, about how he went to the best schools, how he had loving parents, and is capable of huge accomplishments. But then Kaplan turned to Bankman-Fried's time at Jane Street as a trader.

And he talked about how at Jane Street, Bankman-Fried was encouraged to play games with money and that Bankman-Fried went all in on this kind of culture. Judge Kaplan quoted several times from government witnesses like Caroline Ellison,

the former head of Alameda and Bankman Freed's ex-girlfriend. He recalled Ellison's testimony that Bankman Freed said there was a roughly 5% chance he'd be president. And Kaplan pointed out his behavior in this case demonstrates that ambition and led him to commit one of the biggest financial and political crimes in history. And I just want to pick up on that political crimes point because Kaplan elaborated on that more today than what we had heard before. Kaplan spoke more about the scale of Bankman-Fried's donations to both Republicans and Democrats. And Kaplan said that this was for Bankman-Fried to get better regulation for the crypto industry. But as Judge Kaplan pointed out, this was an act. And to show this, he referenced an interview that Bankman-Fried had done where he said, quote, F regulators. Yeah, it was quite

something to hear Judge Kaplan drop the F bomb. But he also spent some time focusing on one of Bankman Freed's characteristics, which was his sort of calculated betting and almost gambling. And he said Bankman Freed throughout the trial and today showed little remorse. And his only regret is that he made a very bad bet. So with that, Judge Kaplan turned to making his ruling and he told Bankman-Fried to stand up and all around us, you could feel all the reporters on the benches craning to get a look at him. And Kaplan laid out that prosecutors wanted 40 to 50 years for Sam Bankman-Fried. But he said that was more than necessary. And he went on to make clear that he wasn't diminishing the harm that Bankman-Fried had caused,

but that he wanted to give a fair sentence. And he has to take so many things into account. And one that he mentioned was Bankman-Fried's flexibility with the truth, especially when he testified. Right. And Judge Kaplan said something that was striking. He said that Bankman-Fried, even when he wasn't lying, was evasive and hair-splitting in his testimony. Kaplan said, quote, I've been doing this job for close to 30 years.

I've never seen a performance like that. And with that, Kaplan read out Bankman-Fried's sentence. 300 months, which after some quick, long division in my notebook, 25 years. And on top of that, Bankman-Fried was going to be fined $11 billion. And a few benches ahead of us, Bankman-Fried's parents could barely watch as the sentence was read out. His father, Joe Bankman, was hunched over, staring down at the floor, and his mother, Barbara Fried, was again looking out at the window, and neither of them were able to watch what was going on. In a statement released afterwards, they said they are heartbroken and they said they would fight for their son.

So that was that. We left court. We were about to head back to the studio when I spotted Sunil Kavuri. Sunil had testified in court earlier today. He was an FTX customer and he had spoken for a few minutes on behalf of victims. And I caught up with him in the rain and I asked him what he made of Bankman-Fried's sentence. Yeah, it was, I think it was good. It was reasonable. Phil, you spoke in court about how traumatic this has been for you and other victims that you've spoken to. Do you feel that from today this will help with moving on from that? Or that depends on the bankruptcy and the result?

It's very difficult. Yeah, I think it will depend on the bankruptcy and the result. Because I think that, unfortunately, there isn't closure. There's no real closure with sentencing of Samban Manfrid. And I know, you know, potentially the prosecution believe the case is closed, but it's not closed that people are still living this nightmare today. And Sunil is right. When it comes to this case, there are still a lot nightmare today. And Sunil is right. When it comes to this case, there are still a lot of open questions. As Sunil points out, the FTX bankruptcy is still

ongoing. So this is a saga that's far from over for customers. And for Bankman Freed, we now know how long he'll be serving, but we don't know where. Judge Kaplan has made a recommendation that Bankman Freed should serve in a low or medium security prison, ideally close to his parents in the San Francisco Bay Area. But ultimately, the Federal Bureau of Prisons will make that decision. And there's also Bankman-Fried's co-conspirators, Caroline Ellison, Nishad Singh, and Gary Wong. They all made deals with the government and testified against Bankman Freed. So there's going to be more to come on what will happen to those three. When we began the series, I was trying to figure out what really happened

with FTX. And the trial, I think, has given us a better understanding of what went wrong and how. But I think it's left us with a lot of questions still as to why things went wrong. We have these two conflicting images of Bankman Freed throughout this trial of what the defense paints as, you know, someone who wanted to do good and change the world, and the government side of, you know, someone who was motivated by greed. Yeah, and after all these hours in court, Caitlin, I feel almost, like you say, more confused than ever about who Bankman Freed really is. And I'm kind of resigned to thinking that we may never really know. So this feels like the end, Caitlin, but Bankman Freed maintains his

innocence and he says that he's going to appeal. Yeah, and who knows, maybe there will be more podcasts to come. You and I are bad at predicting things, but for now, that's it. That's all for today, Thursday, March 28th. The Trial of Crypto's Golden Boy is part of The Journal, which is a co-production of Spotify and The Wall Street Journal. I'm Caitlin Ostroth. And I'm Rachel Humphries. This episode was produced by Enrique Perez de la Rosa, and it was edited by Catherine Whalen. Additional reporting from James Finelli and Corinne Ramey. Our fact checker is Najwa Jamal. Special thanks to Brent Kendall,

Kate Leinbar, Sarah Platt, and Jenna Telesca, and the entire Journal podcast team. Sarah Platt and Jenna Telesca and the entire Journal podcast team. Our engineer is Peter Leonard. Our theme music is by So Wiley and remixed by Peter Leonard. Additional music in this episode by Peter Leonard. And a very special thanks to you for listening. We've loved hearing from you throughout the series. Thank you for your questions, for your feedback.

It's been great to hear from so many of you and remember if you like this show subscribe to the journal podcast which is out every weekday afternoon thanks again for listening