With a sentence of 25 years in prison, Sam Bankman-Fried joins a list of notorious white-collar criminals like Bernie Madoff and Jeffrey Skilling who have received severe penalties for financial fraud.
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The punishment meted out by a federal judge places Bankman-Fried’s failed cryptocurrency exchange FTX alongside Enron and WorldCom as a defining example of corporate greed.
The sentence also closes a chapter in the spectacular fall of Bankman-Fried, who went from crypto wunderkind to convicted felon in just two years following the collapse of FTX, amid allegations he had stolen billions of dollars from the exchange’s customers.
Prosecutors had asked for a sentence of 40 to 50 years, saying in court filings that the “sheer scale of Bankman-Fried’s fraud calls for severe punishment.”
In their sentencing request, they wrote: “The amount of loss — at least $10 billion — makes this one of the largest financial frauds of all time.”
A presentencing report drawn up by the U.S. Probation Office went even further, recommending a sentence of 100 years. That would have meant the 32-year-old Bankman-Fried would never see freedom again.
Bankman-Fried’s lawyers had asked for a much more lenient sentence of between five years, three months, and six and a half years, asking the court to “resist the temptation to compare Sam’s case to some of the more notorious scandals of the recent past.”
They argued that most of FTX’s customers would be made whole through a bankruptcy proceeding that had recovered much of the money, meaning that Bankman-Fried’s actions were essentially a victimless crime, a notion rejected by Judge Lewis Kaplan.
In court filings, Bankman-Fried’s attorneys said his case aligned more closely to that of Theranos founder Elizabeth Holmes, who was sentenced to 11 years for fraud, rather than that of Bernie Madoff, who was sentenced to 150 years for stealing billions from investors in a massive Ponzi scheme.
An even better comparison, they argued, was Michael Milken, the 1980s Wall Street investment titan who served two years in prison for securities fraud and later became a noted philanthropist. Bankman-Fried, they said, also intended to dedicate his life to charitable work after serving his sentence.
Prosecutors countered by saying Bankman-Fried actually stood out among well-known fraudsters.
“Unlike other white collar offenders, the losses the defendant is responsible for are not borne exclusively by sophisticated investors or extrapolated based on a stock price drop. The victims, on the other hand, include tens of thousands of everyday people. People who entrusted the defendant with their money,” they wrote in court filings.
“The fact that two years later victims may receive some money back through FTX’s bankruptcy is of little comfort for those victims who needed the money in November 2022. The suffocating sense of dread and despair that victims felt when they could not withdraw their money, their shame and embarrassment, and the resulting damage to lives and businesses, cannot be undone,” prosecutors wrote.
At his sentencing hearing, Bankman-Fried acknowledged the reality of his situation.
“My useful life is probably over. It’s been over for a while now,” he said, according to reports.
Here’s how Bankman-Fried’s sentence compares to some of the biggest corporate-fraud cases in history.
Sholam Weiss, 845 years
In 1999, Sholam Weiss received what is believed to be the longest-ever sentence for a white-collar crime following his conviction in absentia for stealing $450 million in a complex mortgage and stock fraud. The scam bankrupted the National Heritage Life Insurance Company and wiped out the life savings of thousands of elderly victims.
Shortly before trial, Weiss rejected a plea deal that would have put him behind bars for five years. After his conviction and before his sentencing, Weiss fled the country and remained on the lam for three years before being arrested in Austria.
His supporters argued that Weiss’s sentence was excessive and had been handed down only because he had rejected the plea offer and then fled. The sentence was later reduced on appeal to 835 years.
In 2021, after serving 18 years, Weiss, who was then 66, had his sentence commuted by then President Donald Trump on his last day in office. Trump cited the “unduly harsh” length of the sentence and Weiss’s poor health.
Bernie Madoff, 150 years
If there is a poster boy for financial crime, it is Bernie Madoff.
Once a respected titan of Wall Street, Madoff’s web of lies came undone amid the 2008 financial crisis, when it was revealed that his popular investment fund had been a Ponzi scheme all along.
At the time, it was believed that some $65 billion had gone missing, devastating tens of thousands of people, including celebrities and sophisticated investors. Once his scheme had collapsed, Madoff quickly acknowledged his guilt and, at the age of 71, was sentenced to 150 years in prison.
In 2021, after serving 11 years, Madoff died in prison at the age of 82.
The amount that Madoff was alleged to have stolen was eventually revised to about $18 billion, after phony paper profits were deducted from the total. Following years of lawsuits and asset seizures, over $14.7 billion has been recovered.
Allen Stanford, 110 years
The second-largest case of investor fraud in history — after that of Bernie Madoff — was that of Allen Stanford.
Stanford’s rags-to-riches story was impressive. Born into poverty in rural Texas, he had built a finance empire from nothing, becoming a billionaire and even receiving a knighthood.
In 2009, just months after Madoff’s empire had come crashing down, investigators raided the headquarters of the Stanford Financial Group in Houston. The raid was based on charges brought by the Securities and Exchange Commission alleging Stanford had defrauded thousands of investors through the issuance of more than $7 billion worth of fraudulent certificates of deposit as part of an extensive Ponzi scheme.
Criminal charges followed, and in 2012 Stanford was convicted of fraud and sentenced to 110 years in prison. Stanford, now 74, remains behind bars.
Lawrence Duran, 50 years
In what is believed to be the longest prison sentence ever involving Medicare fraud, Lawrence Duran was sentenced to 50 years in 2011 for orchestrating a scheme that generated $205 million.
Prosecutors said Duran, who had run a national chain of mental-health centers, preyed on patients with advanced dementia by submitting false claims for expensive therapies that they never received.
In some cases, prosecutors said elderly and infirm patients were left in rooms for hours under the guise of receiving high-priced treatment, even though they didn’t know where they were or what was happening around them.
Duran and several co-conspirators pleaded guilty and were ordered to pay back tens of millions of dollars. Duran, who is now 62, remains behind bars.
Bernie Ebbers, 25 years
Dubbed the “Telecom Cowboy,” Ebbers presided over the collapse of WorldCom in 2002, which resulted from widespread accounting irregularities involving loans Ebbers took from the company.
Ebbers, who had helped build WorldCom into the second-largest telecom company in the U.S. behind AT&T, blamed his subordinates for the suspect bookkeeping practices, but he was convicted of fraud and conspiracy in 2005 and was sentenced to 25 years in prison.
In 2019, after serving 13 years, Ebbers was released due to declining health and died a month later at the age of 78.
Jeffrey Skilling, 24 years
Jeffrey Skilling was chief executive of Enron during the ill-fated energy company’s collapse in 2001 amid allegations that the company had egregiously cooked its books.
When the company filed for chapter 11 that year, it was the largest corporate bankruptcy proceeding in history, costing more than 20,000 people their jobs. The bookkeeping scandal was so broad that it triggered the dissolution of Arthur Andersen, then one of the Big Five global accounting firms.
Skilling and Enron Chair Ken Lay were both hit with criminal charges and convicted of fraud, conspiracy and insider trading in 2006. Lay died while awaiting sentencing. Skilling was sentenced to 24 years in prison.
Over the course of several appeals, Skilling’s sentence was reduced to 14 years and in 2019, he was released from prison. Following his release, Skilling, who is now 70, returned to Texas and attempted to get back into the oil and gas business.
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Source: finance.yahoo.com