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Sam Bankman-Fried’s Hallucinations of Grandeur
Sam Bankman-Fried’s Hallucinations of Grandeur
The former crypto mogul faces a 25-year sentence for his financial con game
April 1, 2024
Sam Bankman-Fried attends a bail hearing in Manhattan last August. (Michael M. Santiago / Getty Images)
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Like an AI chatbot, fallen FTX CEO Sam Bankman-Fried carries a lot of data in his head but understands nothing. From his ignoble place at the defendant’s table during his sentencing hearing last week in Manhattan, he hallucinated arguments that, to some, could seem true, but were fictions cobbled together from real parts. His role as a supposed financial genius is now exposed as the handiwork of a crypto-age mechanical Turk—a conman simulating an ability that just isn’t there. Too many people fell for it.
During his sentencing, Bankman-Fried stuck to—and indeed amplified—one of his most enduring lies: that his theft of more than $8 billion in FTX customer funds resulted in no actual financial loss to anyone. The money to pay back customers was always there, he said in his final statement before being sentenced. “There is billions more than is necessary. It has been true for the whole time.”
“I reject entirely the defendant’s argument that there was no loss,” said Judge Lewis Kaplan.
Kaplan reminded the defendant that investors wrote down to zero $1.7 billion in investments. Two lenders were unable to recoup loans from FTX and went bankrupt. People lost their jobs and had their lives upended. For many customers, still waiting to access their funds, the opportunity cost has been enormous. They couldn’t pay bills, became delinquent on car and house payments. Their mental health deteriorated. And when they are eventually paid back, they will be repaid in the significantly diminished dollar-value equivalent of their assets from November 2022, just before FTX failed.
Some of the money that Bankman-Fried stole went to investments that later hit big, like the AI startup Anthropic. After a brief winter downturn, cryptocurrency prices are booming again, meaning the tokens that FTX and Bankman-Fried acquired through insider dealings (or created himself) could be worth quite a bit. But much of that value is on paper, yet to be tested in an illiquid market, and it has nothing to do with the law.
“A thief who takes his loot to Las Vegas and successfully bets the stolen money is not entitled to a discount on the sentence by using his Las Vegas winnings to pay back all or part of what he stole if and when he gets caught,” Kaplan said.
Bankman-Fried stood and, in a low voice, made a meandering statement that periodically veered from consensual reality. He apologized to his colleagues, some of them by name. They had followed him around the world, devoted their lives to his project. “They all built something really beautiful,” said the founder of an offshore crypto casino and money laundering network. “They threw themselves into it. And then I threw all of that away.”
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He didn’t acknowledge just how he “threw all of that away,” by stealing $8 billion in customer funds, which he frittered away on luxury real estate, startup investments, a lover’s hedge fund, and a Kazakh bitcoin mine. Rather, he said that his companies were overleveraged and suffered a liquidity crisis. “FTX wasn’t bankrupt. Alameda wasn’t bankrupt.”
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There had been a way out, Bankman-Fried insisted: a way to repay people by shutting down one of his companies to save the other. “That’s also not how this story ended, of course, because I wasn’t done screwing up,” he said.
“They could have been paid back,” he said, sounding almost incredulous that it hadn’t been done yet. “There were enough assets, there are enough assets to pay back all customers, all creditors in full at current prices, at prices at the time, with interest.”
The scale of Bankman-Fried’s delusion was breathtaking. Whatever set of figures he was working from bore no resemblance to the reports of prosecutors, forensic accounts, and bankruptcy lawyers. Perhaps he knew what was in his disordered financial empire better than anyone—or maybe he would lie for as long as he could, insisting that while he was responsible, he had just made some “bad decisions.” The central article of his delusive management regime at FTX was always that things could have been fixed—if only people had listened and given him more time.
Bankman-Fried slipped into a more maudlin register. “My useful life is probably over,” he said. “I have long since given everything I have to give.”
It wasn’t always clear what he was talking about. What did he have to give? How were an offshore crypto casino, bank fraud, $150 million in bribes to Chinese officials, and what assistant US Attorney Nicolas Roos called “the largest election crime in United States history”—a massive straw donor operation involving FTX executives, Gabriel Bankman-Fried, Barbara Fried, and political consultants, who collectively funneled tens of millions of dollars to hundreds of politicians—supposed to advance the flourishing of the human race? Where was the goodness that allegedly oozed out of Sam Bankman-Fried, as he preached his enlightened, species-saving gospel of “effective altruism”?
Bankman-Fried still seemed to think he missed out on some fantastic philanthropic possibility, some world-changing venture conceived by his brother—who, as part of his FTX-funded charitable endeavors, once considered making a bid to purchase the sovereign island nation of Nauru.
“I guess there is a big opportunity in the world to do what the world thought I would do,” he said.
He hoped his former colleagues would pick up the pieces.
It was an admission of both his own titanic self-regard and the profoundly overblown hype that once surrounded him. Both pathological conditions had been cultivated by Bankman-Fried and by the venture capitalists, talking heads, and paid-up celebrities who benefitted from his rise.
Trial evidence and testimony showed that, despite his social awkwardness, Bankman-Fried is not modest. A quietly cocky, coddled nerd, he was grandiose in his ambitions, telling his former lover and Alameda Research CEO Caroline Ellison that there was a five percent chance he might become president of the United States. He manipulated friends and lied to investors. He made lists of favorite journalists who he could use to push his agenda. He considered announcing a public shift to the political right—on Tucker Carlson’s show—to try to cultivate support there. An amoral capitalist who cloaked himself in a fake humanitarianism, he did business with a slew of bad industry actors. And he expressed no remorse.
“The goal was power and influence,” said Judge Kaplan. “He was viewing the cost of getting caught, discounted by probability or improbability, against the gain of getting away without getting caught, given the probabilities. That was the game. It started at least as early as Jane Street and it continued to the very end. It’s his nature.”
Ultimately, Bankman-Fried received a sentence of 25 years, less than the 40 to 50 years requested by the prosecution. Judge Kaplan suggested that the sentence be served at a medium-security facility in the San Francisco Bay Area, near the defendant’s parents. The American prison system is brutal, but the endgame of his prosecution could have been far worse for Bankman-Fried. The political corruption, the bribes, the sketchy financial relationships, the elite rot he both embodied and, briefly, built an empire on—all that is now being brushed aside. Bankman-Fried will appeal his conviction, but the myth of his market-conquering heroics ends here—no matter what he says he believes.
