Sam Bankman-Fried’s Losing Game

Sam Bankman-Fried was uncommonly comfortable with gambling and taking risks. Today, he received a sentence of 25 years in prison, and a judge determined he was sorry for making bad bets—but not remorseful for playing his dangerous game.

First, here are three new stories from The Atlantic:

Out of the Game

Sam Bankman-Fried is a notorious gamer. He has played video games in the company of journalists, at meetings with his investors, and even, reportedly, during a Zoom call with Anna Wintour.

At the height of his success, Bankman-Fried’s ability to game while carrying on serious conversations was framed by admirers as evidence of how quirky and smart he is. But in a Manhattan federal courtroom this morning, Judge Lewis Kaplan concluded that Bankman-Fried ran his failed cryptocurrency exchange like a game. The judge suggested that Bankman-Fried had gambled with people’s lives and money, and that he was not remorseful for committing crimes but regretful that “he made a very bad bet about the likelihood of getting caught.” The judge sentenced Bankman-Fried, who is 32, to 25 years in prison—a term shorter than the 40–50 years prosecutors had argued for, and substantially shorter than the maximum 110 years his crimes carried. (Bankman-Fried, whose defense had asked for a sentence of no more than six and a half years, plans to appeal the verdict.)

Wearing a loose brown prison uniform in the courtroom this morning, Bankman-Fried sat still for most of the proceedings; gone was his signature fidget. When he stood up to address the courtroom, flanked by a United States marshal, he professed sorrow for all the customers and employees who suffered. Bankman-Fried admitted that he had made “bad decisions.” But he fell short of expressing true contrition. He sounded almost dazed, peppering his halting speech with ums. Speaking at some length, he rambled about why people hadn’t been paid back yet, and insisted that FTX had enough assets to repay its customers all along.

Saying you made an error is not the same as saying that you wouldn’t attempt something similar if given another chance. The judge pointed out that Bankman-Fried is a talented marketer who previously launched massive media tours to try to rewrite his story in public (including in the days following the collapse of FTX); he could do the same in the future. “There is a risk that this man will be in a position to do something very bad” if not deterred by a meaningful prison term, the judge argued.

With the 25-year sentence, Judge Kaplan is signaling to a “fairly young and fast industry that criminality will be resolutely punished,” Yesha Yadav, an expert on cryptocurrency at Vanderbilt Law school, told me in an email. The crypto industry is eager to distance itself from Bankman-Fried, who until 2022 was its shining star and envoy to lawmakers and the public. Some crypto leaders even rooted for Bankman-Fried to get a long sentence. His transgressions were so extreme—such eye-popping numbers, such apparent shamelessness in his machinations—that it was easy for the industry to write him off as an anomaly, an exception to its values. But Bankman-Fried was only in a position to abuse his power because he had amassed it through the explicit championing of Silicon Valley insiders. As I wrote in The Atlantic the night his verdict dropped last fall, Silicon Valley may not learn anything from this. As long as the incentive structures of crypto and the broader tech industry remain the same, which they have thus far, little is likely to change.

The crypto industry has rebounded after an era of major turbulence, caused in part by Bankman-Fried’s crimes, and its revival may help FTX pay back its creditors. The race to fill the power vacuum at the top of the industry has begun, and leaders are claiming that they’ll do things differently. Brian Armstrong, the head of Coinbase, a large American crypto exchange, suggested that the guilty plea to money-laundering violations by Changpeng Zhao—who simultaneously stepped down as the head of rival firm Binance in November—marked the start of a “new chapter” for the industry, one “built right here in America, in a compliant way, under U.S. law.” The industry, which has seen high-profile actors facing charges and prison sentences in recent months, is talking loudly about rebuilding trust with consumers. But the lack of systemic regulations in America means that the market remains vulnerable to bad behavior, Yadav noted.

Bankman-Fried’s sentencing won’t transform Silicon Valley. But it does send the message that the crypto industry should not be a game, and that its Wild West image is aging badly. Before reading out his sentence, the judge brought up the testimony of Caroline Ellison, the former CEO of Bankman-Fried’s hedge fund, his ex-girlfriend, and the star witness in the government’s case against him. Ellison had shared a telling anecdote: Bankman-Fried had told her that if he could flip a coin—either humanity is destroyed, or the world becomes twice as good—he would do it. Bankman-Fried was a gambler. But he lost this coin toss, and he won’t be able to play again anytime soon.

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Stephanie Bai contributed to this newsletter.

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