Jailing Sam Bankman-Fried marks an end to Wild West days of crypto

The ‘Crypto King’ was once the new technology’s revered figurehead. Now, as he begins a 25-year prison sentence, he could become an unlikely symbol of its newfound maturity, writes Anthony Cuthbertson

‘He presented himself as the good guy, all in favour of the appropriate regulation of the crypto industry’ (Getty)

In September 2022, Sam Bankman-Fried’s face was on the cover of Fortune magazine, the name of his company was splashed across stadiums, and he was in talks with Elon Musk to help finance the takeover of Twitter. As the head of the world’s biggest crypto exchange, he had become the world’s richest person under the age of 30 and was being touted by Silicon Valley investors as a future trillionaire.

Just three months later, the man dubbed the “Crypto King” was arrested and charged with fraud and money laundering that ultimately resulted in the collapse of the FTX exchange. In that moment, he may also have broken a record for going from billionaire to broke in the shortest amount of time.

This week, after more than a year of legal proceedings, he was sentenced to 25 years in prison for his crimes.

Judge Lewis Kaplan, who handed Bankman-Fried the sentence in a New York courtroom on Thursday, said the 32-year-old had never uttered “a word of remorse for the commission of terrible crimes”.

As the founder and head of FTX, which was at one point handling daily trading volumes of $21bn (£16.6bn), Bankman-Fried had positioned himself as one of the industry’s figureheads. In December 2021, he had appeared before Congress to offer politicians his thoughts on how best to regulate the space.

“He presented himself as the good guy, all in favour of the appropriate regulation of the crypto industry,” Judge Kaplan said. “In my judgement, that was an act.”

In this courtroom sketch, Bankman-Fried makes a statement during his sentencing in Manhattan federal court, on 28 March (AP)

His fall, and the collapse of FTX, contributed to one of the worst price crashes in bitcoin’s history. FTX customers collectively lost billions of dollars, while more than $2 trillion was ultimately wiped from the crypto market as investors sought a way out of a space where their funds appeared to be at the mercy of fraudsters and get-rich-quick charlatans.

Bankman-Fried ruled over an era often referred to as the Wild West days of cryptocurrency. As with any new technology, regulators and lawmakers had been playing catch-up since bitcoin first emerged in 2009, and amid this lack of rules, SBF became crypto’s most famous crook.

“The crypto industry might be new, the players like Sam Bankman-Fried may be new, but this kind of fraud is as old as time and we have no patience for it,” said senior prosecutor Damian Williams after the Californian was found guilty of what was one of the biggest financial frauds in US history.

Since FTX’s collapse, there has been a concerted crackdown by regulators to prevent another such disaster. The US Securities and Exchange Commission (SEC) has filed dozens of civil lawsuits against some of the industry’s biggest figures. SEC chair Gary Gensler said last year that the regulator would be the “cop on the beat” to bring to an end the “Wild West” days of the crypto industry. “As with seatbelts in cars, we need to ensure that investor protections come as standard in the crypto market,” he said.

The SEC took action against major crypto exchanges Binance and Coinbase, while also approving the first ever spot bitcoin exchange-traded funds. This has brought in hundreds of billions of dollars of institutional investment, with finance giants like BlackRock and Fidelity offering investors a safe way into the space.

Kristalina Georgieva, managing director of the International Monetary Fund, has also spoken of “leaving the Wild West” of crypto behind through new rules and regulations.

“The Wild West was a tough place. With few sheriffs around, and limited legislation and regulation, it was a land of crashes and criminals,” she said in a speech last December. “These rules are not meant to return us to a pre-crypto world, nor to squash innovation. Not all in crypto was tainted by fraud, just like the Wild West was not only about crooks, despite their legendary exploits.”

In the 15 months since Bankman-Fried’s arrest, the rebuilding of the crypto industry has coincided with a record-breaking rally for the crypto market. Bitcoin hit a new all-time high this month, having quadrupled in value since FTX’s collapse.

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Bankman-Fried now looks forward to a lengthy sentence in what will likely be a maximum security prison – it could have been a lot worse; he faced more than 100 years in prison if given the maximum penalty – while crypto looks ahead to what many believe will be a new era of increased scrutiny and protections for consumers.

With the imprisonment of the Wild West’s “Most Wanted”, a period defined by greed and lawlessness appears to be finally coming to an end.