No one should expect sympathy when the crypto bubble bursts…as it surely will, warns ALEX BRUMMER

When it comes to financial justice, no perpetrator wants to appear before an American judge.

As the guardians of free-market capitalism, the US courts regard white-collar crime with the same solemnity as other crimes and sentence it harshly.

FTX’s young founder Sam Bankman-Fried is in the pantheon of major American fraudsters, along with Worldcom CEO Bernie Ebbers and Tyco’s Dennis Kozlowski, both of whom received 25-year prison sentences.

Only the late Bernie Madoff, sentenced to an astonishing 150 years, was given more time.

Holocaust survivor, writer and Nobel laureate Elie Wiesel, who was among Madoff’s victims, said at the time that the greatest punishment for Madoff would be to sit in his cell with a constant relay of photos of his victims.

Perhaps Bankman-Fried should receive a similar punishment.

The difference is that in the shadowy, mysterious world of cryptocurrency, there is so much anonymity that no one really knows who they are dealing with.

That’s why bitcoin and other cryptocurrencies are the preferred means of exchange for terrorist groups, including Hamas and Isis.

It took the events of October 7 in Israel to prompt the US Department of Justice and Israeli authorities to shut down crypto wallets.

In addition to his 25-year prison sentence, Bankman-Fried must pay a world-class bill. Judge Lewis Kaplan imposed $11 billion in financial penalties.

That puts into perspective the $355 million (£277 million) civil fine imposed on Donald Trump for inflating the value of his assets to obtain loans from his bankers.

Judge Kaplan was unimpressed by Bankman-Fried’s claims that FTX customers and creditors would be paid in full.

He compared the mop-haired millennial to a thief who takes his loot to Las Vegas, successfully wagers the stolen money and then asks for a lighter sentence because he might be able to use his gambling winnings to pay back the victims.

Bankman-Fried enjoyed a lavish lifestyle in the Caribbean, was courted by heads of state and gave vast amounts of money to Democratic candidates. He promised to use his wealth to improve humanity.

Other convicted con artists, such as insider trader Ivan Boesky (whose trial I covered in 1987) tried the same tactic and gave away tens of millions to universities.

When he was sent down for five years, his name was struck off the endowed buildings.

What is most disturbing about Bankman-Fried and the deception exposed at Binance, resulting in a $4 billion (£3.15 million) fine for boss Changpeng Zhao, is the lack of discipline this has brought to the crypto markets in the Wild West.

Quite the opposite. Bitcoin reached a new peak of $71,419 this month, nearly doubling its July 2021 price.

The reluctant decision of the US regulator, the Securities and Exchange Commission, to allow Exchange Traded Funds (ETFs) containing crypto gave new life to an asset class favored by scammers, terrorists and uninitiated speculators.

Their possessions have been converted into great wealth. It is unbelievable that the financial markets, which must provide capital and liquidity to respectable listed companies, would allow intruders.

There is no doubt that eventually, as central banks get their act together, government-backed digital currencies will become a factor. It could even change the architecture of banking as we know it.

No one should think that Bitcoin and its ilk have any intrinsic value.

The process of mining and creation is shrouded in fantasy. The algorithms used to create them consume enormous amounts of energy in a world where investments are often judged against climate change values.

As the Bankman-Fried case shows, unregulated crypto assets sourced from sun-drenched offshore islands are an invitation to fraudulent behavior.

Fortunes may have been made by those with the common sense to sell on the go and convert the profits into fiat currency.

No one should expect sympathy or compensation when the crypto bubble bursts… which it certainly will.