- Convicted felon Sam Bankman-Fried is set to appear in New York federal court this week for his sentencing
- He stole $8billion from FTX cryptocurrency exchange investors
- His defense lawyers argues for sentence under seven years as he is a first-time, nonviolent offender
Shamed FTX CEO Sam Bankman-Fried, 32, is set to appear in court later this week to face justice for stealing billions from crypto investors with prosecutors wanting him to spend decades behind bars and his defense demanding he be freed by age 40.
Once worth over $26 billion, Bankman-Fried faces a maximum of 110 years in prison for defrauding FTX customers and investors.
He conspired with senior officers at his company to steal roughly $8 billion in customer deposits that were supposed to be safe on the FTX cryptocurrency exchange, which froze withdrawals and went bankrupt in November 2022.
Federal prosecutors with the Southern District of New York argued in a March court filing that Bankman-Fried ought to spend 40 to 50 years in prison to deter potential future crimes and ‘protect the public.’
‘Bankman-Fried’s crimes were serious and long-running, causing billions of dollars in losses and significant harm to tens of thousands of victims financially and emotionally,’ according to the government’s sentencing memorandum.
His defense is asking the court to impose a sentence of no greater than six-and-a-half years because, among other things, he’s a first-time, nonviolent offender who is neurodivergent.
However, the real cornerstone of the defense’s argument for a lenient sentence is that a lawyer for the FTX debtors said in January that victims ‘will eventually be paid in full.’
While that hasn’t been confirmed, the crypto market’s rebound in 2024 makes it more likely since the FTX estate has been selling crypto to raise cash, according to bankruptcy documents.
But prosecutors wanted to see him locked up for decades with little chance of leaving prison before Bankman-Fried becomes an old man.
The government argued that an effective life sentence, similar to the ones handed down to Bernie Madoff and Allen Stanford, would be ‘greater than necessary’ for Bankman-Fried partly due to how much younger he is than them.
A separate presentence investigation report by the federal probation office recommended 100 years, a prospect Bankman-Fried’s new attorneys called ‘grotesque’ and ‘barbaric.’
Over 100 victim impact statements have poured in leading up to his sentencing. Everyone from single parents to young risk-takers trying to boost their wealth to experienced crypto investors wrote in.
Each person tells a different story. Some say they lost their life savings in the FTX collapse. Others describe the day the exchange went bust as a ‘nightmare.’
Many expressed anger at Bankman-Fried specifically and urged the court to take seriously what happened to them.
‘All my hard-earned life savings were invested in bitcoin on the FTX platform, hoping to secure a better future for my family and myself. However, the actions of SBF and FTX have shattered those hopes,’ one victim wrote. ‘The scam has caused immense emotional distress, leading to constant thoughts of suicide.’
While another added: ‘The same week the FTX collapsed my mother was diagnosed with cancer, it was a very hard time for me and my family… I had to travel constantly to be with her and support her. Raising a kid, taking care of my sick mother while struggling financially due to being scammed is something I don’t wish on anyone.’
Customers wrote about losses well into the hundreds of thousands, some even saying they lost millions when taking into account how much cryptocurrencies have appreciated in recent months.
Bitcoin, for example, pushed past $72,000 in mid-March.
Ultimately, Judge Lewis Kaplan will decide whether he puts more emphasis on the amount that could be repaid to victims or the fact that customers have been deprived of their money because of the fraud perpetrated by Bankman-Fried.
Bankman-Fried’s October trial lasted a month, with the government calling over a dozen witnesses to the defense’s three. The most explosive testimony came from other FTX executives, including his ex-girlfriend Caroline Ellison.
Ellison served as the CEO for Alameda Research, a crypto trading firm that Bankman-Fried founded in 2017. FTX was founded two years later and according to prosecutors, the two firms were joined at the hip.
So much so that Alameda had access to FTX customer deposits through a $65 billion line of credit it frequently drew on.
At trial, the government claimed that billions worth of customer money was funnelled into Alameda to pay back the eye-watering loans it had taken out from crypto lenders.
Ellison testified in October that Alameda took FTX deposits for ‘whatever’ it needed and that Bankman-Fried ‘directed me to commit these crimes.’
Part of what Ellison said Bankman-Fried instructed her to do was to draft seven different balance sheets to send to Genesis, one of Alameda’s main lenders, when it recalled its $500 million loan to Alameda.
He and Ellison agreed to send a falsified balance sheet that understated Alameda’s liabilities and omitted any mention of it borrowing money from the FTX exchange, aka customers, Ellison testified.
All told, Ellison said Alameda took about $14 billion from FTX customers over the firm’s lifetime.
Before FTX collapsed in November 2022, some in financial media considered Bankman-Fried to be a quirky, yet responsible steward of the crypto boom because he championed more stringent regulation for the industry
The fraud testified in front of Congress multiple times, professing his belief that the CFTC could assert itself a whole lot more in regulating crypto spot markets.
But, prosecutors said at trial, it was part of the façade, and that while Bankman-Fried was talking a big game about regulation, he was busy spending FTX customer money on keeping Alameda afloat, illiquid venture investments and real estate.
FTX and its related entities spent over $256 million on real estate in 2022 alone, the year the company collapsed. Much of that real estate was based in the Bahamas, where FTX was headquartered.
Bankman-Fried, along with FTX top brass, lived in a luxury penthouse apartment worth around $30 million. His parents, Joseph Bankman and Barbara Fried, were also deeded a $16.4 million home in the Bahamas. Court testimony revealed that many of these purchases were almost certainly financed with customer deposits from FTX.
For over a month after FTX went bust, Bankman-Fried struggled to turn down a single interview. He denied the improper use of customer money to numerous outlets, even telling ABC’s George Stephanopoulos just over a week before his arrest that he didn’t know FTX customer funds were being used to pay off Alameda’s loan obligations.
Bankman-Fried told the jury a similar story, saying he didn’t ‘recall’ over two dozen times in response to questions from the government.
Even Bankman-Fried’s arrest and the events leading up to his trial were covered extensively. He was arrested in the Bahamas in December 2022, and then released on $250 million bond secured by his parents’ home in Palo Alto, California.
He was confined to that home until August 2023, when he violated his bail by allegedly tampering with witnesses.
The curly-haired ex-billionaire has been held at the Metropolitan Detention Center in Brooklyn since.
High profile prisoners at center have included R. Kelly, Ghislaine Maxwell, Martin Shkreli and now Bankman-Fried who was recently pictured alongside fellow inmates.
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