FTX co-founder Sam Bankman-Fried will learn Thursday how much prison time he will get after being convicted of defrauding his customers, investors, and lenders.
The entrepreneur who presided over the largest crypto collapse in history faces up to 110 years. Prosecutors have requested a sentence of 40 to 50 years, while Bankman-Fried’s lawyers asked for six and a half years.
The decision will be made by Manhattan federal Judge Lewis Kaplan, who presided over Bankman-Fried’s trial last fall and confronted the defendant at several points along the way.
Kaplan even revoked Bankman-Fried’s bail and put him behind bars before the trial began. During the trial, the judge repeatedly admonished Bankman-Fried on the stand for not directly answering questions.
Dozens of FTX victims, including those who said they lost their life’s savings due to FTX’s demise, have submitted letters urging Kaplan to impose a harsh sentence.
Bankman-Fried has made his own case for a more lenient sentence, saying in submissions to the court that prosecutors distorted reality by characterizing him as a “depraved super-villain” motivated by material wealth and luxuries.
Instead, his lawyers argue in a court filing, Bankman-Fried “eschews materialistic trappings” and suffers from a severe condition that causes his “near-complete absence of enjoyment, motivation, and interest.”
The lawyers went on to say that Bankman-Fried has been diagnosed with autism spectrum disorder that causes him, at times, to assess risk with a “different relative valuation of emotions versus ultimate impact than many people do.”
Bankman-Fried will have one more chance in court Thursday to make a last statement, or “allocution.”
Sentences for white collar crimes have varied in recent years, from 150 years for Bernard Madoff to 11 years for Elizabeth Holmes.
The sentencing of Bankman-Fried completes a dramatic fall for a onetime billionaire who ran the world’s second-largest crypto exchange and was the face of a boom in digital assets during the early years of the pandemic.
His empire imploded in late 2022 as FTX filed for bankruptcy and he was arrested by authorities in the Bahamas.
His trial last fall captivated the financial world. A 12-person jury eventually sided with prosecutors who argued that Bankman-Fried deliberately stole up to $14 billion in customer deposits from his cryptocurrency exchange in a scheme that he carried out with three of his top executives.
The group, prosecutors claimed, allowed Bankman-Fried’s sister crypto trading firm Alameda Research “secret” backdoor access to FTX’s customer deposits, then spent the money on investments, loan repayments, political donations, and real estate.
“He spent his customers’ money, and he lied to them about it,” prosecutor Nicolas Roos said in the government’s closing argument.
The other three FTX executives — Alameda CEO Caroline Ellison, FTX co-founder Gary Wang, and FTX engineering director Nishad Singh — pleaded guilty to fraud charges and testified against Bankman-Fried under plea agreements with the government.
They are expected to be sentenced later in 2024.
Bankman-Fried testified that poor business decisions and management screwups — and not fraud — were to blame for the undoing of his cryptocurrency exchange.
“Did you defraud anyone?” Bankman-Fried’s lawyer, Mark Cohen, asked him during the defendant’s risky gamble to take the stand in the trial’s final days.
“No, I did not,” Bankman-Fried answered.
Martin Auerbach, a white collar criminal defense attorney and former federal prosecutor, told Yahoo Finance in November that the challenge for Bankman-Fried in his sentencing is that “the magnitude of the loss is sufficiently great.”
The federal sentencing guidelines, while advisory rather than mandatory, suggest prison term enhancements that lengthen sentences as victims’ losses increase. The calculation, Auerbach said, is a critical factor in white collar crimes.
“He probably tops out on the charts,” Auerbach said, referring to between $10 billion and $14 billion that prosecutors said Bankman-Fried stole from his FTX customers, lenders, and creditors.
The judge “could well think that this is a message that needs to be said, not only to this individual, but to a generation.”
Judge Kaplan will be tasked with weighing those billions in funds that Bankman-Fried put at risk against the reality that the company now reports those who were harmed may be fully repaid.
In January, lawyers for the defunct exchange told a Delaware bankruptcy court judge that a plan for FTX to repay customers and general unsecured creditors in full was “within reach.”
“The $8 billion figure for customers that the government uses does not reflect customer losses as of the bankruptcy petition date,” Bankman-Fried’s lawyers wrote in a pre-sentencing brief.
“It reflects the temporary shortfall in liquid assets to cover the unprecedented level of customer withdrawal requests beginning on November 6, 2022, which reached $4 billion per day the morning of November 8, 2022.”
Bankman-Fried’s lawyers argue that prosecutors misrepresented at trial that those customer funds simply vanished.
No matter what happens Thursday, prosecutors have already decided to spare Bankman-Fried from additional legal jeopardy.
They withdrew plans to take a separate set of charges to trial against the entrepreneur that alleged he committed bank fraud and bribed Chinese officials.
