Convicted crypto kingpin Sam Bankman-Fried is headed to prison for 25 years after New York federal judge Lewis Kaplan expressed disbelief at almost every argument from his legal team.
The mastermind behind one of the largest cases of corporate fraud in US history was convicted on seven charges (conspiracy to commit wire fraud on customers and lenders, actual wire fraud on the same, and conspiracies to commit commodities fraud, securities fraud and money laundering) in early November last year, and has been behind bars ever since.
Bankman-Fried, more commonly known by the moniker "SBF," was CEO and co-founder of collapsed cryptocurrency exchange FTX, as well as the cofounder of Alameda Research, a hedge fund that worked in partnership with the exchange. Alameda and FTX's commingling of customer funds to make risky investments was a key part of the reason the companies collapsed. Since liquidators have taken control of FTX the forensics have uncovered little to no oversight of funds and leadership regularly embezzled funds. More than $8 billion in cryptocurrency was unaccounted for when FTX collapsed in 2022.
The maximum penalty SBF could have faced for his crimes was 110 years. Prosecutors recently recommended the judge sentence him to 40 to 50 years, while SBF's own attorneys asked for just six years or so behind bars.
Marc Mukasey and Torrey Young, SBF's lawyers told the court in a sentencing memorandum [PDF] that SBF was far from the "depraved super-villain" that prosecutors painted him as. They argued that SBF didn't deserve to spend decades in prison since customer funds were ultimately recovered, that he was a first time, non-violent offender unlikely to commit more crimes and that he's not the unrepentant monster prosecutors depicted at trial.
Victim impact letters and statements from FTX's current leadership paint a very different picture, however.
One of the claims that SBF has made repeatedly since he was charged was that FTX was solvent, which was why debtors could all be repaid. John Ray, current FTX CEO who is overseeing the company's liquidation, that's not at all true.
"Mr Bankman-Fried continues to live a life of delusion," Ray said in his memorandum [PDF] to the judge. "I can assure the Court that [SBF's] statements [are] categorically, callously, and demonstrably false."
"Even the best conceivable outcome in the Chapter 11 proceeding will not yield a true, full economic recovery by all creditors and non-insider equity investors as if the fraud never happened." Ray added. He noted that, when taking over leadership of FTX, the company only had 105 BTC left on the exchange against customer entitlements of nearly 100k BTC.
"Why were the bitcoins missing? A jury has concluded beyond a reasonable doubt that Mr Bankman-Fried stole them and converted them into other things," Ray said. "For that reason, they are not available to be returned in-kind to his victims."
There's no shortage of victim impact statements filed after SBF's conviction that paint pictures of financial ruin for FTX customers, many of whom believe they'll never see full compensation for their losses. They describe the emotional toll the collapse took on them, with hundreds of thousands of lost investments. Others support Ray's claims that SBF is lying about not having caused harm, urging the judge to reject the defense's argument for a pittance of a sentence.
Live-tweeting of the proceedings by Inner City Press' Matthew Russell Lee, who has documented the case extensively, show that Kaplan was unimpressed with the defense's arguments.
"I reject the defense's argument about loss, both on the law and on the facts. The assertion that customers and creditors will be paid in full is misleading," Kaplan said, per the ICP tweet feed. "For the reasons well articulated by Mr Ray, that people will be paid back is speculative."
Kaplan also said that SBF committed perjury while on the stand on multiple occasions, including lying about knowledge of the missing $8 billion in crypto and saying he didn't know that Alameda had to borrow customer money from FTX to repay third-party loans. Kaplan also concluded that SBF committed witness tampering prior to being sent to jail over accusations of such.
We asked SBF's lawyers for comment on his sentence and appeal plans mentioned in court, but haven't heard back. ®
Source: The register