Thursday, April 25

Sam Bankman-Fried should be sentenced to 40 to 50 years in prison, prosecutors say

Federal prosecutors said Friday that Sam Bankman-Fried, the cryptocurrency mogul convicted of masterminding a multibillion-dollar fraud, should be sentenced to 40 to 50 years in prison.

Prosecutors made the recommendation in a filing in U.S. District Court in Manhattan. Mr. Bankman-Fried’s sentencing hearing is scheduled for March 28, when Judge Lewis A. Kaplan will decide his fate. He faces a maximum sentence of 110 years.

“Justice demands that he receive a prison sentence commensurate with the extraordinary dimensions of his crimes,” prosecutors said in a 116-page memo to the judge.

The Federal Probation Department separately recommended a sentence of 100 years for Mr. Bankman-Fried, 32, effectively a life sentence. But prosecutors said in the filing that sending him to prison for the rest of his life was not justified, despite the seriousness of his crime, because of his relative youth.

In a filing last month, Mr. Bankman-Fried’s lawyers argued that he should be sentenced to no more than six and a half years.

A spokesman for Mr. Bankman-Fried said Friday that a lawyer representing him would file a response to the government early next week.

Just 18 months ago, Mr. Bankman-Fried was a high-flying crypto mogul, presiding over the FTX cryptocurrency exchange, a $40 billion business empire. But then FTX collapsed virtually overnight, putting it in the crosshairs of law enforcement.

In November, a federal jury in Manhattan convicted Mr. Bankman-Fried of stealing $8 billion from FTX customers to finance political contributions, investments in other companies and lavish real estate purchases.

The implosion of FTX and the subsequent arrest and conviction of Mr. Bankman-Fried was seen as a historic nadir for the lightly regulated crypto world.

“The crypto industry may be new,” Damian Williams, U.S. Attorney for the Southern District of New York, said after the verdict, “but this type of fraud, this type of corruption is as old as time.” .

Since then, the crypto industry appears to have put Mr. Bankman-Fried’s crimes in the rearview mirror. As he prepares for sentencing, the prices of most digital assets have soared, with Bitcoin hitting an all-time high this month.

Prosecutors said in Friday’s filing that a sentence of 40 to 50 years was appropriate given the scale of Mr. Bankman-Fried’s fraud and its impact on people around the world, including those who placed part of their retirement money and savings into FTX.

“The scale of Bankman-Fried’s fraud calls for severe sanctions,” prosecutors wrote. “The amount of loss – at least $10 billion – makes this one of the largest financial frauds of all time.”

If Mr. Bankman-Fried receives a light sentence, prosecutors said, there is a real risk that he will commit future fraud.

In the sentencing proposal, prosecutors included several pages of customer messages sent to Mr. Bankman-Fried on X, formerly Twitter, around the time of FTX’s collapse. In many messages, customers expressed their anger at not having access to their accounts.

Marc Mukasey, the lawyer hired by Mr. Bankman-Fried to prepare the sentencing, argued in his legal filing that the 100-year sentence recommended by the probation service would be reminiscent of the 150 years given to Bernard Madoff, who pleaded guilty in 2009. to running one of the largest Ponzi schemes in history. Any comparison between the two men is inappropriate, Mr. Mukasey said, given “the length of time and the dollars” involved in Mr. Madoff’s crimes — a fraud that lasted 20 years and generated $64 billion in losses. paper.

The probation service’s recommendation was “barbaric” and “grotesque”, he said.

Mr. Mukasey also pointed out that it took more than 15 years for a court-appointed trustee to return about $14 billion to Mr. Madoff’s investors. By contrast, the bankruptcy lawyers overseeing FTX’s unwinding have suggested that customers of Mr. Bankman-Fried’s bankrupt exchange would likely get all their money back in a relatively short time.

Prosecutors said in their filing that even if FTX customers got most of their money back, they would have had to wait more than two years for that to happen. Prosecutors said “this provides little comfort to victims who needed money in November 2022.”

In the filing, prosecutors asked Judge Kaplan to also order Mr. Bankman-Fried to forfeit more than $10 billion, representing losses and money stolen from his crime. Given the millions of potential victims and the complexity of calculating losses, prosecutors said any money handed over by Mr. Bankman-Fried could be distributed as part of FTX’s bankruptcy.

Judges are not required to follow federal sentencing guidelines. And in imposing a sentence, Judge Kaplan may consider various factors, including Mr. Bankman-Fried’s age, whether he is a first-time offender and whether he will be rehabilitated.

But one factor that could work against Mr. Bankman-Fried is that he chose to testify at his trial and has at times appeared evasive during cross-examination. If Judge Kaplan concludes that Mr. Bankman-Fried testified falsely, he could take that into account in deciding the sentence.

In a column published this week in the New York Law Journal, John S. Martin, a former federal judge in Manhattan, criticized “irrationally long sentences” for most fraud and white-collar crimes. He said 100-year sentences had “no impact on crime rates”.

“Let me be clear, Bankman-Fried deserves to be punished,” Mr. Martin wrote. But he added: “Our extremely long prison sentences are one of the reasons the United States has the largest prison population in the world. »