April 17, 2024

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Sam Bankman Fried: Judgment on the disgraced 'Cryptocurrency King'

Sam Bankman Fried: Judgment on the disgraced 'Cryptocurrency King'

  • Written by Natalie Sherman
  • Business Correspondent, New York

Image source, Getty Images/Bloomberg

Sam Bankman-Fried, the billionaire former cryptocurrency boss who was convicted of fraud and money laundering last year, will return to court in New York on Thursday to be sentenced for his crimes.

The 32-year-old will certainly go to prison; What is not known is how long.

This moment revived debate about the extent of his crimes, and what punishment might be appropriate for him.

His legal team has called for leniency, but prosecutors are asking for 40 to 50 years in prison.

They say such a punishment is justified for someone who lied to investors and banks, and stole billions in deposits from customers of the now-bankrupt cryptocurrency exchange, FTX.

His defense team proposed five to six-and-a-half years in prison, accusing the government of adopting a “medieval view of punishment” by insisting on a long prison sentence for a non-violent first-time offender.

That question sparked hundreds of pages of letters from former FTX clients, his family, his parents' friends — and even complete strangers — trying to sway Judge Lewis Kaplan, the federal judge who will decide his fate.

“He showed no remorse, so why should any judge show any mercy?” said Sunil Kavori, a British investor who had holdings worth more than $2 million in the stock market when it collapsed, and one of the people who mobilized former clients to share their experience with the court.

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Sunil Kavori faces a long and uncertain wait to recover any of his investments

The collapse of FTX in 2022 was a stunning downfall for Bankman Fried, who became a billionaire and business celebrity promoting the company, a platform people could use to deposit and trade cryptocurrencies.

It attracted millions of customers, before rumors of financial problems sparked a run on deposits.

In November 2023, a US jury found that Bankman-Fried stole billions of dollars of client money from the stock exchange before the collapse to buy real estate, make political donations and use it for other investments.

Many of those clients now appear poised to recover large sums, under a plan being developed in a separate bankruptcy case.

Under this proposal, former clients could receive money based on the value of their holdings at the time of the stock market crash.

In court filings, the defense of Bankman-Fried, who is expected to appeal his conviction, said such restitution warranted a reduced sentence.

They said it proved that “money was always available” which “would be impossible if that had happened”. [FTX’s] “The assets disappeared into Sam's personal pockets.”

But the payment plan angered many former customers, as they would miss out on the crypto recovery that has occurred since then.

John Ray, the attorney leading FTX through bankruptcy and a critic of Bankman-Fried, noted these concerns in his own letter to the court.

“Make no mistake; customers, non-government creditors, government creditors, and uninformed shareholders have suffered and continue to suffer,” he wrote to the court, arguing that the minimal loss claims were a sign that Bankman-Fried continued to live a “life of delusion.”

Former FTX clients interviewed by the BBC said they felt insulted by the cheerful dismissal of their problems, and urged the judge to reject calls for leniency.

“The people who say this are not in a situation like me, where I lost everything,” said Arush Sehgal, a 38-year-old technology entrepreneur in Barcelona, ​​who lives with his wife. It is one of the largest individual creditors on the exchange, with about $4 million worth of savings in dollars and bitcoin at FTX when it collapsed.

Image source, Arush Sehgal

He is one of the clients suing over the current bankruptcy plan, which he said amounts to a “second offense” against Bankman Fried's customers.

Angela Chang, a 36-year-old from Vancouver who worked in software, said she deposited about $250,000 in dollars with FTX when it collapsed. She said she feared that damage to FTX customers would be discounted because they were operating in the cryptocurrency industry.

“People think cryptocurrencies are criminal, so they sympathize with this guy… but I'm not a criminal,” she said, describing how the company's downfall sent her into depression and left her racking up credit card debt. . . Facing a cash crunch, it eventually sold part of the claim to an investor.

The extent of the crime is rarely as contested as in this case, said Daniel Richman, a law professor at Columbia University.

But he said decisions are often shaped by other issues, including the judge's impressions of the defendant and what it might take to deter him from committing further crimes.

In that case, Judge Kaplan, a veteran of the court system who has presided over a slew of high-profile trials involving public figures like Donald Trump and actor Kevin Spacey, proved skeptical of Bankman-Fried's actions, and revoked bail. last year after it was discovered he was trying to intimidate other witnesses.

“Any judge or lawyer will tell you that one of the best things a defendant can do before being sentenced is to show that they are on the right track, show some remorse, and demonstrate some degree of self-knowledge regarding their crime,” Professor Richman said.

“Here we not only have a defendant who went to trial, but we also have a defendant who, at least the judge believed, was obstructing the trial,” he said, adding that it would be “really surprising” if Judge Kaplan issued a ruling. Ruling anything like a defense request.

Since the 1980s, the United States has significantly increased the length of its official prison sentence recommendations for white-collar criminals.

Professor Richman said that although judges often stray from the guidelines, offering wide variation, “the risk of harshness is greater than in most countries” – especially in high-profile cases.

In her appeal to the judge, Barbara Freed, Bankman-Freed's mother and a former law professor, cited the “punitive nature” of the American justice system “which makes us very isolated among democracies.”

“I have no illusions about the redemptive power of prisons,” she wrote. “Putting him in prison for decades would destroy Sam just as much as hanging him would.”

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