Bankman-Fried Should Get Up to 50 Years in Prison, US Says

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(Bloomberg) -- Prosecutors said Sam Bankman-Fried should get as much as 50 years behind bars for his role in the collapse of his FTX cryptocurrency exchange in “what is likely the largest fraud of the last decade.”

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A sentence ranging from 40 to 50 years is necessary for Bankman-Fried’s “historic” crime involving more than 1 million victims and losses of more than $10 billion, prosecutors said Friday in a court filing. The request is far less than the 100 years recommended in US criminal sentencing guidelines, but much more than the 6 1/2-years his lawyers suggested.

“In every part of his business, and with respect to each crime committed, the defendant demonstrated a brazen disrespect for the rule of law,” prosecutors said in the filing. “He understood the rules, but decided they did not apply to him.”

US District Judge Lewis A. Kaplan in New York is scheduled to sentence the 32-year-old on March 28. With such a wide disparity in the recommendations, the judge’s decision could be a bellwether for other cryptocurrency executives who defrauded investors or mismanaged client funds.

A jury in Manhattan convicted Bankman-Fried in November of seven charges, including wire fraud and conspiracy. Prosecutors said he directed the transfer of FTX customer money into Alameda Research, an affiliated hedge fund, for risky investments, political donations and expensive real estate before both companies collapsed into bankruptcy in 2022. Before then, FTX was valued at $32 billion.

During the trial, several close colleagues and friends at FTX and Alameda testified against him, some in hopes of lenient sentencing for their own admitted crimes.

Mark Botnick, a spokesman for Bankman-Fried said that his lawyers will file a response to the government’s memo next week.

‘Pernicious Megalomania’

Prosecutors said Friday that he showed “unmatched greed and hubris” and broke the law based on a “pernicious megalomania guided by the defendant’s own values and sense of superiority.”

“Even now Bankman-Fried refuses to admit what he did was wrong,” prosecutors said.

When it comes to sentencing, it may not help that Bankman-Fried had a sometimes contentious relationship with the judge.

After Bankman-Fried was charged in December 2022, Kaplan allowed him to remain under house arrest at his parent’s home in Palo Alto, California, while awaiting trial. But months later, he was found to be using encrypted messaging apps and VPN programs, which conflicted with the conditions of his release.

Ellison Diary

The judge ordered him locked up in August after the former crypto mogul leaked to the New York Times parts of a diary written by Caroline Ellison, the former chief executive officer of Alameda Research and Bankman-Fried’s ex-girlfriend. Ellison had pleaded guilty to related crimes and was cooperating with prosecutors. She later testified against Bankman-Fried at trial.

At the time Kaplan called him “someone who has shown a willingness and a desire to risk crossing the line in an effort to get right up to it no matter where the line is.”

Near the end of his month-long trial, Bankman-Fried took the witness stand in his own defense, often appearing vague and evasive. The judge frequently interrupted to caution him to answer the questions asked. Jurors took less than five hours to reject his claim that he wasn’t aware of wrongdoing at FTX.

Bankman-Fried “lied repeatedly under oath,” the government said in its court filing. If Kaplan determines he did lie on the stand, that could result in a harsher sentence.

Prosecutors argued that Bankman-Fried made more than $100 million in illegal political donations to more than 300 politicians and political action groups - the biggest-ever violation of campaign finance laws. He spent an additional $150 million to bribe officials of the Chinese government, also a record by an individual, they said.

The court filing includes a chart showing 13 people convicted of frauds with $100 million or more in losses and argues that most got sentences ranging from 40 to 50 years. Bernard Madoff had the top sentence, 150 years, for the biggest Ponzi scheme in US history. Madoff died in prison in 2021.

Bankman-Fried’s fraud should be ranked second, after Madoff’s, which had losses of $13 billion, according to the government.

Last month in a court filing, defense lawyers argued for a relatively lenient sentence, calling the potential for a 100-year term under the guidelines “grotesque” and “barbaric.” They said that figure was based on a false view that Bankman-Fried’s conduct caused a $10 billion loss.

Bankman-Fried has been confined since August in the Metropolitan Detention Center in Brooklyn. Judges, advocates and former inmates have been harshly critical of conditions at the MDC, which holds people charged with crimes and awaiting trial.

Bankman-Fried’s lawyers complained he wasn’t getting access to medication for his depression and ADHD. And the jail offered very limited food options for their vegan client. Bankman-Fried has appeared to have lost a significant amount of weight while locked up.

The case is US v. Bankman-Fried, 22-cr-00673, US District Court, Southern District of New York (Manhattan).

--With assistance from Chris Dolmetsch and Ava Benny-Morrison.

(Updates with details from prosecution sentencing request)

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