‘Crypto king’ Sam Bankman-Fried to be sentenced

Sam Bankman-Fried, the ex-billionaire crypto executive who faced charges of fraud and money laundering last year, will appear in a New York court on Thursday for sentencing regarding his offenses.

The 32-year-old’s impending incarceration is certain, but the duration remains uncertain.

This development has reignited discussions regarding the severity of his offenses and the appropriate sentencing.

While his legal representatives advocate for leniency, prosecutors are pushing for a 40 to 50-year prison term, arguing that such punishment is fitting for someone who deceived investors and financial institutions, as well as embezzled billions from clients of his now-defunct cryptocurrency exchange, FTX.

In contrast, his defense team suggests a shorter sentence of five to 6.5 years, accusing the government of embracing an outdated perspective on punishment by advocating for an extended period of incarceration for a non-violent, first-time offender.

The matter has prompted an outpouring of support and opposition, resulting in hundreds of pages of letters from former FTX clients, family members, friends of his parents, and even strangers, all attempting to sway Judge Lewis Kaplan, the federal judge responsible for determining his fate.

“He has shown no remorse so why would any judge show any mercy?” said Sunil Kavuri, a British investor who had more than $2m worth of holdings on the exchange when it collapsed, and one of the people mobilising former customers to share their experience with the court.

The collapse of FTX in 2022 marked a dramatic downfall for Bankman-Fried, who had risen to billionaire status and attained celebrity status in the business world by promoting the company as a platform for depositing and trading cryptocurrencies.

FTX attracted millions of customers before rumors of financial instability triggered a rush to withdraw deposits. In November 2023, a US jury convicted Bankman-Fried of embezzling billions in customer funds from the exchange before its collapse, using the money for real estate purchases, political donations, and other investments.

However, many of these customers now stand to recover substantial amounts under a proposed plan in the ongoing bankruptcy proceedings. According to this plan, former customers would receive compensation based on the value of their holdings at the time of the exchange’s collapse.

In defense of Bankman-Fried, who is expected to appeal his conviction, his legal team has argued that the proposed restitution supports a more lenient sentence. They contend that this repayment plan demonstrates that funds were available and not diverted into Bankman-Fried’s personal accounts.

Nevertheless, the reimbursement plan has sparked outrage among many former customers, as they will miss out on the resurgence of cryptocurrency values since the collapse.

John Ray, the attorney overseeing FTX’s bankruptcy proceedings and a vocal critic of Bankman-Fried, highlighted these concerns in his own letter to the court.

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

Former FTX customers interviewed by the BBC said they were offended by the blithe dismissal of their problems, and urged the judge to reject calls for leniency.

“The people who are saying this are not in a position like I’m in, where you’ve lost everything,” said Arush Sehgal, a 38-year-old tech entrepreneur living in Barcelona, who, with his wife, is one of the exchange’s biggest individual creditors, with about $4m worth in savings in dollars and bitcoin at FTX when it collapsed.

He is one of the customers suing over the current bankruptcy plan, which he said amounted to a “second crime” against Bankman-Fried’s customers.

Angela Chang, of Vancouver, a 36-year-old who worked in software, said she had about $250,000 deposited in dollars with FTX when it collapsed. She said she feared the harm done to FTX customers was being discounted because they were in the crypto industry.

“People think that crypto is criminal and so they have sympathy for this guy …. But I’m not a criminal,” she said, describing how the fall of the firm threw her into depression and left her running up credit card debt. Facing a cash crunch, she ultimately sold a portion of a claim to an investor.

According to Daniel Richman, a Columbia Law professor, the magnitude of the offense is seldom as disputed as it is in this particular instance.

However, he noted that judicial decisions are often influenced by various factors, including the judge’s perception of the defendant and what measures would be necessary to deter them from committing further crimes.

In this scenario, Judge Kaplan, an experienced figure within the legal system who has overseen numerous high-profile trials involving notable figures like Donald Trump and actor Kevin Spacey, has already displayed skepticism towards Bankman-Fried’s behavior. Last year, Judge Kaplan revoked Bankman-Fried’s bail after determining that he had attempted to intimidate other witnesses.

“Any judge or lawyer will tell you that one of the best things the defendant can do before being sentences is really really show he’s on the right path, show some remorse and show some degree of self-knowledge as to his offence,” Prof Richman said.

“Here you not only have a defendant who went to trial but you have one who really, at least the judge believed, was obstructive prior to trial,” he said, adding that it would be “really surprising” for Judge Kaplan to render a sentence anything like the defence request.

Since the 1980s, the US has significantly increased the length of its official recommendations for jail time for white collar criminals.

Though judges frequently depart from the guidelines, introducing wide variability, “the risk of harshness is greater than in most countries” – particularly for high-profile cases, Prof Richman said.

In her own appeal to the judge, Barbara Fried, Bankman-Fried’s mother and a former law professor, noted the “punitive nature” of the US justice system “which makes us an extreme outlier among democracies”.

“I have no illusions about the redemptive power of prisons,” she wrote. “Being consigned to prison for decades will destroy Sam as surely as would hanging him.”