Federal prosecutors said Friday that crypto tycoon Sam Bankman Freed, convicted of masterminding a multibillion-dollar fraud scheme, should be sentenced to 40 to 50 years in prison. said.
Prosecutors outlined the recommendation in a filing in U.S. District Court in Manhattan. Bankman Freed’s sentencing hearing is scheduled for March 28, where Judge Lewis A. Kaplan will decide his fate. He could face up to 110 years in prison.
“The judiciary demands that he receive a prison sentence commensurate with the extraordinary scale of his crime,” prosecutors wrote in a 116-page sentencing memo to the judge.
Separately, the Federal Probation Service recommended Bankman Freed, 32, be sentenced to 100 years in prison, effectively a life sentence. But prosecutors said in their filing that despite the severity of his crimes, sending him to prison for life was not justified because he was relatively young.
In a filing last month, Bankman Fried’s lawyers argued that he should be sentenced to no more than 6 1/2 years in prison.
A spokeswoman for Mr. Bankman Freed declined to comment Friday.
Just 18 months ago, Bankman Fried was a high-flying crypto tycoon who ran a $40 billion business empire, the cryptocurrency exchange FTX. But then FTX collapsed almost overnight and became a target for law enforcement.
A federal jury in Manhattan convicted Bankman Fried in November of stealing $8 billion from FTX customers to fund political contributions, investments in other companies and lavish real estate purchases.
The collapse of FTX and the subsequent arrest and conviction of Bankman Fried was seen as a historic nadir for the lightly regulated crypto industry.
“The crypto industry may be new,” Damian Williams, an attorney for the Southern District of New York, said after the verdict, “but this type of fraud and corruption has been around for a long time.”
Since then, the crypto industry seems to have kept Bankman Fried’s crimes in the rearview mirror. As he prepares for his sentencing, the prices of most digital assets soar, with Bitcoin reaching an all-time high this month.
Prosecutors said in Friday’s filing that given the scale of Bankman Fried’s fraud and its impact on people around the world, including those who put portions of their retirement savings and lifetime savings into FTX, He said a sentence of 40 to 50 years in prison would be appropriate.
“The magnitude of Mr. Bankman Freed’s fraud demands severe punishment,” prosecutors wrote. “Losses are at least $10 billion, making this one of the largest financial frauds in history.”
Prosecutors said if Bankman-Fried is given a lighter sentence, he may commit some fraud in the future.
Prosecutors included in their sentencing submission several pages of customer messages sent to Bankman Fried on X (formerly Twitter) at the time of FTX’s collapse. Many of the posts express anger at customers not being able to access their accounts.
Mark Mukasey, the lawyer hired by Bankman Freed to prepare the sentencing, said in legal filings that the 100-year prison sentence recommended by the Probation Department was the same for Bernard Madoff, who pleaded guilty in 2009. He argued that it would be reminiscent of the 150-year prison sentence given to him. He ends up running one of the biggest Ponzi schemes in history. Mukasey said comparisons between the two were inappropriate given the “length and amount” of Madoff’s crimes, a fraud that generated $64 billion in paper losses over 20 years.
He said the Probation Service’s recommendations were “barbaric” and “grotesque”.
Mr. Mukasey also noted that it took more than 15 years for a court-appointed receiver to return about $14 billion to Mr. Madoff’s investors. By contrast, bankruptcy lawyers overseeing FTX’s unwinding have suggested that customers of Bankman Freed’s failed exchange are likely to get their full money back on a relatively quick timeline.
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. “That is of little solace to the victims who needed the funds in November 2022,” prosecutors said.
In their filing, prosecutors asked Judge Kaplan to order Bankman Fried to forfeit more than $10 billion in criminal losses and stolen money. Given the millions of potential victims and the complexity of calculating losses, prosecutors said the funds handed over by Bankman Fried would be best distributed in FTX’s bankruptcy.
Judges are not required to follow federal sentencing guidelines. And Judge Kaplan can consider a variety of factors when deciding on a sentence, including Bankman-Freed’s age, the fact that it is a first-time offender, and his potential for rehabilitation.
But one factor that may work against Bankman-Fried is that he chose to testify at trial and at times appeared evasive during cross-examination. If Judge Kaplan concludes that Bankman Fried’s testimony is false, he may consider it in sentencing.
In a column in this week’s New York Law Journal, former Manhattan federal judge John S. Martin criticized the “unreasonably long sentences” for most fraud and white-collar crimes. He said the 100-year sentence “has no effect on crime rates.”
“Let me be clear: Bankman Freed deserves to be punished,” Martin wrote. But, he added, “one of the reasons the United States has the highest prison population in the world is because of extremely long prison sentences.”
