Daily Management Review

Disgraced 'Crypto King' Sam Bankman-Fried Is Sentenced


Disgraced 'Crypto King' Sam Bankman-Fried Is Sentenced
Sam Bankman-Fried, the former millionaire crypto CEO convicted of fraud and money laundering last year, will appear in court in New York on Thursday to be sentenced.
The 32-year-old will undoubtedly face jail time; the length of his sentence is unknown. The incident has reignited debate over the scope of his offences - and what punishment is appropriate.
His legal team has asked for mercy, but prosecutors want 40 to 50 years in prison. They argue that such a punishment is appropriate for someone who misled to investors and banks and stole billions of dollars in deposits from clients of his now-defunct cryptocurrency exchange, FTX.
His defence team has recommended a sentence of five to 6.5 years in prison, accusing the government of adopting "a mediaeval view of punishment" by requiring such a hefty sentence for a nonviolent, first-time offender.
The question has prompted hundreds of pages of letters from former FTX clients, family, friends of his parents, and even complete strangers attempting to persuade Judge Lewis Kaplan, the federal justice who will decide his fate.
"He has shown no remorse so why would any judge show any mercy?" Sunil Kavuri, a British investor who had more than $2 million in holdings on the exchange when it crashed, is one of those organising former clients to share their stories with the court.
The collapse of FTX in 2022 was a startling fall for Bankman-Fried, who had become a billionaire and business celebrity by promoting the company, which provided a platform for users to deposit and trade cryptocurrency. It drew millions of customers before reports of financial distress triggered a run on deposits.
In November 2023, a US jury concluded Bankman-Fried had stolen billions in client money from the exchange prior to the collapse to buy property, make political donations, and utilise for other investments.
Many of those customers look to be on track to recoup considerable sums under a plan being prepared in a separate bankruptcy case.
According to that suggestion, past customers might get money depending on the value of their holdings at the time the exchange failed.
In court files, Bankman-Fried's defence, which is anticipated to appeal his conviction, argued that such recovery justifies a lower sentence.
They claimed it demonstrated that "money has always been available," which "would be impossible if [FTX's] assets had disappeared into Sam's personal pockets".
However, the payback plan has infuriated many former clients, who will miss out on the recent cryptocurrency rebound.
John Ray, the lawyer guiding FTX through bankruptcy and a critic of Bankman-Fried, raised the same 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, saying that the assertions of minor loss were a proof that Bankman-Fried continued to live "a life of delusion".
Former FTX customers questioned by the BBC said they were insulted by the judge's rejection of their complaints and encouraged him to reject requests 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 $4 million in savings in dollars and bitcoin at FTX when it collapsed.
He is one of the clients suing over the current bankruptcy plan, which he claims constitutes a "second crime" against Bankman-Fried's customers.
Angela Chang, a 36-year-old software developer from Vancouver, said she had approximately $250,000 deposited with FTX when company crashed. She expressed concern that the harm done to FTX clients was being overlooked because they were in the cryptocurrency sector.
"People believe that cryptocurrency is criminal, so they sympathise with this guy.... But I'm not a criminal," she said, revealing how the firm's collapse pushed her into melancholy and left her with credit card debt. Faced with a liquidity emergency, she eventually sold a share of a claim to an investor.
According to Columbia Law professor Daniel Richman, the severity of the offence was rarely as questioned as in this instance. However, he stated that decisions are frequently influenced by other factors, such as a judge's impressions of the offender and what it would take to discourage him from committing future crimes.
In this case, Judge Kaplan, a court veteran who has presided over a number of high-profile trials involving public figures such as Donald Trump and actor Kevin Spacey, has already expressed concern about Bankman-Fried's actions, revoking his bail last year after discovering he was attempting 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 United States has considerably raised the duration of its official prison sentence guidelines for white collar criminals. Though judges frequently deviate from the standards, producing broad variety, Prof Richman stated that "the risk of harshness is greater than in most countries" - particularly in high-profile cases.
Barbara Fried, Bankman-Fried's mother and a former law professor, underlined in her own appeal to the judge the "punitive nature" of the US judicial 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."