Sam Bankman-Fried, a victim of the FTX scam, says her life has been ruined
Sam Bankman-Fried, a victim of the FTX scam, says her life has been ruined

  • More than four months after being convicted on seven counts by a New York jury, Sam Bankman-Fried is ready to learn how long he will spend behind bars.
  • Bankman-Fried faces a maximum sentence of more than 100 years in prison, although the government had suggested a sentence in the 40 to 50 year range.
  • Prosecutors won their case by convincing jurors that Bankman-Fried stole at least $8 billion from clients.

NEW YORK, USA – JANUARY 3: Sam Bankman-Fried leaves court in New York on January 3, 2023.

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In a letter to the Department of Justice, an FTX customer who lost $4 million when the exchange filed for bankruptcy in 2022 expressed disgust at the narrative circulating that the crypto exchange’s customers will ever be made whole.

“I searched the list of scheduled claims and calculated the exact amount stolen,” wrote the former FTX client, whose identity was withheld by the government. “The total amount owed to customers is $19,722,911,002.84.”

This week, that letter landed on the desk of US District Judge Louis Kaplan, who on Thursday will inform FTX founder Sam Bankman-Fried of his prison sentence stemming from his role in the stock market crash. At 9:30 a.m., the sentencing proceedings will take place on the 26th floor of the federal courthouse in midtown Manhattan, the same place where a jury found the former crypto executive guilty of all seven criminal charges against him in November.

The victim, who wrote that 30 years’ worth of savings had been deposited into FTX three months before the stock market crashed, was part of a last-minute push by prosecutors to influence Judge Kaplan before sentencing.

“My whole life was destroyed,” the man wrote. “I have 2 small children, one was born just before the collapse. Besides money, I lost my happiness, my ability to get out of bed, my will to go on living. My wife is suicidal and depressed.”

The same kinds of stories were told during Bankman-Fried’s month-long criminal trial last year. Prosecutors won their case by convincing jurors that Bankman-Fried stole at least $8 billion from clients. For some it meant financial ruin.

“In their sentencing application, the prosecution included moving accounts from former FTX customers who spoke of the devastation experienced by those who lost their money, the uncertainty of wondering if they could ever get anything back and dealing with the emotional consequences of being cheated,” said Yesha Yadav, a law professor and associate dean at Vanderbilt University. “These victim impact statements can be very powerful.”

Bankman-Fried, 32, faces a maximum sentence of more than 100 years in prison, although the government had suggested a sentence in the 40 to 50 year range. Protection is fishing for no more than 6.5 years.

For months, Judge Kaplan weighed the appropriate punishment for Bankman-Fried’s crimes related to the collapse of his $32 billion crypto empire.

CNBC spoke with former federal prosecutors, trial lawyers and a mix of lawyers working to defend white-collar criminals to find out what to expect on Thursday.

Bankman-Fried was convicted of bank fraud and conspiracy to commit bank fraud against clients of FTX and against lenders to subsidiary hedge fund Alameda Research, as well as conspiracy to commit securities fraud and conspiracy to commit commodity fraud against investors in FTX and Conspiracy to Engage in Money Laundering.

The defense team argued that Bankman-Fried’s sentence should reflect the potential for FTX customers to be refunded in part or in full. The likelihood of that scenario has increased in recent months thanks to the rising value of cryptocurrencies and other assets held by FTX, such as its stake in artificial intelligence startup Anthropic.

Although the bankruptcy estate promises to pay back customers, many of FTX’s thousands of victims claim that their crypto stakes were significantly undervalued by the exchange’s new management team.

“There will be a lot of talk about the loss during the conduct rather than the recovery or potential recovery after it was discovered,” said former federal and state prosecutor David Weinstein, who now practices as a corporate compliance and white-collar attorney at Jones Walker. Weinstein said he expects to see a sentence in the 30- to 40-year range.

Mark Binney, a former state and federal prosecutor and assistant U.S. attorney specializing in financial crimes, predicted a sentence of no less than 30 years.

“Probation calculates the guidelines at 110 years,” said Binney, who currently represents white-collar crypto defendants as part of the Reed Smith law firm’s On Chain Digital Assets team. “I think the judge will probably side with probation and the government on the amount of the loss and the appropriate guidelines.”

Caroline Ellison, former CEO of Alameda Research LLC, arrives in court in New York, U.S., Thursday, Oct. 12, 2023.

Bloomberg | Bloomberg | Getty Images

Judge Kaplan, 78, is a veteran of the Southern District of New York and has presided over some of the biggest cases to come before his court. He showed little patience with Bankman-Fried during the defendant’s four days in court.

“Unfortunately for the SBF, some of his testimony at trial was highly evasive, somewhat cold and often contradictory,” Yadav said, adding that a sentence of 20 to 25 years could offer Judge Kaplan a way to balance the gravity of the crime with an admission of client recoveries and the potential for future rehabilitation.

Former federal prosecutor Neama Rahmani described Kaplan as “old school” and predicted a sentence of 20 to 30 years.

Tre Lovell, a corporate attorney in Los Angeles, said the main factors Kaplan will consider will be the extent of the fraud, along with the fact that Bankman-Fried appears to have lied under oath while showing little remorse.

“The judge is not going to stop Bankman-Fried from resting just because FTX has recovered a lot of funds to make up for the amount customers lost,” Lovell said. “The judge will simply look at Bankman-Fried’s conduct while he led the company, not what the company did after he stepped down as CEO.”

Bankman-Fried has one last chance to stand before a judge to show some level of remorse and a promise to turn himself in for good.

“If he says he’s had a chance to think about what he’s done and that he’s very sorry for misusing investors’ hard-earned funds and that he wants to use his acumen in that area for the public good, then he can walk away with a 20 years in prison,” Lovell said. “It’s never too late in court to say you’re sorry. But he’s not going to get a big discount on his sentence just because he’s remorseful.”

WATCHING: Prosecutors are recommending 40-50 years in prison for Bankman-Fried

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