Federal prosecutors believe convicted fraudster Sam Bankman-Fried should be sent away to prison for at least 4o years.
Prosecutors from the Southern District of New York filed a lengthy sentencing memo on Friday arguing that Bankman-Fried should spend 40 to 50 years behind bars for orchestrating a multi-billion dollar fraud scheme at cryptocurrency exchange platform FTX.
“Samuel Bankman-Fried was convicted of orchestrating one of the largest financial frauds in history, and what is likely the largest fraud in the last decade. The enormous scale of the fraud at FTX is measured not just by the amount of money that was stolen, although the more-than-$8 billion of customer money that was misappropriated puts this crime in a class of cases that can be counted on one hand,” the sentencing memo begins.
“And unlike so many defendants before this Court, there are no persuasive mitigating conditions to explain his criminal conduct. His crimes are not the product of dire financial circumstances, passion or impulse, or a momentary lapse of judgment. Unlike other white-collar offenders, the losses the defendant is responsible for are not borne exclusively by sophisticated investors or extrapolated based on a stock price drop.”
A son of two Stanford professors, Bankman-Fried was convicted of seven counts of fraud and conspiracy related to misallocating billions of customer funds from FTX to fund his own investments, luxury goods, political donations, and access to A-list celebrities.
Federal prosecutors deliver in the sentencing memo a detailed recollection of the facts in the Bankman-Fried case and the offenses proven at trial. The financial fraud was perpetrated against FTX’s customers and investors, as well as lenders to FTX’s sister hedge fund Alameda Research.
“Contrary to those statements and representations, the defendant conspired with Caroline Ellison, Gary Wang, and Nishad Singh to defraud FTX’s customers by fraudulently inducing customers to deposit funds on FTX, by misappropriating those funds by directing them to Alameda, and by making false statements to lull customers into not withdrawing their money,” the memo reads.
Federal prosecutors detailed the system used by FTX and Alameda to commit fraud against customers and key moments when Bankman-Fried doubled down on the fraud scheme instead of putting an end to it. FTX investors lost more than $1 billion worth of investments due to the collapse of FTX that resulted from the fraud orchestrated by Bankman-Fried. Similarly, the losses from the loans to Alameda were over $1 billion in total.
At one point, Bankman-Fried’s net worth peaked at an estimated $26.5 billion due to his stake in FTX and its affiliated cryptocurrency tokens. His $40 million of disclosed political donations in the 2022 midterms, almost entirely to Democrats, made him one of the largest donors of the 2022 election cycle, according to Open Secrets. The campaign finance charges against Bankman-Fried were dropped because of a dispute surrounding his extradition from the Bahamas.
However, federal prosecutors presented the campaign finance scheme as evidence to support the other fraud charges, and they did produce evidence showing Bankman-Fried used FTX executives Ryan Salame and Nishad Singh to facilitate a straw donor scheme totaling an estimated $100 million to both parties and affiliated organizations.
Campaign finance records indicate that in 2022, Salame donated $24 million, almost entirely to Republicans and conservative groups, while Singh gave roughly $8 million in 2022, entirely to Democrats. The straw donor scheme began in 2020, designed to increase support for cryptocurrency in both parties.
Furthermore, Bankman-Fried obstructed justice on three fronts, first by deleting text messages through Signal, an encrypted messaging service with an auto-delete feature that activates after a certain amount of time. FTX and Alameda employees were instructed to use Signal to hide information from regulators, two witnesses testified.
His bail was revoked after tampering with multiple witnesses, particularly star witness Caroline Ellison, a former Alameda executive and lover of Bankman-Fried’s, by leaking her private journal to the New York Times to cast doubt on her credibility. Federal prosecutors also accuse Bankman-Fried of committing perjury during his testimony.
The sentencing memo goes through the applicable sentencing guidelines and the necessary enhancements based on the evidence presented at trial.
“While a Guidelines sentence — which would exceed 100 years, effectively a life sentence — is not necessary, the Government urges the Court to impose a sentence that underscores the remarkably serious nature of the harm to thousands of victims; prevents the defendant from ever again committing fraud; and sends a powerful signal to others who might be tempted to engage in financial misconduct that the consequences will be severe. A sentence of 40 to 50 years is necessary to serve such purposes,” the memo concludes.
Bankman-Fried’s defense lawyers are seeking a sentence between five and one-quarter and six and a half years. He is set to be sentenced on March 28.