Sam Bankman-Fried arrives in court for sentencing over FTX fraud

FILE PHOTO: Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, leaves the Manhattan federal court in New York City, U.S. March 30, 2023. REUTERS/Amanda Perobelli/File Photo

By Luc Cohen

NEW YORK (Reuters) -Sam Bankman-Fried, the former billionaire cryptocurrency wunderkind, arrived on Thursday in the courtroom where he will be sentenced over his conviction for stealing $8 billion from customers of the now-bankrupt FTX exchange he founded.

Bankman-Fried, 32, was led into U.S. District Judge Lewis Kaplan’s Manhattan courtroom by members of the U.S. Marshals Service, having been convicted in November in what prosecutors have called one of the biggest financial frauds in American history.

His parents, Stanford University law professors Joseph Bankman and Barbara Fried, arrived at the federal courthouse earlier.

Bankman-Fried faces the prospect of decades behind bars after a jury found him guilty on seven fraud and conspiracy counts.

His sentencing hearing is due to start at 9:30 a.m. EDT (1330 GMT).

The hearing marks the final step in Bankman-Fried’s downfall from an ultra-wealthy cryptocurrency entrepreneur and major political donor to the biggest trophy to date in a crackdown by U.S. authorities on malfeasance in digital asset markets.

Bankman-Fried has vowed to appeal his conviction and sentence.

He faces a statutory maximum of 110 years in prison, but will likely receive less. Prosecutors are seeking a prison sentence of 40 to 50 years.

“His life in recent years has been one of unmatched greed and hubris; of ambition and rationalization; and courting risk and gambling repeatedly with other people’s money,” the U.S. Attorney’s office in Manhattan, which charged Bankman-Fried in December 2022, wrote in a March 15 sentencing memorandum.

Bankman-Fried’s defense lawyer Marc Mukasey has argued that a sentence of less than 5-1/4 years would be appropriate.

Mukasey said FTX customers would likely be made whole in the bankruptcy process, and that Bankman-Fried worked diligently after the exchange’s November 2022 collapse to recover funds.

“The memorandum distorts reality to support its precious ‘loss’ narrative and casts Sam as a depraved super-villain,” Mukasey wrote in a March 19 court filing, referring to the prosecution’s sentencing proposal.

Several FTX customers have written to Kaplan expressing dismay that they will be compensated based on the value of their cryptocurrency at the time of FTX’s bankruptcy, rather than the higher levels at which those assets currently trade.

He has been detained at the Metropolitan Detention Center in Brooklyn since August 2023, when Kaplan revoked his bail after finding he likely tampered with witnesses at least twice.

‘PROMISE OF FALSE HOPE’

A Massachusetts Institute of Technology graduate, Bankman-Fried rode a boom in the values of bitcoin and other digital assets to a net worth of $26 billion, according to Forbes magazine, before he turned 30.

Bankman-Fried became known for his mop of unkempt curly hair and commitment to a movement known as effective altruism, which encourages talented young people to focus on earning money and giving it away to worthy causes.

He was one of the biggest contributors to Democratic candidates and causes ahead of the 2022 U.S. midterm elections.

But prosecutors say the responsible image he cultivated concealed his years-long embezzlement of customer funds.

At trial, three of his former close associates testified that he directed them to use FTX customer funds to plug losses at his crypto-focused hedge fund, Alameda Research.

Bankman-Fried testified in his own defense that he made mistakes such as not implementing a risk management team, but denied he intended to defraud anyone or steal customers’ money.

In their sentencing memorandum, prosecutors said Bankman-Fried could commit fraud again if released at a young age.

They pointed to his personal writings in the weeks following FTX’s collapse, in which he mused about options for restoring his image such as “come out against the woke agenda” or pushing the idea that “SBF died for our sins.”

“It is realistic that he will settle on a narrative, lean into it, and convince other people to part with their money based on lies and the promise of false hope,” prosecutors wrote.

(Reporting by Luc Cohen in New York; Editing by Will Dunham, Noeleen Walder and Daniel Wallis)