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FTX founder Sam Bankman-Fried awaits sentencing for fraud conviction

New York CNN  —  Almost five months after he was found guilty of committing one of the largest white-collar crimes in history, Sam Bankman-Fried is set to return to Manhattan federal court Thursday morning for sentencing that could land him in prison for the next half-century. It is clear that Bankman-Fried, who is appealing his conviction, will go to prison. But the length of that sentence is entirely in the hands of Judge Lewis Kaplan of the Southern District of New York. Prosecutors are angling for 40-50 years. Lawyers for Bankman-Fried, who turned 32 this month, have pushed back, calling that a “medieval…death-in-prison sentencing recommendation.” They say a sentence of no more than six and a half years is appropriate for a non-violent first-time offender. Kaplan will weigh those recommendations, as well as the Probation Department’s guidance — which, at 100 years, had even prosecutors deeming it unnecessarily harsh. He can also consider a range of other factors in his own assessment, including Bankman-Fried’s age and whether the judge believes the former crypto billionaire is likely to commit more crimes. Judge Lewis Kaplan watches as FTX founder Sam Bankman-Fried testifies in his fraud trial over the collapse of the bankrupt cryptocurrency exchange, at federal court in New York City, U.S., October 27, 2023 in this courtroom sketch. REUTERS/Jane Rosenberg JANE ROSENBERG/X03184/REUTERS Related article Sam Bankman-Fried found guilty of seven counts of fraud in stunning fall for former crypto billionaire “There’s this pretense that sentencing is done in this quasi-scientific fashion,” said Howard Fischer, a partner at law firm Moses Singer in New York. “The fact is, there is an enormous amount of latitude that the … sentencing guidelines allow a court to exercise.” In a trial setting, lawyers often have strict orders about what topics will be allowed to be discussed in front of the jury. Sentencing is a much more fluid process, with both sides allowed to make sweeping arguments to try to make their case to the judge. Prosecutors filed a 116-page sentencing memo earlier this month, arguing that Bankman-Fried’s punishment should be ”commensurate with the extraordinary dimensions of his crimes.” They also took aim at the defense’s position that Bankman-Fried cared deeply about giving to charity and helping others. “With all the advantages conferred by a comfortable upbringing, an MIT education, a prestigious start to his career in finance, and a worthy idea for a startup business, Bankman-Fried could have pursued the … altruistic life he has sketched out in his sentencing submission. But instead, 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,” prosecutors wrote in a memo. In a letter to the court, Marc Mukasey, the lawyer Bankman-Fried retained for sentencing, called the government’s memo “disturbing” and accused the government of trying to “break” Bankman-Fried. “We have yet to identify a federal defendant convicted of a non-violent offense who served a 40-50 year sentence and was released — perhaps because inmates suffer a two-year decline in life expectancy for each year of imprisonment,” Mukasey wrote. “Crushing Sam in this way is unnecessary.” Pre-trial conduct Defense lawyers in white-collar cases often advise their clients from the start to shore up their image — go to church or temple, use your free time to volunteer at a soup kitchen, get involved with activities that can eventually be used to paint you in a more flattering light. Caroline Ellison, former chief executive officer of Alameda Research LLC, exits court in New York, US, on Thursday, Oct. 12, 2023. Ellison, ex-girlfriend of FTX co-founder Sam Bankman-Fried, outlined for a New York jury Wednesday how she worked with Sam Bankman-Fried to deceive lenders and customers to build his multi-billion dollar cryptocurrency empire, and their failed attempts to prevent a spectacular collapse. Stephanie Keith/Bloomberg/Getty Images Related article Secret audio, a star witness, and ‘Thai prostitutes’ complicate Sam Bankman-Fried’s defense Those options weren’t possible for Bankman-Fried, who was released on house arrest in December 2022 and confined to his parents’ home in Palo Alto, California. But in the run-up to his trial, Bankman-Fried repeatedly tested the limits of his bail, including by sounding off to the press and releasing private writings of his former colleague, Caroline Ellison, who was also his ex-girlfriend. In August 2023, Judge Kaplan sided with prosecutors and revoked Bankman-Fried’s bail. That landed Bankman-Fried in the notoriously troubled Metropolitan Detention Center in Brooklyn. His behavior may come back to haunt Bankman-Fried in sentencing, Fischer said. “The thing that hurts Bankman-Fried is his pretrial conduct,” he said. “His disregard for the norms of the criminal justice system is quite shocking.” Ellison and several other former executives testified against Bankman-Fried in exchange for pleading guilty to similar federal charges and cooperating with prosecutors. They are expected to be sentenced after Bankman-Fried. Calculating the FTX loss One area in dispute is the calculation of losses incurred by customers of Bankman-Fried’s now-defunct crypto exchange FTX whose funds were frozen as the platform collapsed practically overnight in November 2022. Typically, in white-collar crimes, the bigger the financial loss, the longer the sentence. Bernie Madoff, the mastermind behind a yearslong $20 billion Ponzi scheme, was sentenced in 2009 to 150 years for what the judge called “one of the most egregious financial crimes of our time.” Representation of Bitcoin and other cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on June 26, 2023. Jakub Porzycki/NurPhoto/Getty Images Related article Crypto’s 2023 was marred by fraud and scandal. It may have been its best year ever Prosecutors in Bankman-Fried’s case put the total loss “conservatively” at more than $10 billion — a figure that includes customer funds and losses incurred by investors in FTX and lenders to its sister trading house, Alameda Research, which also collapsed. But since FTX’s demise, the value of its cryptocurrency holdings has increased, raising the prospect that tens of thousands of customers could be made whole. The defense is leaning on that to push for a lighter sentence. “Each victim quoted in the government’s opposition will receive 100 cents on the dollar — plus interest,” Mukasey wrote in a court filing last month. The loss amount is fair game for Kaplan to consider in sentencing. But legal experts say that even if 100% of FTX customers get their money back, it’s not necessarily going to sway the judge to go easy on Bankman-Fried. “It’s almost as if you say, ‘Yeah, I stole all this money … but I also bought five lottery tickets, and guess what? One of them won, so no harm, no foul,’” said Fischer. John Ray, the bankruptcy expert who took over FTX after it collapsed, also fired back at the defense’s contention that the “harm to customers, lenders, and investors is zero” because the money was “not lost.” Ray stressed the return of value “is by no means assured,” and that such value would not exist without the work of his team “digging through the rubble of Mr. Bankman-Fried’s sprawling criminal enterprise.” The FTX Bankman-Fried left behind was “neither solvent nor safe,” Ray said in a letter to the court last week.