The SBF team advocates 5-6 years in prison, citing FTX clients’ money

While prosecutors are demanding that FTX founder Sam Bankman-Fried spend 40 to 50 years in prison for his crimes, the defense team is urging the judge to think about a sentence roughly 90% shorter.

Bankman-Fried’s fate can be announced in Manhattan on Thursday morning by Judge Lewis Kaplan, who presided over the month-long trial in November. Bankman-Fried was found guilty on seven counts related to the collapse of cryptocurrency exchange FTX and the disappearance of roughly $10 billion in customer deposits.

The Bankman-Fried team hopes Kaplan will take into consideration the increased likelihood that FTX clients will have the opportunity to get well most, if not all, of the money they lost when the exchange spiraled out of business in 2022.

Last month, lawyers representing FTX’s bankruptcy estate told a judge in Delaware that they expected full repayment of legitimate claims from customers and creditors. Bankruptcy attorney Andrew Dietderich, who’s working with FTX’s latest management team, said there may be “still a lot of work and risk left before getting all of the clients’ money back,” however the team has “a strategy to get there.”

This was a potentially dramatic shift in the narrative about FTX’s demise 16 months ago. At the time, it was believed that many hundreds of consumers – reportedly as many as a million – had collectively lost billions of dollars that would not be recovered on account of the poorly regulated and unsecured nature of the crypto industry. These clients faced the true possibility of the overwhelming majority of their money evaporating, just like other cases of hedge funds and lenders that collapsed throughout the so-called crypto of winter 2022.

Much of the federal government’s successful case against Bankman-Fried hinged on convincing the jury that the defendant had stolen billions of dollars’ price of FTX customer money to make dangerous bets in Alameda.

For months, as FTX wound its way through a bankruptcy court in Delaware, latest CEO John Ray III and his team of restructuring advisers recovered money, luxury properties and cryptocurrencies, and tracked down missing assets. They have already raised greater than $7 billion, which doesn’t include valuables comparable to gifts and a $26 million estate for Bankman-Fried’s parents or $700 million donated to K5 Global and founder Michael Kiveswho invested FTX money in corporations like SpaceX, which have since appreciated in value.

Bankman-Fried’s defense attorney asked the court for a sentence of 63 to 78 months. In addition to the “first-time non-violent crime” claim, attorneys for FTX’s founder rely largely on the argument that Bankman-Fried’s dangerous bets paid off and the bankruptcy estate expects to totally repay FTX’s customers.

It’s a story Bankman-Fried tried to sell while awaiting trial.

“FTX US remains fully solvent” Bankman-Fried wrote in a Substack post on January 12, 2023, while he was under house arrest at his parents’ home in Palo Alto, California. He said the exchange “should be able to refund all customers’ funds.”

One of the important thing assets in FTX’s portfolio is shares in the synthetic intelligence startup Anthropic. Late last week, the FTX bankruptcy estate reached an agreement with a consortium of buyers to sell most of its stake in Anthropic for $884 million. Under Bankman-Fried’s leadership, FTX invested $500 million in the startup in 2021, ahead of the generative artificial intelligence boom. As of December 2023, the corporate’s valuation had reached $18 billion, which might make FTX’s roughly 8% stake price roughly $1.4 billion.

During the Bankman-Frieda trial, Kaplan denied a defense request to permit a finding that FTX’s investment in Anthropic was a sensible alternative.

Renato Mariotti, a former prosecutor in the U.S. Department of Justice’s Securities and Commodities Fraud Section, told CNBC that the more money that will be recovered from clients, the higher for Bankman-Fried.

“If true, it is significant and the judge has an obligation to consider restitution to the victim at sentencing,” Mariotti said. “But even if the victims were not harmed, he is still guilty of a crime.”

Mariotti said he expected the sentence to be somewhere between what the prosecution and defense were in search of, predicting it could be “at least 20 to 25 years.”

In addition to Anthropic’s gains, FTX clients can look to the cryptocurrency market recovery for signs of optimism. is trading near $70,000, down from lower than $17,000 on the time of FTX’s collapse.

In September, the bankruptcy team published a standing report showing that FTX held $3.4 billion in digital assets, of which over $1.1 billion got here from cryptocurrency investments. In defense letter submitted to the court last month, lawyers note a big increase in the worth of FTX’s shares in Solana, claiming that as of February 26, the estate a rise of roughly $4 billion over the past six months due to token appreciation.

Solana belongs to the category of so-called “Sam coins”, a gaggle that also includes Serum, a token created and promoted by FTX and Alameda. Solana has seen tremendous growth recently, increasing greater than eightfold because the end of September.

Meanwhile, FTX’s bitcoin stock, which was price $560 million on the time of the September report when the coin was trading around $25,000, also saw a big increase. Since then, Bitcoin’s value has increased by roughly 180%.

For FTX clients, in keeping with the judge’s ruling, getting the entire amount means receiving the money equivalent of their cryptocurrency in November 2022. In other words, they don’t see any upside to investing in FTX nor do they receive virtual coins that might enable them to money out at higher valuations.

Braden Perry, formerly a senior trial attorney on the Commodity Futures Trading Commission, told CNBC that Bankman-Fried faces not less than 70 months in prison on account of his underlying level of offense, variety of victims, sophisticated means and leadership role – even when there are any monetary loss for victims. Perry added that the huge losses that were originally expected would suggest a lifespan of 30 years.