Federal prosecutors said Friday that Sam Bankman-Fried, the cryptocurrency magnate who was convicted of masterminding a multimillion-dollar fraud, should receive a prison sentence of 40 to 50 years.
Prosecutors outlined the recommendation in a document filed in U.S. District Court in Manhattan. Mr. Bankman-Fried's sentencing hearing is scheduled for March 28, when Judge Lewis A. Kaplan will decide his fate. He faces a maximum possible sentence of 110 years.
“Justice requires that he receive a prison sentence commensurate with the extraordinary dimensions of his crimes,” prosecutors said in a 116-page sentencing memo to the judge.
The federal probation department separately recommended a 100-year sentence for Bankman-Fried, 32, effectively a life sentence. But prosecutors said in the filing that sending him to prison for the rest of his life was not justified, despite the seriousness of his crime, because of his relative youth.
In a filing filed last month, Bankman-Fried's attorneys argued that she should receive a sentence of no more than six and a half years.
A spokesman for Bankman-Fried said Friday that a lawyer for him will submit a response to the government early next week.
Just 18 months ago, Bankman-Fried was a high-flying cryptocurrency mogul, presiding over cryptocurrency exchange FTX, a $40 billion business empire. But then FTX collapsed virtually overnight, putting it in the crosshairs of authorities.
In November, a federal jury in Manhattan convicted Bankman-Fried of stealing $8 billion from FTX clients to finance political contributions, investments in other companies and lavish real estate purchases.
The implosion of FTX and the subsequent arrest and conviction of Mr. Bankman-Fried were seen as a historic nadir for the lightly regulated crypto world.
“The crypto industry may be new,” Damian Williams, U.S. Attorney for the Southern District of New York, said after the verdict, “but this type of fraud, this type of corruption, is as old as time.”
Since then, the crypto industry appears to have put Mr. Bankman-Fried's crimes in the rearview mirror. As he prepares for his sentencing, prices of most digital assets have skyrocketed, with bitcoin hitting a record high this month.
Prosecutors said in Friday's filing that a sentence of 40 to 50 years was appropriate given the magnitude of the Bankman-Fried fraud and its impact on people around the world, including those who had invested some of their retirement money and savings of his entire life at FTX.
“The magnitude of Bankman-Fried's fraud demands severe punishment,” prosecutors wrote. “The amount of the loss (at least $10 billion) makes this one of the largest financial frauds of all time.”
If Bankman-Fried receives a light sentence, prosecutors said, there is a real risk that he will commit some fraud in the future.
In their sentencing filing, prosecutors included several pages of customer messages sent to Mr. Bankman-Fried on X, formerly Twitter, at the time of FTX's collapse. In many of the posts, customers expressed anger at not having access to their accounts.
Marc Mukasey, the lawyer Bankman-Fried hired to prepare the sentence, argued in his legal filing that the 100-year sentence recommended by the probation department would be reminiscent of the 150 years given to Bernard Madoff, who pleaded guilty in 2009. a run one of the largest Ponzi schemes in history. Any comparison between the two men is inappropriate, Mukasey said, given “the duration and dollars” involved in Madoff's crimes: a 20-year fraud that generated $64 billion in paper losses.
The probation department's recommendation was “barbaric” and “grotesque,” he said.
Mukasey also noted that it took a court-appointed receiver more than 15 years to return approximately $14 billion to Madoff investors. By contrast, bankruptcy lawyers overseeing the FTX liquidation have suggested that customers of the failed Bankman-Fried exchange are likely to get all their money back in a relatively quick time frame.
Prosecutors said in their filing that even if FTX customers got most of their money back, they would have had to wait more than two years for that to happen. Prosecutors said “it is of little comfort to those victims who needed the money in November 2022.”
In the filing, prosecutors asked Judge Kaplan to also order Bankman-Fried to forfeit more than $10 billion, representing losses and stolen money from her crime. Given the millions of potential victims and the complexity of calculating losses, prosecutors said any money handed over by Bankman-Fried would be better distributed in FTX's bankruptcy.
Judges are not required to follow federal sentencing guidelines. And in imposing a sentence, Judge Kaplan may consider a variety of factors, including Mr. Bankman-Fried's age, the fact that he is a first-time offender and the possibility of him being rehabilitated.
But one factor that may work against Bankman-Fried is that he chose to testify at his trial and at times seemed evasive during cross-examination. If Judge Kaplan concludes that Bankman-Fried testified falsely, he could take that into account when deciding the sentence.
In a column published this week in The New York Law Journal, John S. Martin, a former Manhattan federal judge, criticized the “unreasonably long sentences” for most fraud and white-collar crimes. He said the 100-year sentences had had “no impact on crime rates”.
“Let me be clear: Bankman-Fried deserves to be punished,” Martin wrote. But he added: “Our extremely long prison sentences are one of the reasons the United States has the largest prison population in the world.”
