Ahead of sentencing, SBF team argues for 5-6 years in jail because FTX customers will get money back

While prosecutors want FTX founder Sam Bankman-Fried to serve 40 to 50 years in jail for his crimes, the defense team is seeking the judge to consider a sentence that is nearly 90% less.

Bankman-Fried’s fate will be revealed 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 offenses related to the collapse of cryptocurrency exchange FTX and the loss of around $10 billion in customer deposits.

Bankman-Fried’s team hopes that Kaplan considers the enhanced possibility that FTX consumers will be able to recover the majority, if not all, of the money they lost when the exchange went bankrupt in 2022.

Lawyers representing FTX’s bankruptcy estate told a Delaware judge last month that they anticipate to properly reimburse customers and creditors who have legitimate claims. Bankruptcy attorney Andrew Dietderich, who works with FTX’s new leadership team, said “there is still a great amount of work and risk” in returning all of the money to clients, but the team has a “strategy to achieve it.”

It represented a potentially major shift in the story surrounding FTX’s collapse 16 months ago. At the time, it was thought that many thousands of clients, possibly up to a million, had cumulatively lost billions of dollars that would be impossible to recover due to the crypto industry’s poorly regulated and unprotected nature. These clients faced the actual danger of losing the great majority of their money, as had other hedge firms and lenders that failed during the so-called crypto winter of 2022.

Much of the government’s successful case against Bankman-Fried was based on convincing the jury that the defendant stole billions of dollars in FTX client funds to place dangerous wagers at Alameda.

For months, as FTX worked its way through a Delaware bankruptcy court, new CEO John Ray III and his team of restructuring experts have been reclaiming cash, luxury property, and cryptocurrency, as well as locating lost assets. They’ve already collected more than $7 billion, which excludes valuables such as $26 million in gifts and property to Bankman-Fried’s parents, as well as $700 million given to K5 Global and founder Michael Kives, who invested FTX cash in companies like SpaceX, which have since grown in value.


Bankman-Fried’s defense team has requested for a sentence ranging from 63 to 78 months. Aside from the fact that he is a “first time, nonviolent offender,” advocates defending the FTX founder rely mostly on the claim that Bankman-Fried’s risky bets paid off and that the bankruptcy estate expects to properly compensate FTX clients.

Bankman-Fried was attempting to market the story while awaiting trial.

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

One major asset in FTX’s portfolio is its ownership in Anthropic, an artificial intelligence business. Late last week, FTX’s bankruptcy estate reached an agreement with a consortium of purchasers to sell the majority of its Anthropic properties for $884 million. Under Bankman-Fried’s leadership, FTX invested $500 million in the firm in 2021, before the generative AI boom. The company’s valuation reached $18 billion in December 2023, putting FTX’s roughly 8% ownership worth around $1.4 billion.

During Bankman-Fried’s trial, Kaplan dismissed the defense’s request that it be allowed to state that FTX’s investment in Anthropic was a wise decision.

‘Still guilty.’
Renato Mariotti, a veteran prosecutor in the Securities and Commodities Fraud Section of the United States Department of Justice, told CNBC that the more money the estate can collect for clients, the better for Bankman Fried.

“If true, that is relevant and the judge is required to consider victim restitution at sentencing,” Mariotti told the court. “But even if victims weren’t harmed, he is still guilty of the offense.”

Mariotti predicted that the sentence will be “at least 20 to 25 years,” falling midway between the prosecution and defense requests.

In addition to the Anthropic gains, FTX consumers should look to the cryptocurrency resurgence for hints of confidence. Bitcoin now trades at $70,000, up from around $17,000 during FTX’s collapse.

In September, the bankruptcy team reported that FTX has $3.4 billion in digital assets, including approximately $1.1 billion from its investment in cryptocurrency Solana. In the defense’s statement to the court submitted last month, attorneys note a significant growth in the value of FTX’s Solana share, claiming that as of Feb. 26, the estate had seen a roughly $4 billion increase over the previous six months due to the token’s appreciation.

Solana belongs to a category known as “Sam coins,” which also includes Serum, a token created and pushed by FTX and Alameda. Solana has experienced a massive surge in recent months, increasing more than eightfold since the end of September.

Meanwhile, FTX’s bitcoin holdings, which were valued at $560 million in September when the coin was selling at roughly $25,000, have increased significantly. Bitcoin’s value has climbed by almost 180% since then.

According to a judge’s order, being made whole for FTX clients entails receiving cash equivalent to the value of their cryptocurrency in November 2022. In other words, they are neither reaping the benefits of FTX’s investments or receiving virtual currencies that would allow them to cash out at greater valuations.

Braden Perry, a former senior trial lawyer for the Commodity Futures Trading Commission, told CNBC that Bankman-Fried faces at least 70 months in prison based on his base level offense, number of victims, sophisticated means, and leadership role, even if the victims suffered no monetary losses. Perry said that the substantial losses that were originally predicted would imply a 30-year life expectancy.