Law360 (February 28, 2024, 1:40 AM EST)
-- FTX founder Sam Bankman-Fried asked a Manhattan federal judge late Tuesday for a sentence that releases him "promptly" after his conviction for stealing billions from customers of the now-collapsed crypto exchange, arguing that federal sentencing guidelines recommend no more than six-and-a-half years in prison.
Bankman-Fried made the request in a memorandum submitted to U.S. District Judge Lewis A. Kaplan, who is due to sentence the 31-year-old former crypto executive on March 28. Bankman-Fried was found guilty in November of seven counts of fraud, conspiracy and money laundering, although he maintains his innocence and has vowed to appeal.
According to the filing, a presentence report prepared by the U.S. Probation Department calculated sentencing guidelines that call for a maximum sentence of 1,320 months, or 110 years, with the report recommending a downward variance of 10 years to bring the recommended sentence to 100 years.
But Bankman-Fried asked the court to reject the report's "barbaric proposal," saying the advisory guidelines should put the appropriate sentence range at 63 to 78 months, or 5 years and 3 months to 6 years and 6 months.
Considering the former CEO's "charitable works and demonstrated commitment to others, a sentence that returns Sam promptly to a productive role in society would be sufficient, but not greater than necessary, to comply with the purposes of sentencing," the memo states.
Bankman-Fried argues that he is a first-time, non-violent offender and that the report includes an incorrect 30-point increase to the base offense level based on the assumption that the case involved a loss of $10 billion. But the report adopted that $10 billion loss number "without a scintilla of support," the memo states.
Tuesday's filing says that bankruptcy counsel for FTX stated last month that "customers and creditors who can prove their losses are expected to get back all of their money."
"[T]he company was solvent at the time of the bankruptcy petition," the memo asserts. "The money was there — not lost."
"The harm to customers, lenders, and investors is zero," the filing adds, italicizing the sentence for emphasis.
Alternatively, the court could peg customer losses as the estimated cost of collection in the bankruptcy proceedings, according to the memo.
At this point, the total fees incurred by advisors to the unsecured creditors committee is about $57.5 million, the memo states, which Bankman-Fried argued is a much more reasonable estimate of actual loss than the presentence report's estimate of $10 billion.
With that in mind, there should not be a 30-point increase in the guidelines calculation for a loss amount enhancement, Bankman-Fried said.
The memo also highlights Bankman-Fried's "selfless, altruistic" qualities and his commitment to philanthropy, attaching 29 letters of support from his brother and parents; several professors at Stanford University, where his parents work, including the interim dean of Stanford Law School; tech executives; two psychiatrists; and his former personal assistant.
Barbara Fried, an attorney and professor emeritus at Stanford Law, wrote that anyone who tries to "understand him through the lens of 'normal' behavior and motivations is going to misunderstand" her son. She said her son has suffered with depression but has devoted his life to the happiness of others.
For example, when he took a lucrative job as a trader at Jane Street Capital, he gave away more than half his earnings without telling his parents, according to the letter. Even in the six months he has spent in detention, she said her son is running a tutoring session to help fellow inmates prepare for GED exams.
Fried also emphasized that her son is autistic and that she fears for his life in a typical prison environment, where his "inability to read or respond appropriately to many social cues, and his touching but naive belief in the power of facts and reason to resolve disputes, put him in extreme danger."
"If allowed to resume his life, he would do the only thing he has ever cared about: devote the remainder of his natural life to leaving the world a better place than he found it," Fried wrote.
Paul Brest, named the interim dean of Stanford Law last month, wrote that Bankman-Fried is a proponent of a philanthropy theory called "effective altruism," which holds that a person's life "should be devoted to doing as much good as possible."
"Beyond his intellectual contributions, Mr. Bankman-Fried has manifested the philosophy in his own giving and life," Brest wrote, noting that he has donated millions of dollars to effective altruism causes. "Based on his behavior to date, Mr. Bankman-Fried is likely to continue to engage in philanthropy in whatever circumstances he is placed."
The prosecution's sentencing recommendation is due March 15.
Counsel for Bankman-Fried and a representative for the DOJ did not immediately respond to requests for comment late Tuesday.
During a month-long trial this past fall, prosecutors said Bankman-Fried drove FTX into bankruptcy by spending $10 billion worth of customer deposits on venture investments, lavish real estate and political donations.
Three of Bankman-Fried's top lieutenants — Caroline Ellison, Gary Wang and Nishad Singh — testified that the defendant accomplished this scheme by secretly funneling billions of dollars between FTX and his crypto hedge fund Alameda Research.
The defense, meanwhile, said Bankman-Fried made a number of governance mistakes but did not intend to steal from FTX customers. Bankman-Fried himself made this argument from the witness stand, telling jurors that he always believed Alameda could lawfully borrow from FTX and then repay the debts.
The jury ultimately deliberated for just over four hours before finding Bankman-Fried guilty on all counts. He has been detained at Brooklyn's Metropolitan Detention Center since August due to alleged witness tampering.
The government is represented by Danielle R. Sassoon, Nicolas Roos, Danielle Kudla, Samuel Raymond and Thane Rehn of the U.S. Attorney's Office for the Southern District of New York and Jil Simon of the U.S. Department of Justice's Criminal Division.
Bankman-Fried is represented by Marc L. Mukasey, Torrey K. Young, Thomas E. Thornhill, Michael F. Westfal and Stephanie Guaba of Mukasey Young LLP.
The case is U.S. v. Bankman-Fried, case number 1:22-cr-00673, in the U.S. District Court for the Southern District of New York.