Ahead of sentencing, SBF team argues for 5-6 years in jail because FTX customers will get money back
Government exhibit in the case against former FTX CEO Sam Bankman-Fried.
Source: SDNY
While prosecutors are requesting that FTX founder Sam Bankman-Fried spend 40 to 50 years in prison for his crimes, the defense team is urging the judge to consider a sentence that’s roughly 90% shorter.
Bankman-Fried’s fate will be announced in Manhattan on Thursday morning by Judge Lewis Kaplan, who presided over the monthlong trial in November. Bankman-Fried was found guilty of seven charges tied to the collapse of crypto exchange FTX and the roughly $10 billion of customer deposits that went missing.
The hope for Bankman-Fried’s team is that Kaplan takes into account the increased likelihood that FTX customers will be able to recoup most, if not all, of the money they lost when the exchange spiraled into bankruptcy in 2022.
Lawyers representing the bankruptcy estate of FTX told a judge in Delaware last month that they expect to fully repay customers and creditors with 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” ahead in getting all the money back to clients, but that the team has a “strategy to achieve it.”
It was a potentially dramatic change in the narrative surrounding FTX’s collapse 16 months ago. At the time, it was believed that many thousands of customers — reportedly up to a million — collectively lost billions of dollars that would be unrecoverable due to the lightly regulated and unsecured nature of the crypto industry. Those clients faced the real possibility that the vast majority of their money had evaporated, just like in other cases of hedge funds and lenders that failed during the so-called crypto winter of 2022.
Much of the government’s successful case against Bankman-Fried hinged on convincing the jury that the defendant had stolen billions of dollars worth of FTX customer money to make risky bets at Alameda.
For months, as FTX has wound its way through a Delaware bankruptcy court, new CEO John Ray III and his team of restructuring advisors have been clawing back cash, luxury property, and crypto, as well as tracking down missing assets. They’ve already collected more than $7 billion, and that doesn’t include valuables like $26 million in gifts and property to Bankman-Fried’s parents, or the $700 million handed over to K5 Global and founder Michael Kives, who invested FTX cash in companies like SpaceX that have since increased in value.
Bankman-Fried’s defense team has asked the court for a sentence in the range of 63 to 78 months. Beyond the fact that he’s a “first time, nonviolent offender,” attorneys for the FTX founder largely lean on the argument that Bankman-Fried’s risky bets paid off and the bankruptcy estate expects to fully repay FTX customers.
It’s a story that Bankman-Fried was trying to sell as he awaited trial.
“FTX US remains fully solvent,” Bankman-Fried wrote in a Substack post on Jan. 12, 2023, while he was under house arrest at his parents’ home in Palo Alto, California. He said the exchange “should be able to return all customers’ funds.”
One key asset in FTX’s portfolio is its stake in artificial intelligence startup Anthropic. Late last week, FTX’s bankruptcy estate struck a deal with a consortium of buyers to sell the majority of its Anthropic holdings for $884 million. Under Bankman-Fried’s leadership, FTX invested $500 million in the startup in 2021 before the boom in generative AI. The company’s valuation hit $18 billion in December 2023, which would put FTX’s roughly 8% stake at about $1.4 billion.
During Bankman-Fried’s trial, Kaplan denied the defense’s request that it be permitted to say that FTX’s investment in Anthropic was a smart bet.
‘Still guilty’
Renato Mariotti, a former prosecutor in the U.S. Justice Department’s Securities and Commodities Fraud Section, told CNBC that the more money the estate is able to recover for clients, the better for Bankman-Fried.
“If true, that is relevant and the judge is required to consider victim restitution at sentencing,” Mariotti said. “But even if victims weren’t harmed, he is still guilty of the offense.”
Mariotti said he expects the sentence to fall somewhere in between what the prosecution and defense are asking, predicting it will be “at least 20 to 25 years.”
Joseph Bankman and Barbara Fried arrive for the trial of their son, former FTX Chief Executive Sam Bankman-Fried, who is facing fraud charges over the collapse of the bankrupt cryptocurrency exchange, at Federal Court in New York City, U.S., October 26, 2023.
Brendan Mcdermid | Reuters
In addition to the Anthropic gains, FTX customers can look at the rebound in crypto for signs of optimism. Bitcoin is trading at close to $70,000, up from less than $17,000 at the time of FTX’s collapse.
In September, the bankruptcy team released a status report showing that FTX had $3.4 billion worth of digital assets, with over $1.1 billion coming from its investment in crypto coin Solana. In the defense’s letter to the court filed last month, attorneys note a sizable increase in the value of FTX’s Solana stake, saying that as of Feb. 26, the estate saw a roughly $4 billion increase over the last six months thanks to the token’s appreciation.
Solana fits into a category of so-called “Sam coins,” a group that also includes Serum, a token created and promoted by FTX and Alameda. Solana saw a huge run-up of late, climbing more than eightfold since the end of September.
Meanwhile, FTX’s bitcoin stash, which was worth $560 million at the time of the September report, when the coin was trading at around $25,000, has seen a significant uptick as well. Bitcoin’s value has increased by around 180% since then.
For FTX customers, being made whole, according to a judge’s ruling, means getting the cash equivalent of what their crypto was worth in November 2022. In other words, they’re not seeing any of the upside of FTX’s investments or being given virtual coins that would allow them to cash out at higher valuations.
Braden Perry, who was once a 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 there’s no monetary loss to the victims. The massive losses that were originally expected would suggest 30 years to life, Perry added.
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AI and Crypto Czar David Sacks speaks with President Donald J Trump as he signs executive orders in the Oval Office at the White House on Jan. 23, 2025 in Washington, DC.
Jabin Botsford | The Washington Post | Getty Images
As David Sacks, the newly appointed White House AI and crypto czar, collaborates with lawmakers on potential regulations for digital assets, one of the first things they’ll be focused on is stablecoins.
“They are very committed to moving legislation through the House and the Senate this year in order to provide that clear regulatory framework that the digital assets ecosystem needs to sustain innovation in the United States,” Sacks said on CNBC’s “Closing Bell Over Time” on Tuesday. “Moving legislation through Congress takes time, but I think this is something we could do in the next six months.”
Earlier in the day, Sacks joined leaders of the House and Senate committees for banking and finance for a press conference to talk about their early objectives for crypto policy, with the help of the SEC. It was part of a busy day in Washington for regulators and key players on Capitol Hill and in Trump’s White House to announce next steps in their digital currency plans.
“I look forward to working with each of you in creating a golden age in digital assets,” Sacks said at the press event.
He was flanked by Sen. Tim Scott (R-S.C.), chairman of the Senate Banking committee, Rep. French Hill (R-Ark.), chair of the House Financial Services Committee, and Sen. John Boozman (R-Ark.), who heads the Senate Agriculture Committee.
The leaders said their first priority is supporting a stablecoin bill introduced by Sen. Bill Hagerty (R-Tenn.), who has proposed new rules for stablecoins to create a “clear regulatory framework” for their use. Stablecoins are a type of cryptocurrency whose value is pegged to a real-world asset, such as the U.S. dollar.
Stablecoins have been gaining popularity but mostly overseas. Lawmakers are now promoting U.S.-based stablecoin issuance, reinforcing the dollar’s dominance through digital finance. Supporters like Sacks say such a move could drive trillions of dollars in new demand for the dollar and help lower long-term interest rates.
David Sacks, U.S. President Donald Trump’s AI and Crypto Czar, listens to President Trump signs a series of executive orders in the Oval Office of the White House on January 23, 2025 in Washington, DC.
Anna Moneymaker | Getty Images
Sacks on Tuesday told CNBC that a top agenda item for his new task force is evaluating “the feasibility of a bitcoin reserve,” an idea President Donald Trump suggested during his campaign. Sacks noted that the president asked his digital assets working group to study “whether it’s feasible to create either a bitcoin reserve or some sort of digital asset stockpile.” He clarified that they “haven’t committed yet to doing it, but it’s one of the first things” they’ll be considering.
Also on Tuesday, the SEC made a major shift in its approach to digital asset regulation. Under new leadership, the agency announced it would open its doors to meetings with anyone interested in discussing crypto, an effort to show a clear contrast to former SEC Chair Gary Gensler, who emerged as an antagonist to the industry.
SEC Commissioner Hester Peirce, now leading the agency’s newly established Crypto Task Force, published a statement titled The Journey Begins. She said the idea is to create more transparent and predictable regulations, removing legal ambiguity and unnecessary roadblocks.
“The Task Force is working to help create a regulatory framework that both achieves the Commission’s important regulatory objectives — including protecting investors — and preserves industry’s ability to offer products and services,” Peirce wrote.
Priorities include clarifying which crypto assets fall under securities laws, crafting a path for token issuers to gain regulatory approval and ensuring compliance measures don’t stifle innovation. The group will also examine crypto lending, staking, exchange-traded products, and cross-border regulations. Peirce stressed that while the SEC aims to foster industry growth, it will not tolerate fraud.
The SEC said it’s actively soliciting input from the public. Firms and individuals can submit written feedback or request meetings with the task force.
Tuesday’s press conference was the first major policy event led by Sacks, who was named to the post in December. While he lacks direct control over regulatory agencies or congressional funding, Sacks’ close ties to the White House and Elon Musk have positioned him as a key figure in the administration.
In June, Sacks, previously a Trump critic, hosted a fundraiser at his Pacific Heights mansion that raised $12 million for the Republican leader’s presidential campaign.
Sacks was in Washington, D.C., for the inauguration last month and attended the Crypto Ball, surrounded by industry leaders and policymakers. He declared at the event that, “The war on crypto is over.” During Trump’s first week in office, Sacks stood alongside the president in the Oval Office as he signed an executive order on digital assets.
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