Bankman-Fried appeals FTX fraud conviction, 25-year sentence

[April 12, 2024]  By Luc Cohen

NEW YORK (Reuters) -Sam Bankman-Fried, facing the prospect of spending much of his adult life behind bars, on Thursday appealed his conviction and 25-year prison sentence for stealing $8 billion from customers of the now-bankrupt FTX cryptocurrency exchange he founded.

Defense lawyer Marc Mukasey had announced plans for the appeal to the Manhattan-based 2nd U.S. Circuit Court of Appeals during Bankman-Fried's March 28 sentencing hearing. The 32-year-old former billionaire crypto wunderkind was convicted in November on seven counts of fraud and conspiracy in what federal prosecutors have called one of the biggest financial frauds in U.S. history.

Bankman-Fried's appeal could take years. He faces steep odds, with his lawyers needing to persuade the 2nd Circuit - and potentially the U.S. Supreme Court - that U.S. District Judge Lewis Kaplan made significant errors that deprived Bankman-Fried of his legal rights and made the trial unfair.

The sentence imposed by Kaplan was shorter than the 40- to 50-year term that prosecutors had recommended but longer than the 5-1/4 years or fewer that Mukasey had suggested.

Bankman-Fried's sentencing put an exclamation point on his downfall from an entrepreneur whose meteoric rise prompted adulation, reverence and jealousy from some quarters into the biggest trophy for U.S. prosecutors in their crackdown on excesses in the cryptocurrency markets.

The Massachusetts Institute of Technology graduate rode a boom in the values of bitcoin and other digital assets to a $26 billion net worth before he turned 30, Forbes magazine estimated.

Bankman-Fried also became a major political donor and an advocate of effective altruism, a movement that encourages talented young people to focus on earning money and giving it away to worthy causes.

His wealth evaporated when Bahamas-based FTX declared bankruptcy on Nov. 11, 2022, following a wave of withdrawals by customers panicking over reports that Bankman-Fried commingled their assets with Alameda Research, a crypto-focused hedge fund he also controlled.

The next month, Bankman-Fried was arrested in the Bahamas and extradited to the United States.

'BAD DECISIONS'

Three former close associates testified as prosecution witnesses against Bankman-Fried, saying he ordered them to use FTX funds to pay Alameda's debts, make political donations and buy luxury real estate in the Bahamas. They pleaded guilty to fraud and are awaiting sentencing.

Bankman-Fried testified in his own defense, acknowledging he made mistakes managing risk but denying he stole money.

FTX cryptocurrency exchange founder Sam Bankman-Fried stands before U.S. District Judge Lewis Kaplan as he is sentenced to 25 years in prison, at Federal Court in New York City, U.S., March 28, 2024 in this courtroom sketch. REUTERS/Jane Rosenberg/File Photo

"I made a series of bad decisions," Bankman-Fried said at his sentencing hearing. "They weren't selfish decisions. They weren't selfless decisions. They were bad decisions."

His lawyers have complained that prosecutors worked too closely with FTX's bankruptcy estate, and asked it to hand over only information that would help their case.

During the sentencing hearing, Mukasey told Kaplan that the judge should ignore the prosecution's claim that FTX customers had lost $8 billion because, he said, customers would likely be made whole eventually. Kaplan dismissed that as speculative, and said Bankman-Fried lied by testifying he did not know until shortly before FTX's collapse that Alameda had spent large sums of customer money.

"He was viewing the cost of getting caught, discounted by probability or improbability, against the gain of getting away without getting caught, given the probabilities. That was the game," Kaplan said of Bankman-Fried.

Earlier on Thursday, Bankman-Fried's former lawyer Mark Cohen questioned the disparity between Bankman-Fried's sentence and rival exchange Binance's founder Changpeng Zhao's maximum 18-month sentence for violating an anti-money laundering law.

Zhao pleaded guilty in connection with a $4.3 billion settlement for Binance and is due to be sentenced on April 30. Authorities said Binance failed to report more than 100,000 suspicious transactions with U.S.-designated terrorist groups including Hamas, al Qaeda and Islamic State.

"These are very different outcomes," Cohen, who represented Bankman-Fried at his trial, said at a conference hosted by the New York City Bar. "Can you square them from a policy point of view? I would suggest it's very hard."

Nicolas Roos, one of prosecutors in the Bankman-Fried case, said at the conference that the two cases involved very different conduct. Zhao also acknowledged wrongdoing and traveled voluntarily to the United States to face the charges.

(Reporting by Luc Cohen in New York; Editing by Will Dunham)

[© 2024 Thomson Reuters. All rights reserved.]This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.