SBF staff argues for 5-6 12 months sentence, cite FTX prospects’ cash

Whereas prosecutors are requesting that FTX founder Sam Bankman-Fried spend 40 to 50 years in jail for his crimes, the protection staff is urging the choose to contemplate a sentence that is roughly 90% shorter.

Bankman-Fried’s destiny can be introduced in Manhattan on Thursday morning by Choose Lewis Kaplan, who presided over the monthlong trial in November. Bankman-Fried was discovered responsible of seven fees tied to the collapse of crypto trade FTX and the roughly $10 billion of buyer deposits that went lacking.

The hope for Bankman-Fried’s staff is that Kaplan takes into consideration the elevated chance that FTX prospects will be capable of recoup most, if not all, of the cash they misplaced when the trade spiraled out of business in 2022.

Legal professionals representing the chapter property of FTX advised a choose in Delaware final month that they anticipate to totally repay prospects and collectors with reliable claims. Chapter lawyer Andrew Dietderich, who works with FTX’s new management staff, stated “there is still a great amount of work and risk” forward in getting all the cash again to purchasers, however that the staff has a “strategy to achieve it.”

It was a probably dramatic change within the narrative surrounding FTX’s collapse 16 months in the past. On the time, it was believed that many hundreds of consumers — reportedly as much as 1,000,000 — collectively misplaced billions of {dollars} that will be unrecoverable as a result of flippantly regulated and unsecured nature of the crypto trade. These purchasers confronted the true chance that the overwhelming majority of their cash had evaporated, similar to in different instances of hedge funds and lenders that failed throughout the so-called crypto winter of 2022.

A lot of the federal government’s profitable case in opposition to Bankman-Fried hinged on convincing the jury that the defendant had stolen billions of {dollars} price of FTX buyer cash to make dangerous bets at Alameda.

For months, as FTX has wound its manner by way of a Delaware chapter courtroom, new CEO John Ray III and his staff of restructuring advisors have been clawing again money, luxurious property, and crypto, in addition to monitoring down lacking property. They’ve already collected greater than $7 billion, and that does not embrace valuables like $26 million in items and property to Bankman-Fried’s parents, or the $700 million handed over to K5 Global and founder Michael Kives, who invested FTX money in corporations like SpaceX which have since elevated in worth.

Bankman-Fried’s protection staff has requested the courtroom for a sentence within the vary of 63 to 78 months. Past the truth that he is a “first time, nonviolent offender,” attorneys for the FTX founder largely lean on the argument that Bankman-Fried’s dangerous bets paid off and the chapter property expects to totally repay FTX prospects.

It is a story that Bankman-Fried was making an attempt to promote as he awaited trial.

“FTX US remains fully solvent,” Bankman-Fried wrote in a Substack post on Jan. 12, 2023, whereas he was beneath home arrest at his dad and mom’ residence in Palo Alto, California. He stated the trade “should be able to return all customers’ funds.”

One key asset in FTX’s portfolio is its stake in synthetic intelligence startup Anthropic. Late final week, FTX’s chapter property struck a deal with a consortium of patrons to promote nearly all of its Anthropic holdings for $884 million. Below Bankman-Fried’s management, FTX invested $500 million within the startup in 2021 earlier than the growth in generative AI. The corporate’s valuation hit $18 billion in December 2023, which might put FTX’s roughly 8% stake at about $1.4 billion.

Throughout Bankman-Fried’s trial, Kaplan denied the protection’s request that or not it’s permitted to say that FTX’s funding in Anthropic was a wise wager.

Along with the Anthropic positive factors, FTX prospects can take a look at the rebound in crypto for indicators of optimism. Bitcoin is buying and selling at near $70,000, up from lower than $17,000 on the time of FTX’s collapse.

In September, the chapter staff released a status report displaying that FTX had $3.4 billion price of digital property, with over $1.1 billion coming from its funding in crypto coin Solana. Within the defense’s letter to the court filed last month, attorneys be aware a large enhance within the worth of FTX’s Solana stake, saying that as of Feb. 26, the property noticed a roughly $4 billion increase over the last six months because of the token’s appreciation.

Solana matches right into a class of so-called “Sam coins,” a bunch that additionally contains Serum, a token created and promoted by FTX and Alameda. Solana noticed an enormous run-up of late, climbing greater than eightfold for the reason that finish of September.

In the meantime, FTX’s bitcoin stash, which was price $560 million on the time of the September report, when the coin was buying and selling at round $25,000, has seen a major uptick as properly. Bitcoin’s worth has elevated by round 180% since then.

For FTX prospects, being made complete, in accordance with a choose’s ruling, means getting the money equal of what their crypto was price in November 2022. In different phrases, they are not seeing any of the upside of FTX’s investments or being given digital cash that will permit them to money out at greater valuations.

Braden Perry, who was as soon as a senior trial lawyer for the Commodity Futures Buying and selling Fee, advised CNBC that Bankman-Fried faces a minimum of 70 months in jail primarily based on his base stage offense, variety of victims, refined means and management function — even when there isn’t any financial loss to the victims. The large losses that had been initially anticipated would recommend 30 years to life, Perry added.