Sam Bankman-Fried’s upcoming sentencing hearing, scheduled for March 28, could be affected by a “significant spike” in the value of bitcoin, the Financial Times reported. Scheduled to take place in the Southern District of New York before Judge Louis Kaplan, the hearing could potentially be influenced by recent developments surrounding cryptocurrency.
Bankman-Fried’s lawyers took advantage of the soaring prices of various cryptocurrencies and AI assets held by FTX, arguing that this development could mitigate the financial damage caused by their client’s actions. They made a bold claim, stating, “Each victim … will receive 100 cents on the dollar, plus interest.”
The defense team argued for a lenient sentence for Bankman-Fried, citing recovery efforts after the FTX collapse. They argue that victims will eventually be fully compensated, highlighting the recent surge in the prices of bitcoin and other cryptocurrencies, the FT report said.
Bankman-Fried’s lawyers argue that the $8 billion shortfall in FTX’s balance sheet was merely a temporary setback caused by unprecedented customer withdrawal requests during FTX’s peak in late 2022. They stress that victims will receive 100 cents on the dollar, plus interest boosted by the increased value of cryptocurrency assets, the report added.
“The harm to customers, lenders and investors is nil,” Bankman-Fried lawyers wrote to Kaplan last month, asking for a sentence of no more than six and a half years. The $8 billion hole, they say, reflects a “temporary shortage of liquid assets to cover the unprecedented level of customer withdrawal requests” during the FTX peak in late 2022.
In stark contrast, John Ray, FTX’s interim CEO overseeing the bankruptcy proceedings, offered a more moderate view. Ray emphasized the complexity of victim restitution and the enduring challenges of achieving full economic recovery for all affected parties. Ray argued that even the best-case scenario would not result in a full recovery of victims’ pre-fraud economic positions.
“Mr Bankman-Fried’s victims will never be put back in the same economic position they would be in today but for his colossal fraud,” Ray told Kaplan in a letter this month, quoted by the FT. “Indeed, even the best possible outcome… . . will not result in true, full economic recovery from all creditors and non-domestic equity investors as if the fraud had never occurred.”
The disparity between the optimistic claims of Bankman-Fried’s lawyers and Ray’s cautious assessment raised questions about the potential impact of fluctuations in the price of bitcoin on the sentencing decision. While Bankman-Fried’s defense team sought to downplay the severity of the crimes and advocate for a shorter sentence, Ray’s statements underscored the lasting impact and continued uncertainty surrounding victim restitution.
Prosecutors, who urged the court to impose a sentence of 40 to 50 years, dismissed Bankman-Fried’s claims as a “distortion” of the bankruptcy proceedings. They argue that many customers may never recover the full value of their investments, and the emotional toll on victims cannot be offset by potential recoveries.
Prosecutors say Bankman-Fried’s victims “have not received any restitution and there is no timetable for when such payments will be made.”
“The fact that two years later the victims may get some money back through FTX’s bankruptcy is not much comfort to those victims who needed the money in November 2022,” prosecutors wrote, as quoted by the FT. “The suffocating sense of fear and despair victims felt when they were unable to withdraw their money, their shame and embarrassment, and the resulting damage to lives and businesses, cannot be reversed through bankruptcy.”
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