How Sam Bankman-Fried's Sentencing Hearing May Play Out

Sam Bankman-Fried will find out this week if he is potentially facing decades in prison. Judge Lewis Kaplan is set to sentence him for his conviction last year on two fraud charges and five conspiracy charges tied to the operation and collapse of FTX.

A Presentence Investigation Report, compiled by a probation officer, recommends a 100-year sentence. Attorneys for Bankman-Fried suggested 63 to 78 months. The Department of Justice urged 40 to 50 years, a proposal the defense called "disturbing" and "medieval."

Bankman-Fried isn't likely to face anywhere nearly as long as 50 years, let alone a century in prison. Lawyers I spoke to before his trial began estimated he might spend around two decades in prison if he was convicted. Additional lawyers I spoke to over the past week loosely agreed with that estimate, saying 20 to 25 years seems likely.

And, of course, Bankman-Fried and his team will almost certainly appeal the "guilty" verdict a dozen jurors handed down nearly five months ago.

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The presentence report, which was compiled by a probation officer, summarizes Bankman-Fried's background, the case and how the facts of the case fit into sentencing guidelines.

Broadly speaking, Judge Kaplan's sentence will need to take into effect what are known as 3553 factors. This will include a defendant's history, background, upbringing, education, physical and mental condition, the facts of the case, any harm to potential victims and what kind of message the sentence might send to other individuals who might be considering or have the potential to commit similar crimes, said David Weinstein, a partner with Jones Walker.

This defendant's history includes any criminal record (or lack thereof), any charity work they may have done, if they were abused or compelled to do things, if they have "an emergent family situation" that might lead to their committing crimes and other similar background factors, said Tama Kudman, a partner at Kudman Trachten Aloe Posner.

Beyond the presentence report and the prosecution and defense submissions, the judge might take into account the character and victim statements provided by the parties.

The presentence report itself – which isn't a public document – recommended 100 years, according to the defense submission last month. It provides Bankman-Fried's history – the upbringing and background details mentioned above – to the judge, alongside the calculation of the figure.

However, this figure is based purely on consulting guidelines, Kudman told CoinDesk.

"This was a mechanical calculator, not that Probation is necessarily saying 'we think you should sentence him for 100 years,'" she said. "What Probation is saying is 'in consulting guidelines, this is the conclusion, this is the numerical calculation.'"

However, the defense is arguing that the calculation is wrong, pointing to a lack of actual losses by the victims based on FTX's bankruptcy estate estimation that creditors may be made whole or nearly whole. The prosecution is, to put it mildly, pushing back against that characterization, pointing to FTX creditors who are waiting to actually get any of their holdings back. Those creditors submitted dozens upon dozens of letters saying they suffered hardships because they couldn't access their funds for the last year and a half.

The judge already has a firsthand impression of the case from hearing all the witnesses testify during the trial, said Martin Auerbach, of counsel with Withers Bergman.

"He will read all of the various impact statements and all of the letters in support and conclude where they fit in the landscape of how he assesses the defendant, how he assesses the offense," he said. "What he thinks the most appropriate sentence is to reach the three goals of sentencing, which are [a] punishment that fits both the crime and the defendant; general deterrence, so that other people understand that they shouldn't do anything like this in the future; and specific deterrence to make sure that the defendant doesn't repeat the offenses for which he has been convicted, or anything like that," Auerbach added.

Judge Kaplan may also determine whether Bankman-Fried has shown remorse or accepted responsibility for the crimes he was convicted of and weigh that in his sentencing decision, Auerbach said.

Another factor might be "whether the judge thinks that [Bankman-Fried] testified truthfully," he said. "In my experience, nobody likes to feel that somebody has come into their space and lied, and if the judge concludes that that's what happened, that has to weigh in the equation."

The DOJ alleged "perjury" in its sentencing submission, trying to nail the idea that Bankman-Fried was not fully truthful when testifying in his own defense last October.

Prosecutors will often claim that a defendant's testimony was perjury if they claimed they were not guilty but ultimately found guilty, Weinstein and Kudman said.

Auerbach and Kudman both also noted that sentencing guidelines – which are no longer mandatory – can rapidly increase the length of a sentence due to how they're designed.

The guidelines can skew a sentence "in ways that don't necessarily track with the severity and nature of the offense," Auerbach said.

They also don't account for differences in intent. If one defendant is pocketing their customers' funds and another is just trying to invest those funds for their customers and loses the cash, the guidelines treat them the same even if the underlying intent is different.

"In truth, but for crypto winter, it might be that FTX would have sailed through the rough patches, and no one would have been the wiser," he noted.

Kudman similarly said that given cryptocurrencies' volatility, victims' values can oscillate pretty quickly.

"Those qualitative differences are important," she said. "They're being obscured by these loss amounts."

She also noted that the guidelines were adopted decades ago, while inflation and other factors have ballooned the values thrown around during fraud cases over the past several years.

Both the defense and prosecution submitted a number of letters to support their arguments. The defense filed several letters from Bankman-Fried's friends and family, attesting to his character to argue he could become a productive member of society after being released from his brief stint in prison.

Prosecutors, on the other hand, filed letters from FTX creditors who wrote about losing their savings and having to replan parts of their lives around their losses – directly pushing back against the defense narrative that there were no losses. Bankman-Fried's defense team filed a handful of additional letters on Tuesday. This latest salvo came from the mother of an FTX creditor, as well as several people who said Bankman-Fried may have "some type of atypical neurological processes," leaning on repeated statements that he has exhibited signs of autism. Also, he's vegan (a point already made in previous letters).

"In January 2024, my son was contacted by an entity overseeing the disbursement of FTX client funds … the hope that customer funds will be reimbursed in some measure mitigates the severity of Sam's guilt, and it seems to me that the length of his sentence should reflect this fact," said a letter signed by someone identifying herself as the mother of an FTX creditor.

Judge Lewis Kaplan, when he makes his decision at the end of the hearing Thursday, will weigh letters like that one, alongside the dozens of other messages, as part of his calculus. While the judge might allow statements from Bankman-Fried, FTX creditors or others during the hearing, he may base the bulk of his decision on the existing written record.

"There's a tension between the desires of the victims to see people punished and what's at risk for a defendant, and as a society, we have to ask where do we think the emphasis should be placed? There's always a balancing act between punishment, rehabilitation and determining all of the issues that we're trying to balance," Kudman said.

— Nikhilesh De

Welcome back to a limited-run issue of this newsletter. We'll be here through the rest of this week for sentencing.

Tomorrow, we're back in court for the actual sentencing hearing. Lawyers I've spoken to estimate the hearing could be as brief as an hour or take most of the day, so who knows long we'll actually be there. Depending on how Judge Kaplan decides to approach the hearing, we may hear from FTX customers, friends and family members of Bankman-Fried or the man himself.

We'll provide regular updates at CoinDesk.

— Nikhilesh De