FTX’s caretaker chief executive has branded Sam Bankman-Fried a deluded criminal who masterminded a “colossal fraud”, and accused the bankrupt cryptocurrency exchange’s founder of lying about the losses incurred by former customers in an attempt to reduce his sentence.
In a fiery letter to Judge Lewis Kaplan, who is due to pass sentence next week, John Ray said Mr Bankman-Fried had run FTX “with hubris, arrogance and a complete lack of respect for the basic norms of the law, which is all the more inexcusable given his privileged upbringing”.
He said the contention by the 32-year-old’s lawyers that the “harm to customers, lenders and investors is zero” was “categorically, callously and demonstrably false”.
Prosecutors are seeking a 40-50 year sentence for Mr Bankman-Fried, who was convicted on seven counts of fraud and money laundering last year related to the collapse of FTX and an affiliated hedge fund, Alameda Research.
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His counsel have suggested their client deserves a sentence of no more than 6½ years in total, primarily because FTX’s victims would be repaid in full through the bankruptcy proceedings.
Mr Ray, who once oversaw the restructuring of Enron, rubbished that claim, and said that what had been recovered had only occurred because his “very large team” had spent “over a year stewarding the estate from a metaphorical dumpster fire to ... [an entity] that will return substantial value to creditors”.
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He added that value “would not exist without the tens of thousands of hours that dedicated professionals have spent digging through the rubble of Mr Bankman-Fried’s sprawling criminal enterprise to unearth every possible dollar, token or other asset that was spent on luxury homes, private jets, overpriced speculative ventures, and otherwise lost to the four winds”.
Mr Bankman-Fried’s lawyers had referred to a hearing in the bankruptcy proceedings from January, in which a lawyer for FTX told the court that he expected customers “will eventually be paid in full”.
[ S seeks up to 50-year sentence for FTX founder Sam Bankman-FriedOpens in new window ]
But Mr Ray said Mr Bankman-Fried had mischaracterised that statement, and that his victims would “never be returned to the same economic position they would have been in today absent his colossal fraud”.
Because creditors will be paid out based on the value of their deposits at the time of FTX’s bankruptcy in November 2022, someone who held bitcoin at that time would get a payout worth 400 per cent less than the cryptocurrency’s current value, Ray said.
Mr Ray said he could not return the actual crypto to customers because, by way of example, “when I took over as CEO, there were only 105 bitcoins left on the FTX.com exchange, against customer entitlements of nearly 100,000 bitcoins”.
“Why were the bitcoins missing? A jury has concluded beyond a reasonable doubt that Mr Bankman-Fried stole them and converted them into other things,” the filing said.
In their sentencing submission, government prosecutors underlined that Bankman-Fried had committed several other alleged crimes that were not even introduced during the trial last year, including making illegal campaign donations.
Mr Ray struck a similar note, emphasising that Mr Bankman-Fried “continues to live a life of delusion” and that “there are plenty of things we did not get back, like the bribes to Chinese officials or the hundreds of millions of dollars he spent to buy access to or time with celebrities or politicians or investments for which he grossly overpaid having done zero diligence”.
“The harm was vast. The remorse is non-existent. Effective altruism, at least as lived by Samuel Bankman-Fried, was a lie.”
A spokesperson for Mr Bankman-Fried declined to comment. – Copyright The Financial Times Limited 2024
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