The Department of Justice, which secured criminal convictions and a 25-year prison sentence against the crypto mogul Sam Bankman-Fried, has until Friday to make its case for why those verdicts are sturdy enough to stand.
The government’s push to lock in Bankman-Fried’s prison sentence comes after President Trump’s nominee for chairman of the Securities and Exchange Commission, Paul Atkins, ventured on a podcast last year regarding the mogul’s company: “The collapse of FTX was this international debacle that happened because, I think, the U.S. didn’t make our rules accommodating to this new technology.” The price of cryptocurrencies has surged since Trump’s victory.
Bankman-Fried, who made billions of dollars helming the FTX exchange and the Alameda Research investment fund before an $8 billion shortfall in customer funds wrecked his empire, has already argued to the Second United States Appeals Circuit that the trial that ended in those “guilty” verdicts was marred by due-process violations and “rulings and statements evincing partiality.”
In March, though, Judge Lewis Kaplan sentenced him to a quarter century behind bars, with no possibility of parole. That followed Bankman-Fried’s conviction in November on seven counts of criminal fraud. After sentencing, Attorney General Garland accused him of hiding crimes “behind a shiny new thing they claim no one else is smart enough to understand.”
FTX, headquartered in the Bahamas, was at one point the third-largest crypto-exchange currency in the world. Bankman-Fried was widely seen as a prodigy who strode amid the uncertain world of cryptocurrencies like a colossus. Some speculated that he could become the world’s first trillionaire. Others called him the “J.P. Morgan of crypto.” He knew presidents and mingled with actors and athletes. FTX sponsored quarterback Tom Brady, and almost inked an agreement with pop superstar Taylor Swift.
Now, Bankman-Fried sits behind bars at New York City’s Metropolitan Detention Center while the Second Circuit reviews his case on appeal. His convictions were secured in part by the government’s success in enlisting his colleagues to testify against him in exchange for lighter sentences. Particularly damaging was the testimony of his ex-girlfriend and the chief executive of Alameda Research, Caroline Ellison. Judge Kaplan cited her “very, very substantial cooperation.” She was sentenced to two years in prison.
Bankman-Fried has called for a new trial. In a brief filed in September, his lawyers write that “Sam Bankman-Fried was never presumed innocent. He was presumed guilty by the judge who presided over his trial.” Courts have for centuries viewed the presumption of innocence as a core component of the promise of due process vouchsafed in the 14th Amendment.
Bankman-Fried argues on appeal that Judge Kaplan erred in never allowing the jury to hear that FTX’s customers were eventually repaid in full following the exchange’s bankruptcy. Instead, he contends, the jury was furnished with a “false narrative that FTX’s customers, lenders, and investors had permanently lost their money.” Judge Kaplan also barred the defendant from arguing that he relied on legal advice while he ran FTX.
Judge Kaplan also mandated an unusual “pre-trial deposition” where Bankman-Fried was cross-examined by prosecutors outside the presence of a jury. His lawyers characterize that as an “unprecedented proceeding.” Bankman-Fried also argues that the law firm of Sullivan & Cromwell, formerly FTX’s outside counsel, acted improperly when it forced him out as chief executive officer and then simultaneously handled the bankruptcy proceedings and worked with the DOJ to build its case.
Sullivan & Cromwell shared with the Sun that it “does not intend to comment on the Bankman-Fried appeal.” The DOJ-appointed bankruptcy examiner, Robert Cleary, noted in May that he “has not seen any email or other document in which S&C expressly disclosed a crime to prosecutors or regulators.” He also said Sullivan & Cromwell was retained to represent FTX rather than Bankman-Fried.
The opposing case is made in an amicus curiae, or friend of the court, brief filed on Bankman-Fried’s behalf by a group of bankruptcy lawyers. They highlight the speed at which the bankruptcy proceedings occurred, calling it the “prosecutorial equivalent of breaking the sound barrier.” The result, they contend, is that Bankman-Fried “had no opportunity to present rebuttal evidence that the Debtors were never found to be insolvent or that FTX customers are in fact likely to receive almost 150% of their claims.”
Another amicus brief filed on behalf of Bankman-Fried argues that his diagnoses of autism and attention deficit disorder, “neurodivergent developmental conditions,” “posed serious challenges during proceedings in this case.” These conditions, the amici insist, meant that Bankman-Fried’s mannerisms were read at trial as conveying “guilt, furtiveness, or defiance” rather than “earnest efforts to provide complete, precise, and helpful responses.”
At sentencing, Judge Kaplan declared that when Bankman-Fried “wasn’t outright lying, he was evasive, hair splitting and dodging questions.” He added that “in 30 years on the bench” he had “never seen a performance quite like that.” At that same sentencing hearing,, Bankman-Fried’s lawyer protested that his client “doesn’t make decisions with malice in his heart. He makes decisions with math in his head.”