SBF repeatedly lied to get out of “supervillain” prison term, FTX CEO alleges

The CEO of FTX Trading, John Ray, sent a letter to Judge Lewis Kaplan Wednesday to correct what he called "callously" and "demonstrably false" claims that disgraced FTX founder Sam Bankman-Fried made in hopes of receiving a lighter sentence for crimes including defrauding FTX customers.

In a sentencing memo, Bankman-Fried asked the court to drastically slash his prison sentence from what he considered a "grotesque" 110-year maximum to five to six years. Prosecutors have suggested the sentence should be between 40 and 50 years, but Bankman-Fried claimed such a sentence painted him as a "depraved supervillain," Bloomberg reported.

The lightest sentence was appropriate, Bankman-Fried claimed, because the "most reasonable estimate of loss" and "harm" to customers, lenders, and investors is "zero."

According to Ray, "Bankman-Fried continues to live a life of delusion." While Ray's team continues to work to recover funds lost, which has been estimated around $10 billion, the total amount of stakeholder claims filed is $23.6 quintillion dollars.

"One quintillion is one billion billions," Ray told Kaplan. "It is the number 1 followed by 18 zeros. The task of addressing filed claims and reducing them to their proper and 'allowed' amount is monumental. Mr. Bankman-Fried assumes this is a breeze. He is wrong, very wrong."

In one of the letter's most heated moments, Ray explained why Bankman-Fried is also wrong to claim that FTX is "solvent and safe":

Vast sums of money were stolen by Mr. Bankman-Fried, and he was rightly convicted by a jury of his peers. That things that he stole, things he converted into other things, whether they were investments in Bahamas real estate, cryptocurrencies or speculative ventures, were successfully recovered through the enormous efforts of a dedicated group of professionals (a group unfairly maligned by Mr. Bankman-Fried and his supporters) does not mean that things were not stolen. What it means is that we got some of them back. And 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 nonexistent.

Ray appears to be frustrated that Bankman-Fried chose to blame his team currently leading FTX and managing bankruptcy claims, as well as lawyers—labeling them as "enemies"—to dodge responsibility for FTX crimes.

Those crimes include: wire fraud on customers of FTX, conspiracy to commit wire fraud on customers of FTX, wire fraud on lenders to Alameda Research, conspiracy to commit wire fraud on lenders to Alameda Research, conspiracy to commit securities fraud on investors in FTX, conspiracy to commit commodities fraud on customers of FTX in connection with purchases and sales of cryptocurrency and swaps, and conspiracy to commit money laundering.

"Bankman-Fried was willing to consider any narrative, including wildly conflicting narratives, that could potentially save him from this day of reckoning," Ray told Kaplan.

Conflicting narratives Bankman-Fried considered were either focusing "exclusively on the fact" that he "could give value back to customers," and "the Chapter 11 team is destroying it" or "go strong with the message" that "I'm really glad the Chapter 11 team has stepped in, they're great, and even better I have funding that can help make customers more whole while the Chapter 11 team does what is needed to clean things up."

Instead of being "enemies" stopping FTX customers from clawing back all the funds stolen, Ray told Kaplan that his team "worked tirelessly in the months following the collapse to institute governance, controls, and to preserve and protect assets."

"The value we hope to return to creditors 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," Ray told Kaplan, adding that "achieving anticipated recovery levels" that Bankman-Fried suggested all FTX victims are expecting is actually "by no means assured."

"I am quite confident that but for the work of a very large team of dedicated individuals, billions of dollars would have been lost or stolen and the recoveries to customers would be a fraction of their expected recovery," Ray told Kaplan. "I make this statement not to curry sympathy or thanks, but to accurately report on the reasons why the FTX debtors may soon be in a position to compensate victims for some of the losses caused by Mr. Bankman-Fried."

CEO: Five times SBF lied to reduce sentence

Ray broke down for Kaplan every time that Bankman-Fried allegedly misled the court in order to push for a lighter sentence.

SBF “falsely” claimed FTX customers should “get back all their money”

In his sentencing memo, Bankman-Fried cites 14 lines of a transcript from a January hearing before the Bankruptcy Court. Bankman-Fried claimed that this snippet of the hearing showed that "debtors' counsel in the consolidated FTX and Alameda bankruptcy proceeding stated in summary that customers and creditors who can prove their losses are expected to get back all their money."

Ray alleged that Bankman-Fried offered Kaplan a "reckless" misinterpretation of this hearing.

"Victims will never be returned to the same economic position they would have been in today absent his colossal fraud," Ray told Kaplan. "Even the best conceivable outcome in the Chapter 11 proceeding will not yield a true, full economic recovery by all creditors and non-insider equity investors as if the fraud never happened."

Some victims, for example, are "extremely unhappy" about stolen bitcoins now that bitcoin prices have recently reached all-time highs. "They believe they should receive something closer to today's value," Ray said.

"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," Ray wrote. "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. For that reason, they are not available to be returned in-kind to his victims."

Bankman-Fried also ignores that "any material return to stockholders" who purchased $2 billion in preferred stock and over $100 million in common stock—"is highly unlikely," Ray said.

SBF “falsely” claimed he could recover more value

Bankman-Fried claimed that he could help FTX customers and creditors recover more value than the team behind the Chapter 11 bankruptcy petitions that Bankman-Fried "contends should never have happened," Ray said.

But these Chapter 11 petitions "helped stop the damage brought about by the disastrous collapse caused by Mr. Bankman-Fried crimes," Ray said, and secured relief, without which "recovery rates would have been substantially lower."

"There should be no delusion that because assets have increased in value or that the professionals have been able to recover funds and assets taken or stolen from the estate, that there was no need for the Chapter 11 cases," Ray told Kaplan. "It is because of the Chapter 11 cases that we had assets which could rebound in value, and the court process that allowed the estate to chase wrongdoers that now enables the distribution of monies to customers."

SBF “actively worked to hinder” recovery of stolen assets

Ray alleged that after Bankman-Fried adopted the strategy of attacking the Chapter 11 team, the FTX founder "actively worked to hinder the preservation of assets by, for example, transferring assets to the Bahamas as part of his self-professed strategy to win a battle to deprive the Bankruptcy Court of jurisdiction and by requesting reinstatement of his credentials to access the FTX systems."

According to Ray, "This is in stark contrast to the often repeated theme that if only we would have engaged with Mr. Bankman-Fried, the creditors would have been better off. Only by cutting off Mr. Bankman-Fried was the Chapter 11 team able to stop the bleeding. Of this, I have no doubt."

SBF’s effective altruism was a “lie”

Bloomberg described Bankman-Fried as "a champion of effective altruism," where people's choices are judged by how much good they cause in the world.

His ex-girlfriend, former Alameda Research CEO Caroline Ellison, testified that Bankman-Fried's beliefs made him more inclined to risk-taking.

"Bankman-Fried once spoke of a coin-flip scenario where if the coin landed on tails, the world would end," Ellison told Kaplan. "But if the coin landed on heads, 'the world would be twice as good,'" which is why he told her that "he would take the bet if there were a chance of making the world better."