Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Sam Bankman freed sentencing is coming out. He has sent
Speaker 2: us to twenty five years in prison after being convicted
Speaker 2: of fraud over the ft X collapse. Again, he's been
Speaker 2: send us to twenty five years in prison after being
Speaker 2: convicted of fraud over the ft X collapse. Not the
Speaker 2: Bernie made off Nope situation, but then not the ten
Speaker 2: eleven years of sort of the lower white collar crime.
Speaker 1: Yeah, they're the defense was asking for, you know, six
Speaker 1: and a half to seven years. And again the defense
Speaker 1: the prosecution was looking for something in a forty to
Speaker 1: fifty percent range and maybe splitting the difference. Hey, Barry,
Speaker 1: just let you know, we got about a minute left here.
Speaker 1: Just put into context if he can, in the context
Speaker 1: of Bankman freed his sentencing here for twenty five years.
Speaker 2: Yeah, what's your reaction?
Speaker 1: What's your reaction?
Speaker 3: So, you know, I'm more in the Michael Lewis camp
Speaker 3: than than in I love Zeke Fox's book, but the
Speaker 3: you know, when you look at everybody having recovered all
Speaker 3: of their assets, the story perfect example of narrative fallacy.
Speaker 3: The story of this guy is a genius who has
Speaker 3: figured out how to make crypto modernized, and then oh,
Speaker 3: it turns out that they're foamingling funds. Yep, and they're
Speaker 3: kind of running everything on the fly. It's amazing how
Speaker 3: one narrative story failed and was replaced by another. This
Speaker 3: is very similar to Fairhose and what happens there. We
Speaker 3: love these stories and they often deceive us.
Speaker 1: Yep. Absolutely, Hey, Parry, thank you so much for joining us.
Speaker 1: Barry Rodholts, host of Master's in Business on Bloomberg Radio
Speaker 1: and the founder of Rodholts Wealth Management. Again the key
Speaker 1: data point here, as Alex just mentioned, Sam Banking Freed
Speaker 1: sentenced to twenty five years in prison, ordered to four
Speaker 1: foot more than eleven billion dollars. Let's bring in June Grosso,
Speaker 1: Bloomberg's legal analy She joins us here on Bloomberg Interactive
Speaker 1: Broker Studio. Initial reactions juram Well.
Speaker 4: I think it's a very tough sentence, but it was
Speaker 4: expected to Judge Kaplan before the trial said that he
Speaker 4: increased the sentence in guideline range because he found that
Speaker 4: Sam Bankminfried had perjured himself at his trial. He found
Speaker 4: that he committed witness tampering. If you remember, he put
Speaker 4: him into prison before trial, despite this huge bail package,
Speaker 4: because he felt that he was campering with a witness,
Speaker 4: and he said there was a loss to investors of
Speaker 4: one point seven billion dollars, despite the fact that people
Speaker 4: have said that the investors are going to get paid
Speaker 4: back most of them. He said something that I thought
Speaker 4: was kind of it was chilling. So the defense was saying, look,
Speaker 4: let him out early. He could be like a Michael Milket.
Speaker 4: He can come back because he wants to do good
Speaker 4: in the world. He has this ability. And the judge
Speaker 4: said that there's a risk that this man will be
Speaker 4: in a position to do something very bad in the future,
Speaker 4: and it's not a trivial risk. Part of my sentence
Speaker 4: will be for the purpose of disabling him to the
Speaker 4: extent that it can be appropriately done to him for
Speaker 4: a significant period of time. So the judge just didn't
Speaker 4: buy his good in tensions, he said his intentions were
Speaker 4: to gain power.
Speaker 2: But on the flip side, I mean, he wasn't sentenced
Speaker 2: one hundred and fifty years, so like he will still
Speaker 2: have a life when he gets out right. Just if
Speaker 2: you're just joining us now, Sam bankmund free to send
Speaker 2: us twenty five years in prison he will also be
Speaker 2: ordered to forfeit more than eleven billion dollars. So presumably,
Speaker 2: like do you serve that whole twenty five years?
Speaker 4: You serve eighty five percent of the time, and no
Speaker 4: one know the request from the Bureau of Probation for
Speaker 4: one hundred years was ludicrous. No one would be sentenced
Speaker 4: to that. I mean, think about Bernie Madoff. That's like
Speaker 4: a worst scam that you can think of. So he
Speaker 4: was like, he's like the high end of the scale.
Speaker 4: The government was asking for forty to fifty years. That's
Speaker 4: also very high. I mean, you know, think about what
Speaker 4: happened here. But I think the judge is also trying
Speaker 4: to send a message to you know, this has been
Speaker 4: called the greatest financial fraud in the US history by
Speaker 4: the US Attorney for the Southern District of New York.
Speaker 4: So the judge is trying to send a message. But
Speaker 4: this judge has been so tough through the entire trial.
Speaker 4: If you remember, before bankmin Free testified, he had him
Speaker 4: on the stand for three hours outside the presence of
Speaker 4: the jury. He denied almost all of the requests that
Speaker 4: the defense made for motions to introduce different defenses that
Speaker 4: he wanted to present to the jury different expert witnesses.
Speaker 4: So he's been tough on him since the very beginning.
Speaker 4: But I you know, I thought he should get ten years,
Speaker 4: so maybe he'll get twenty years. In point of fact,
Speaker 4: he got twenty five years.
Speaker 1: Interesting, do we know what type of facility he will
Speaker 1: serve this time in? Is this a you know, minimum maximum?
Speaker 5: What did they say?
Speaker 4: I mean, really he's a white collar criminal. There's all
Speaker 4: kinds of evidence that in when he's been in prison,
Speaker 4: and he's been in rikers, that he's been helping to
Speaker 4: teach some of the inmates to help with their gged diplomas,
Speaker 4: and that his one of his roommates show he said
Speaker 4: his salemates is a former police officer, and he said that,
Speaker 4: you know, he really is getting along well in prison
Speaker 4: and he's trying to make you do the best he can.
Speaker 4: I don't this will be up to the Bureau of Prisons.
Speaker 4: It's not gonna be up to the judge where he goes.
Speaker 4: So they're going to do a report after this and determine.
Speaker 4: And also I think he might go to a facility
Speaker 4: in California so he could be near his family.
Speaker 2: And just to reiterate if you're just joining us FTX
Speaker 2: CO finder Sam Beckmanfried has now been sentenced so twenty
Speaker 2: five years in prison for stealing billions of dollars from customers,
Speaker 2: marking the final chapter in this case that has just
Speaker 2: captivated pretty much everybody. He also has been ordered to
Speaker 2: forfeit eleven billion dollars. What happens now? Is there any
Speaker 2: other thing? Appeal convo? What happens next?
Speaker 4: There is an appeal? I mean the defense is going
Speaker 4: to appeal this. Appeals are very hard in criminal cases
Speaker 4: and a lot of the decisions that the judge made
Speaker 4: are considered within a trial judge's discretion, so it's a
Speaker 4: difficult appeal. But yes, they were an appeal. He's hired
Speaker 4: new lawyers. He changed his lawyers from the trial, so
Speaker 4: he has representing him now more Ark muc Casey, who's
Speaker 4: a very well known criminal defense attorney. He represented Trevor
Speaker 4: Milton and got him a sentence of four years when
Speaker 4: the prosecution wanted eleven years, so he.
Speaker 1: Didn't So would he be appealing the verdict or just
Speaker 1: the sentence?
Speaker 4: The verdict? He will be appealing the verdict. What happened
Speaker 4: at trial? You know the charges, the different for example,
Speaker 4: what I just said, the judge didn't allow him all
Speaker 4: these different expert witnesses that he wanted to testify to
Speaker 4: present defenses, and the judge cut all that off. So
Speaker 4: that will be I think the basis of the appeal
Speaker 4: and you know, whatever the defense can can drag up.
Speaker 2: I've also seen things like people are getting their money back,
Speaker 2: the recovery rate is going to be Okay, he has autism,
Speaker 2: he can't like that should be reduced, like does that
Speaker 2: hold water? Like what is that?
Speaker 4: Well, that's what the defense argued. The judge said, he
Speaker 4: is a hot, very high achieving, autistic person, which means
Speaker 4: he's capable of huge accomplishments. But then he turned that
Speaker 4: around and said, wait, we have to be careful of
Speaker 4: those accomplishments. He's a dangerous person. So that was almost
Speaker 4: used against him by the judge. But yeah, there was
Speaker 4: there were There was letters to the judge about his
Speaker 4: autism and how that makes him socially awkward. They had
Speaker 4: experts testifying about it, but the judge didn't buy it.
Speaker 4: The defense also brought up the fact that most of
Speaker 4: the investors, it looks like, are going to be made whole.
Speaker 6: The judge didn't buy that either.
Speaker 7: Despite the judge said that, he said that he's really
Speaker 7: let me see, just that he found that the loss
Speaker 7: to investors was one point seven billion and that the
Speaker 7: fact that they'll be paid in full is misleading, it's
Speaker 7: logically flawed.
Speaker 4: And it's speculative. So everything that the defense put out there,
Speaker 4: the judge just rejected.
Speaker 1: So next steps here think he goes back to this
Speaker 1: this peditentiary, I guess the detention center in Brooklyn.
Speaker 4: I think he will go back there for a bit
Speaker 4: until they decide, you know, where he is going to
Speaker 4: be in prison and where he's going to serve his sentence.
Speaker 4: And in the meantime, you know, it takes a while
Speaker 4: for an appeal to go through. You have to get
Speaker 4: all the documents and the trial transcripts and everything, so
Speaker 4: that's going to be a while. Then the next thing
Speaker 4: we'll hear about probably is where he's going to spend
Speaker 4: his sentence and also you know what the appeal is
Speaker 4: going to be about. That'll probably be you know, months
Speaker 4: and months, maybe a year down the road.
Speaker 1: Hey joining us also in our Bloomberg interarctor broker Stugo
Speaker 1: Peter Jeffrey joined us Bloomberg Legal editor Jeffrey, what's your
Speaker 1: takeaway from the sentence of twenty five years?
Speaker 5: Well, you could tell, as the judge prepared delivered his
Speaker 5: remarks before pronouncing the sentence, that it was going to
Speaker 5: be very stiff, nothing like the six and a half
Speaker 5: that the defense asked for, but not at the range
Speaker 5: of the forty to fifty the government wanted. It was
Speaker 5: sort of right in the middle. The judge hit him
Speaker 5: with three hundred months. We did some quick calculations. It
Speaker 5: was twenty five years, and it is just what the
Speaker 5: judge and had to do. It's a stiff deterrent to
Speaker 5: anybody who plays outside the lines in a sensitive area
Speaker 5: like crypto. And as you were saying, the judge just
Speaker 5: had no patience for the nonetheless excellent defense. A sentencing
Speaker 5: statement that his lawyer mckayzy made it was it was
Speaker 5: one of the best we'd heard. And yet the judge
Speaker 5: thought this won't fly. Look at what he did, and
Speaker 5: he didn't believe.
Speaker 4: He said that he was sorry, but the judge said,
Speaker 4: he has no apparent remorse, so he didn't believe the
Speaker 4: words that were coming out of SBF's mouth that this,
Speaker 4: I mean he made a statement, a twenty minute statement
Speaker 4: in which he said that, you know, he was sorry
Speaker 4: for what happened. I'm sorry about what happened. It haunts
Speaker 4: me every day. I made a series of bad decisions.
Speaker 4: They weren't selfish decisions, they weren't selfless decisions. They were
Speaker 4: bad decisions. And the judge just, yeah, didn't believe anything.
Speaker 5: And maybe most strikingly to me, the judge said, I've
Speaker 5: got to give you a sentence that is going to
Speaker 5: make sure you are not out on the street doing
Speaker 5: this again anytime soon. So we were all sitting around thinking, well,
Speaker 5: he's thirty two. That means he's getting at least twenty
Speaker 5: and you know, it's not a violent crime, but the
Speaker 5: judge was talking in terms almost in terms of the
Speaker 5: violence bankman Free did to investors, customers, employees. Yeah.
Speaker 2: Yeah, if you're just joining us, we just want to
Speaker 2: update you on the news. FTX co founder Sam bank
Speaker 2: And Freed has been sentenced to twenty five years in
Speaker 2: prison for stealing billions of dollars from customers. He's also
Speaker 2: been ordered to remit about eleven billion dollars. As we
Speaker 2: just did some quick math there, he'll be fifty seven now,
Speaker 2: when he gets out of prison. Joining us here is
Speaker 2: Peter Jeffrey, Bloomberg Legal editor joins us in June Grasso,
Speaker 2: a Bloomberg legal analyst. Peter, can you give us some
Speaker 2: just perspective and background here on this kind of sentencing,
Speaker 2: these kind of cases and kind of how we get here?
Speaker 5: Well, just thinking about it, Elizabeth Holmes got a little
Speaker 5: over eleven years for the Pharaohnose froue.
Speaker 2: Peter, gonna need you talking to them mind, Oh, I'm.
Speaker 5: Sorry, Elizabeth Holmes got it. That would help, right, got
Speaker 5: more than eleven years for the Pharohnise fraud. Bernie made
Speaker 5: off one hundred and fifty. And so this one is
Speaker 5: a stiff sentence that, as the judge suggested, I mean,
Speaker 5: you know, we did the math, like like you said,
Speaker 5: he'll be fifty seven when he gets out.
Speaker 7: And yeah, yeah, Paul is a prefect.
Speaker 5: But right, if you're looking for a sentence that will
Speaker 5: stop somebody from pursuing this kind of fraud again, a
Speaker 5: quarter of a century will do it, all.
Speaker 1: Right, So Juna, give us a sense of timing. Just
Speaker 1: as to the.
Speaker 4: Appeal, it's hard to it's hard to say how long
Speaker 4: the appeal will take. Because they have to. It's up
Speaker 4: to the defense to prepare the papers and to But
Speaker 4: I mean, I think it'll be months, maybe, I mean
Speaker 4: even a.
Speaker 7: Year, Peter.
Speaker 5: I think it could be.
Speaker 4: It would be a year. Of course, they'll be trying
Speaker 4: to put it in faster, but and then the prosecution
Speaker 4: gets a chance to respond. It's a long, long process.
Speaker 4: He'll have served years before we hear about what the
Speaker 4: appeal result is. And I mean, I don't think I mean,
Speaker 4: I think it's going to be a hard appeal to make.
Speaker 2: Well, I mean to the eleven billion dollars. Also, June, like,
Speaker 2: where is that?
Speaker 4: Like, I don't know where that is.
Speaker 5: I don't think he has eleven billion.
Speaker 4: He's not supposed to have eleven billion at this point.
Speaker 1: All Right, we're going to continue this conversation, but we're
Speaker 1: going to hand that off to our good friend Joe
Speaker 1: Matthew Balance of power. Joe's down in Washington, DC, and
Speaker 1: we're going to keep June in Peter as well. So Joe,
Speaker 1: big news here coming out of Lower Manhattan.
Speaker 8: That's for sure, Paul.
Speaker 4: Thanks.
Speaker 8: Of course, the story that's resonated here in Washington for
Speaker 8: a lot of different reasons and continues to when we
Speaker 8: talk about crypto on Capitol Hill, the idea of regulating this,
Speaker 8: the stand that lawmakers take on this issue. I'm glad
Speaker 8: to have Kaylee Lines at my side today. Kaylee has
Speaker 8: actually been covering this SBF story from the very beginning,
Speaker 8: remembering she was hosting our Crypto Show when that began,
Speaker 8: and has since come down to Washington to cover financial
Speaker 8: regulations and of course crypto. Kaylee, this this is a
Speaker 8: Washington's in a lot of ways that people might not
Speaker 8: see on the surface, knowing millions of dollars were donated
Speaker 8: to candidates in the way that SBF tried to influence
Speaker 8: a lot of races.
Speaker 6: Yeah, Sam Bankminfreed was incredibly politically active. He made donations
Speaker 6: on a bipartisan basis, but as you say, it was
Speaker 6: a significant amount of money, and he spent a lot
Speaker 6: of time physically here in Washington actually lobbying, not just
Speaker 6: on behalf of FTX, but he really became kind of
Speaker 6: a poster child and spokesperson for the industry, really advocating
Speaker 6: for crypto as a whole legislatively on the Hill, and
Speaker 6: a lot of lawmakers were quite burned ultimately when it
Speaker 6: turned out that FTX ultimately collapsed, and that has certainly
Speaker 6: continued to resonate as we talk about the difficulty of
Speaker 6: actually getting crypto legislation through the industry has had to
Speaker 6: work a lot harder on their lobbying efforts to try
Speaker 6: to delineate FTX from everything else in the industry, considering
Speaker 6: FTX was in many ways a centralized exchange, not necessarily
Speaker 6: the same decentralized model has a lot of this, but
Speaker 6: obviously this to a certain point will bring some closure
Speaker 6: to this. Sam Bankman freed specific case, keeping in mind
Speaker 6: that he was initially charged with violating campaign finance laws.
Speaker 6: They ultimately dropped the charge, so of the seven charges
Speaker 6: he was actually convicted of back in November, including conspiracy
Speaker 6: to commit fraud, et cetera, campaign finance violations were not
Speaker 6: in there. So this sentencing has nothing to do with
Speaker 6: his political activity, even if it's still had it.
Speaker 8: That's a really important point though, certainly for the people
Speaker 8: who are interested in politics and are used to what
Speaker 8: we talk about on this program. Had that charge stayed
Speaker 8: in place, that could have outed a lot of people
Speaker 8: in Washington.
Speaker 6: And certainly, yeah, it could have brought great politically political
Speaker 6: difficulty for many individuals, not just for Sam Bankman Free,
Speaker 6: because theoretically, had that been added, you could be talking
Speaker 6: about a sentence beyond twenty five years today. That said, still,
Speaker 6: this twenty five year sentence is significantly lower than what
Speaker 6: prosecutors were asking for. Obviously, they were pitching for forty
Speaker 6: to fifty years because of the scale of this fraud
Speaker 6: that they were describing, one of the largest and modern
Speaker 6: American financial history, with over a million victims, obviously ten
Speaker 6: billion dollars ultimately in terms of the size of the fraud.
Speaker 6: But we do have to keep in mind here that
Speaker 6: Sam bankman Fried is thirty two years old, as Alex
Speaker 6: and Paul and June were just discussing, So this is
Speaker 6: going to take him well into late middle age ultimately.
Speaker 6: If this sentence stands, obviously there will be an appeal process,
Speaker 6: but who knows how that will shake down.
Speaker 8: It's just amazing when you think about just the way
Speaker 8: human nature is at play in stories like these, Considering
Speaker 8: the paradise he was living in, he had it made.
Speaker 8: He was in the Bahamas living the life he dreamt of.
Speaker 8: He's been since living in Riker's Island.
Speaker 6: Yeah, I mean, he was a billionaire many times over,
Speaker 6: and now of course is part of this. He also
Speaker 6: has not just been sentenced to twenty five years in prison,
Speaker 6: but forfeiting eleven billion dollars and unclear where that eleven
Speaker 6: billion dollars comes from. All of his wealth was tied
Speaker 6: up in FTX, which is now a bankrupt and of
Speaker 6: course everything that can be salvage from that bankruptcy proje
Speaker 6: that process is going to be distributed to the customers
Speaker 6: and users who had money lost in this that, if
Speaker 6: any thing, might be. One of the more redeeming aspects
Speaker 6: of the argument that he and his legal team were
Speaker 6: able to make to Judge Kaplan was that a lot
Speaker 6: of these people will ultimately get most of their money
Speaker 6: back throughout that bankruptcy prodcast process, and so that may
Speaker 6: have helped him here. But yeah, the journey of Sam
Speaker 6: Bankman freed from this meteoric rise to one of the
Speaker 6: most well known individuals hanging out with Jaseel Bunchin and
Speaker 6: Tom Brady and yeah, right, incredibly popular, certainly a well
Speaker 6: known presence here in Washington, to now someone who is
Speaker 6: going to be in prison for a very large chunk
Speaker 6: of his life. It's a remarkable.
Speaker 8: Story spending time with Kaylee Lyons here a little earlier
Speaker 8: than usual on balance of power. If you're just joining
Speaker 8: a sentencing day for SBF and it is twenty five
Speaker 8: years in prison, I think June Grosso was suggesting that
Speaker 8: that could be knocked down. But that's the headline right now.
Speaker 8: And of course, to Kaylee's point, they were asking for
Speaker 8: forty to fifty years. So just for a little bit
Speaker 8: of perspective on this, you've been saying, of course asking questions, Kaylee,
Speaker 8: of lawmakers and regulators about cryptos. You moved to Washington.
Speaker 8: This is colored that debate in a lot of ways,
Speaker 8: where lawmakers feel free to say, you know what, this
Speaker 8: is a home for criminal activity, this is not a
Speaker 8: serious investment. Before this happened, there was more momentum, it seemed,
Speaker 8: on some of these issues. Where's any of this going now?
Speaker 6: Well, it's a great question. Where it's going in the
Speaker 6: House is probably very different than ultimately the question of
Speaker 6: whether it will pass the Senate or become law, because
Speaker 6: in the House you do have much more advocacy for
Speaker 6: the crypto industry in some of those lawmakers, including the chair,
Speaker 6: at least for now, with the Financial Services Committee, Patrick McHenry,
Speaker 6: and that committee has advanced multiple pieces of legislation that
Speaker 6: would in some ways perhaps legitimize the industry more by
Speaker 6: giving them the regulatory clarity they've been asking for, delineating
Speaker 6: what the CFTC or the SEC would have control over,
Speaker 6: including things to stable coins. Not all of this, of course,
Speaker 6: related to the business that FTX was conducting, but it
Speaker 6: has been used as an example for the counter arguments.
Speaker 6: Those who are more cryptoskeptical aren't in the majority in
Speaker 6: the House, but they are in the Senate. Shared Brown Is,
Speaker 6: obviously the head of the Senate Banking Committee, has been
Speaker 6: very reluctant to talk about any of this kind of
Speaker 6: legislation in any way that isn't more critical and skeptical
Speaker 6: of the industry. And he is facing a challenger of
Speaker 6: a pro crypto advocate in his Senate race in Ohio
Speaker 6: in November, Bernie Marino. So you're still seeing the politics
Speaker 6: around this industry playing out, and that goes well beyond
Speaker 6: just the legacy of zam Bankman.
Speaker 8: Freed got you. June Grosso is standing by a host
Speaker 8: of Bloomberg law in New York. Before we moved to
Speaker 8: a conversation with Governor Glegg ned Lamont of Connecticut. I
Speaker 8: just want to bring June in on this specific to
Speaker 8: the sentence. June, what options does he have now you've
Speaker 8: referred to an appeal. What happens next?
Speaker 4: Well, he'll have to serve eighty five percent of that
Speaker 4: sentence unless he wins on appeal, and of course the
Speaker 4: defense is going to appeal. He has changed his lawyers
Speaker 4: since the trial. He's hired Mark Mukasey, very famous, well
Speaker 4: known former pro federal prosecutor in New York. He represented
Speaker 4: Trevor Milton and did much better on the sentence. Treveror
Speaker 4: Milton got four years as opposed to the eleven that
Speaker 4: the prosecution wanted. So the next thing is an appeal
Speaker 4: and they'll go back through the trial there and find
Speaker 4: what they consider to be legal errors, and probably a
Speaker 4: lot of that will be some of the decisions that
Speaker 4: the judge made prior to trial. Even that limited sharply
Speaker 4: limited the defenses that Sam bankmin Freed could assert a trial,
Speaker 4: limited the expert witnesses he wanted to call. He really
Speaker 4: limited his case to a great extent. So I think
Speaker 4: that will be the basis of the appeal. It will
Speaker 4: be probably years before we know what you know how
Speaker 4: that appeal turns out, because it takes quite a bit
Speaker 4: of time to file the papers and have the responses.
Speaker 4: That's where we stand.