FTX Fraudster Sam Bankman-Fried Transferred to New Prison, Forfeits $11B

Key Takeaway

• Sam Bankman-Fried, convicted of fraud and sentenced to 25 years, is being transferred to a new prison, likely in California.
• The transfer process could take over a month despite the judge's recommendation to keep him in New York for appellate counsel access.
• Bankman-Fried was ordered to forfeit $11 billion after FTX collapsed in November 2022 due to financial instability at Alameda Research.

Sam Bankman-Fried's Prison Transfer

Convicted crypto fraudster Sam Bankman-Fried is being relocated from his current New York prison to an undisclosed facility, likely in California, as he prepares to appeal his 25-year sentence. The transfer, which could take over a month due to procedural delays, comes despite a judge's recommendation to keep him in New York to facilitate access to his appellate counsel. Bankman-Fried, who was sentenced in March for seven counts of fraud, conspiracy, and money laundering, was also ordered to forfeit $11 billion. His FTX exchange, once the world's third-largest, collapsed in November 2022 following revelations about its sister company, Alameda Research.

Ryan Salame's Sentencing

Former FTX executive Ryan Salame faces a potential prison sentence of five to seven years for his role in the multibillion-dollar collapse of the cryptocurrency exchange. Federal prosecutors argue that Salame's crimes, including a significant campaign finance offense and operating an unlicensed money transmitting business that handled over $1 billion, warrant a substantial sentence. Salame's lawyers, however, contend that he should serve no more than 18 months, highlighting his cooperation with authorities and personal circumstances.

Salame, who joined FTX's sister hedge fund Alameda Research in 2019, became the CEO of FTX's Bahamian subsidiary in 2021. Prosecutors allege that he facilitated customer deposits through a US bank account without proper licensing and acted as a straw donor for political contributions. Salame's attorneys emphasize his early alert to Bahamian authorities about potential fraud and his efforts to start anew, including raising his first child and seeking treatment for substance abuse.

Salame's plea deal includes forfeiting $6 million in assets, and his sentencing memo features 28 letters from friends and family, including former Alameda Research co-CEO Sam Trabucco. The case is being heard in the US District Court, Southern District of New York.

Neil Phillips' Sentencing Recommendation

Federal prosecutors have recommended a two-year prison sentence for Neil Phillips, co-founder of Glen Point Capital, for manipulating the US dollar-South African rand exchange rate. Phillips was convicted of commodities fraud in October, with prosecutors accusing him of orchestrating $725 million in trades to boost the rand's value and trigger a $20 million option payout.

Prosecutors argue that a two-year sentence and a $1 million fine are necessary to reflect the severity of Phillips' crime and deter others from committing similar fraud. They contend that a sentence without prison time would not match the planning involved in the offense and the financial gain from the fraud. Phillips' defense team argues for no prison time, citing his month-long jail stint and ongoing litigation in a foreign country. Federal sentencing guidelines suggest a much harsher sentence of 78 to 97 months in prison. The case is being heard in the US District Court, Southern District of New York.

Key Witness in Bill Hwang's Trial

Jurors in Bill Hwang’s fraud and market manipulation trial are set to hear from Scott Becker, Archegos Capital Management’s former chief risk officer, who is expected to testify as early as Monday. Becker, who has already pleaded guilty, will serve as a cooperating witness for the prosecution. He was a primary contact for banks and has been recorded reassuring them about Archegos' stability even as the firm was collapsing.

Becker’s testimony is crucial as it promises to provide jurors with an inside look at what prosecutors claim was a sophisticated conspiracy to defraud banks and manipulate markets. According to prosecutors, Becker was part of a “corrupt core” at Archegos, which included Hwang, Halligan, and former head trader William Tomita. Tomita, who has also pleaded guilty, is another key witness for the prosecution.

Misleading Banks

Becker’s involvement in misleading banks has been highlighted through various testimonies. Former UBS Group AG risk manager Bryan Fairbanks testified about a March 10, 2021, call in which Becker claimed that Archegos could liquidate in 30 days if necessary and reassured him that Archegos’ largest position was with UBS. However, it turned out that Archegos had similar positions with other banks, leading to a catastrophic liquidation by the end of March 2021 when margin calls were missed.

Jennifer Miranda, a managing director at Jefferies Financial Group, also testified that Becker reassured her in March 2021 that Archegos had billions in unencumbered cash and could liquidate its positions within a month if necessary. Based on this assurance, Miranda partially approved a $240 million withdrawal request from Archegos. Two days later, Archegos was insolvent, costing Jefferies $40 million.

In his April 2022 guilty plea, Becker admitted to lying to financial institutions about Archegos’ holdings to get them to extend credit or participate in swap transactions. He stated, “I falsely represented to certain financial institutions that Archegos’s largest position was approximately 35% of its net asset value when, in fact, I knew the largest position had grown to a significantly higher percentage than that.”