Divergent Fates: FTX and 3AC Founders Face Potential Prison Sentences

Sam Bankman-Fried, the former head of the collapsed FTX, has rejected a prosecutor’s proposed 50-year sentence, while Kyle Davies, co-founder of the bankrupt hedge fund Three Arrows Capital (3AC), is determined to avoid prison at all costs.

Supervillain

On March 15, Damian Williams, the prosecutor for the Southern District of New York, requested the court to sentence Bankman-Fried to 40 to 50 years in prison. He described the defendant’s refusal to plead guilty and show remorse as “staggering,” calling it “probably the largest fraud in the past decade.”

In response, FTX’s founder’s lawyers submitted an appeal to Judge Lewis Kaplan. According to the memo, the proposed sentence reflects a “medieval view of punishment, comparable to the death penalty.”

“With apparent hostility, the memorandum distorts reality to support the cherished narrative of ‘loss,’ portraying Sam as an immoral supervillain,” the document states.

Bankman-Fried’s lawyers suggested reducing the sentence to five to six years in prison.

To justify this term, the lawyers presented several arguments. They claim that the exchange’s clients did not suffer actual losses, as after the bankruptcy proceedings, all investors and creditors will receive full reimbursement.

Furthermore, according to the lawyers, prosecutors falsely portrayed Bankman-Fried as greedy and driven by a desire to maximize personal wealth, while their client led a “modest lifestyle” and engaged in philanthropy.

The lawyers also contested the prosecutors’ assertion of a high risk of reoffending, citing studies on the low recidivism rate among educated criminals.

“There is no need to crush Sam in this way,” they concluded.

On November 2, 2023, the ex-CEO of FTX was found guilty on seven counts of money laundering, fraud, and conspiracy. He faces a maximum sentence of 115 years in prison.

Previously, the court received 29 letters in support of Bankman-Fried requesting leniency in his future sentence, including from family members and a cellmate. The verdict is scheduled to be announced on March 28.

No Regrets

On March 19, 3AC co-founder Kyle Davies appeared on an episode of the Unchained podcast. He stated that he has no regrets about losing billions of dollars of investors’ money and plans to avoid prison by any means necessary.

“Do I regret the company going bankrupt? No. Companies go bankrupt all the time,” Davies chuckled.

The hedge fund founder joked that he could at least advise future bankrupt companies on a course of action.

He also intends to make every effort to avoid returning to Singapore, where he faces criminal charges. In June, 3AC liquidators sued Davies and another hedge fund co-founder, Su Zhu, demanding the return of $1.3 billion.

In Davies’ view, the current hedge fund managers’ claims of a lack of interaction with the co-founders are greatly exaggerated. He added that “the liquidator’s job literally involves” creating the impression that former executives refuse to cooperate in an attempt to retain more funds.

When asked about his whereabouts, Davies replied that he is “hopping between Europe and Asia.”

In September 2023, his partner Zhu was detained while attempting to leave Singapore. The court sentenced him to four months in prison.

Previously, local authorities banned the founders of Three Arrows Capital from participating in regulated business activities in the country for nine years.

Back in December, a court in the Virgin Islands froze assets worth $1.14 billion belonging to the co-founders of the collapsed hedge fund.