SBF Could Still Change His Not Guilty Plea: Madoff Lawyer

Bernie Madoff’s former lawyer is downplaying the significance of Sam Bankman-Fried’s not guilty plea on Tuesday. 

Ira Lee Sorkin, who represented Madoff, told Blockworks that the FTX founder’s initial plea could soon change, adding that the move likely would not have a material impact on his sentence even if he were to be convicted. It’s not unusual for defendants in criminal cases to switch up their initial pleas. 

“One of the factors in sentencing is what they call acceptance of responsibility,” Sorkin said. “If you plead guilty, under the guidelines, you get two points…But his guidelines are so off the charts that a couple of points are not going to matter one way or the other.”

Bankman-Fried was arrested in the Bahamas last month after FTX filed for bankruptcy in November. He faces charges including wire fraud, money laundering and violating campaign finance laws, which altogether carry a maximum penalty of 115 years in prison.

Madoff pleaded guilty to fraud, money laundering and other charges as part of a $50 billion Ponzi scheme. He was ultimately sentenced to 150 years in federal prison, where he died in April 2021 at 82.

Despite some similarities in the financial crimes of which Bankman-Fried and Madoff were accused, the latter faced a different set of circumstances. Several of those differentiators — including the move by Madoff’s sons, Mark and Andrew, to act as whistleblowers on their father — influenced Madoff’s decision to plead guilty from the outset, Sorkin said. 

“The government had access to all of his trading records, all of the phony documents, the computers…So, there was a whole bunch of evidence against him, particularly from what his boys told the government,” Sorkin said.

The pressure a drawn-out case would have put on Madoff’s wife and children also came into play, according to Sorkin.

The bulk of the evidence prosecutors may have on Bankman-Fried isn’t yet fully clear. But Sorkin said the trial’s upcoming discovery period — where opposing counsels exchange information and related documents that they may later enter into evidence — could be one trigger for a change of plea, Sorkin said. 

Manhattan US Attorney Damian Williams launched a task force Tuesday to continue investigating FTX’s collapse. 

“They may [later] sit down with the government…to see if they can work out a plea,” Sorkin said of Bankman-Fried and his lawyers. “They’ll see what assets he has because the government’s going to look for forfeiture and disgorgement.

Added Sorkin: “If [Bankman-Fried] decides he’s going to fight it, then his lawyers are going to make a judgment as to whether he has a triable case.”

Financial fraudsters who pleaded not guilty

Bankman-Fried is far from the only high-profile purported financial fraudster to claim innocence. 

Michael Milken — a former executive at the then-Wall Street bank Drexel Burnham Lambert charged with racketeering and securities fraud — pleaded not guilty in 1989. He pleaded guilty on six felony counts the following year in a packed Manhattan courtroom, The New York Times reported, as he tearfully thanked the court for allowing him to apologize.

Martin Flumenbaum, who represented Milken, did not immediately return a request for comment.  

Dennis Zozlowski, the former chief executive of then-holding company Tyco International, pleaded not guilty to stealing millions of dollars from the company. 

Zozlowski was convicted in 2005 of securities fraud, grand larceny and falsifying business records. He was sentenced to between eight years and 25 years in prison.

Zozlowski told the New York state Parole Board during a 2012 hearing that he declined a plea deal from the Manhattan district attorney’s office that would have resulted in between two to six years in prison. The board denied his request for parole at the time, but he was later released after serving roughly eight years in prison.

Like Zozlowski, Raj Rajaratnam also claimed to turn down a plea deal of what he expected would have been as little as five years if he cooperated with authorities, Newsweek reported.

Rajaratnam, the founder of former hedge fund firm Galleon Group — formerly one of the largest and most influential such operations in the world — was convicted on charges of securities fraud and sentenced to 11 years in prison. He served nearly eight years behind bars. 

Seth Taube, a former federal prosecutor and SEC official, previously told Blockworks that if convicted, Bankman-Fried could receive a decades-long sentence.

“If he cooperates, he may get out before he needs a cane,” Taube said at the time.

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