Securities Regulation Daily Wrap Up, BLOCKCHAIN—2d Cir.: The gravity of Bankman-Fried’s fraud washed away his arguments on appeal, (Jun 15, 2026)

By Jay Fishman, J.D.

Bankman-Fried’s contending investors would have eventually benefited did not mitigate his intent to mislead them in the first place.

The United States Court of Appeals for the Second Circuit affirmed the New York Southern District Court’s conviction of Samuel Bankman-Fried on seven counts of wire, securities and conspiracy to commit wire and securities fraud, and mandating a 25-year prison sentence and forfeiture of $11,020,000,000. The court dismissed his appellate contentions of trial court error and unconstitutional forfeiture (United States of America v. Samuel Bankman-Fried, No. 24-961-cr (2d Cir. June 12, 2026)).

Recap of case. From 2019 until November 2022 when his FTX and Alameda cryptocurrency companies entered into bankruptcy, Bankman-Fried lured investors into trading in Bitcoin, Ethereum and Ripple, as well cryptocurrency derivatives, and borrowing funds and trading on margin in FTX. By 2022, customer trading was around $10 to $15 billion daily. But unbeknownst to investors, FTX extended Alameda a substantial line of credit into which investor funds were funneled, resulting in a negative balance on FTX’s books. Bank-Fried secretly used Alameda money to: (a) make investments unrelated to FTX customer deposits, (b) cover Alameda’s losses, (c) make political contributions, (d) acquire real estate, and (e) underwrite his lavish lifestyle, and told his former CEO to use FTX customer funds to repay Alameda’s lenders and to send them a false, positive balance sheet to secure additional loans. Additionally, Bankman-Fried, himself, and an Alameda co-owner adapted FTX’s computer code so that customer funds deposited into FTX would automatically be re-routed to Alameda. Both persons testified against him on these points at trial.

By the end of 2022 following a Federal Reserve interest rate hike, liquidity from financial markets drained and cryptocurrency markets crashed, leaving Alameda’s net asset value $40 billon below its assets. With the public announcement of this news, Alameda’s lenders began recalling their loans and customers began withdrawing from FTX. Bankman-Fried was then indicted in December 2022 on charges stemming from FTX’s collapse.

Bankman-Fried’s appeal also collapses. Bankman-Fried made a number of arguments on appeal for why his trial was unfair, including that the district court: (1) did not allow his attorney to present evidence showing the total picture of the FTX situation; (2) improperly instructed the jury on certain matters; and (3) ordered that Bankman-Fried forfeit $11 billion, which he claimed was miscalculated and, moreover, an egregious amount to forfeit, and unconstitutional under the Eighth Amendment by virtue of never allowing him the chance to make a living after his prison term. The court, however, debunked every one of his arguments, the most significant of them addressed as follows:

1. Bankman-Fried argued that the district court abused its discretion by issuing “profoundly one-sided” evidentiary rulings on loss by erroneously permitting the government to argue that the misappropriated funds were permanently lost; Bankman-Fried asserted this error prevented the full picture from being disclosed, namely that customers would later reap the benefits of their cryptocurrency investments and, therefore, suffer no economic loss. But the district court determined it is “immaterial as a matter of law whether the defendant intended to repay.” And the appellate court found the lower court’s ruling correct, stating that FTX customers were defrauded as soon as Bankman-Fried transferred their money to Alameda regardless of how strongly he believed he might later return their money. Stated another way, “no amount of honest belief on the part of the defendant that the victim ultimately would be benefitted will excuse the defendant’s false representations.”

2. On appeal, Bankman-Fried challenged the $11,020,000,000 forfeiture order, contending that: (i) the district court relied on statutes that do not expressly authorize money judgments; (ii) the court erred by miscalculating the forfeiture amount under 18 U.S.C. §981(a)(1)(C)—Bankman-Fried argued that 18 U.S.C. (a)(2)(B)’s net-proceeds definition mandates the forfeiture amount should be the difference between FTX stock’s inflated value and what it would have sold for absent the fraud; and (iii) the amount of the forfeiture was excessive and, therefore, unconstitutional.

The court first determined that while the statutes do not expressly authorize forfeiture money judgments, courts may impose them on defendants like Bankman-Fried who lack assets that can be forfeited at the time of sentencing. Second, the court found the forfeiture amount to be correct, proclaiming that even if the net-proceeds definition applied, Bankman-Fried failed to establish the value of the FTX stock absent the fraud. Lastly, regarding the Excessive Fines Clause under the Eighth Amendment, the court acknowledged Bankman-Fried’s plight that he might not ever be able to make a living when his prison term ends, given the excessive $11 billion forfeiture amount. However, the court was constrained by the laws Congress enacted, namely Congress’s fashioning the Excessive Amounts Clause as a scheme where the size of the forfeiture depends on the amount of a defendant’s gains rather than some other matrix like moral culpability.

The case is No. 24-961-cr.

Judge: Per Curiam.

Attorneys: Danielle Kudla, U.S. Department of Justice, for the U.S. Alexandra A.E. Shapiro (Shapiro Arato Bach LLP) for Samuel Bankman-Fried.

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