Bankman-Fried's Abuse of Trust Enhancement and Embezzlement of Customer Funds

F. The Enhancement for Abuse of Trust Is Applicable

The defendant objects to the two-level enhancement for abuse of a position of public or private trust. (Def. Mem. at 25-26). A defendant’s offense level is increased by two levels pursuant to Section 3B1.3(a) of the Guidelines “[i]f the defendant abused a position of public or private trust … in a manner that significantly facilitated the commission or concealment of the offense.” U.S.S.G. § 3B1.3. “A position of trust ‘is held by one who was accorded discretion by the victim and abused a position of fiduciary or quasi-fiduciary status.’” United States v. Lebedev, 932 F.3d 40, 57 (2d Cir. 2019) (quoting Huggins, 844 F.3d at 124). The enhancement applies, for example, “in the case of an embezzlement of a client’s funds by an attorney serving as a guardian” or “a bank executive’s fraudulent loan scheme.” U.S.S.G. § 3B1.3, cmt. 1. Indeed, courts routinely apply the abuse of trust enhancement when a defendant embezzles customer or client funds. See, e.g., United States v. Friedberg, 558 F.3d 131, 133-35 (2d Cir. 2009) (enhancement appropriate where secretary of fraternal order embezzled organization’s funds); United States v. Christiansen, 958 F.2d 285, 288 (9th Cir. 1992) (enhancement appropriate where credit union manager embezzled funds).

The evidence at trial established that FTX’s customers entrusted their money to the defendant’s care (through FTX) with the understanding—based on the defendant’s representations and conduct—that the assets in the defendant’s care belonged to them and would be held safely for their benefit. The defendant’s embezzlement and misappropriation of customers’ funds in connection with the wire fraud scheme therefore abused the trust of those customers. Arguing otherwise, the defendant asserts that he was in a “purely arm’s-length contractual relationship.” (Def. Mem. at 25). The trial evidence proved the contrary—as the jury concluded. Can Sun, an attorney at FTX, testified that “customer assets [were] held in trust,” meaning “that you hold them, that you are not the beneficial owner of them, and you are holding it for the benefit of someone else; in this case, customers.” (Tr. 1941). The FTX customers who testified similarly stated that they believed their assets were being held in trust—in other words, a fiduciary-like relationship existed. (Tr. 80-81, 1289-90). The same can be inferred from FTX’s policies that existed at the time. (GX-340; GX-558). Indeed, FTX policy documents shared with FTX customers stated that “customer assets are held in trust.” (GX-513).

To support his argument that there was no fiduciary-like relationship—a conclusion contrary to the jury’s verdict—the defendant cites FTX’s terms of service (GX-558), highlighting language disclaiming the existence of a fiduciary relationship. But Huggins instructs that the existence of a fiduciary relationship should be assessed from the standpoint of the victim, not by what is in the terms of service, which victims may not have (and indeed in some cases did not) read. Furthermore, the general disclaimer of a fiduciary relationship in a portion of the terms of service does not eliminate such a relationship. See United States v. Weaver, 860 F.3d 90, 95 (2d Cir. 2017).

Accordingly, the defendant’s objection should be denied.