NEW YORK, March 28 (Reuters) -

Sam Bankman-Fried lied on the witness stand at his fraud

trial last year when he said he did not know that his hedge fund

had spent customer deposits taken from the FTX cryptocurrency

exchange he founded, a judge said at the former billionaire

cryptocurrency wunderkind's sentencing hearing on Thursday.

Bankman-Fried, 32, faces the prospect of decades behind bars

over after a jury found him guilty on Nov. 2 on seven fraud and

conspiracy counts stemming from FTX's November 2022 collapse.

Prosecutors have called it one of the biggest financial frauds

in U.S. history.

U.S. District Judge Lewis Kaplan's finding at the outset of

Thursday's hearing that he committed perjury is a potentially

ominous sign for him.

Kaplan also said he had found FTX customers lost $8 billion,

FTX's equity investors lost $1.7 billion, and that lenders to

the Alameda Research hedge fund Bankman-Fried founded lost $1.3

billion, rejecting Bankman-Fried's argument that customers would

be paid back in full through the bankruptcy process.

"The defendant's assertion that FTX customers and creditors

will be paid in full is misleading, it is logically flawed, it

is speculative," Kaplan said. "A thief who takes his loot to Las

Vegas and successfully bets the stolen money is not entitled to

a discount on the sentence by using his Las Vegas winnings to

pay back what he stole."

Kaplan has not yet announced the sentence, and the hearing

could last hours.

The hearing marks the final step in Bankman-Fried's downfall

from an ultra-wealthy cryptocurrency entrepreneur and major

political donor to the biggest trophy to date in a crackdown by

U.S. authorities on malfeasance in digital asset markets.

Bankman-Fried has vowed to appeal his conviction and

sentence.

He faces a statutory maximum of 110 years in prison, but

will likely receive less. Prosecutors are seeking a prison

sentence of 40 to 50 years.

"His life in recent years has been one of unmatched greed

and hubris; of ambition and rationalization; and courting risk

and gambling repeatedly with other people's money," the U.S.

Attorney's office in Manhattan, which charged Bankman-Fried in

December 2022, wrote in a March 15 sentencing memorandum.

Defense lawyer Marc Mukasey has argued that a sentence of

less than 5-1/4 years would be appropriate.

Mukasey said FTX customers would likely be made whole in the

bankruptcy process, and that Bankman-Fried worked diligently

after the exchange's November 2022 collapse to recover funds.

"The memorandum distorts reality to support its precious

'loss' narrative and casts Sam as a depraved super-villain,"

Mukasey wrote in a March 19 court filing, referring to the

prosecution's sentencing proposal.

Several FTX customers have written to Kaplan expressing

dismay that they will be compensated based on the value of their

cryptocurrency at the time of FTX's bankruptcy, rather than the

higher levels at which those assets currently trade.

One of those customers, London resident Sunil Kavuri, said

at Bankman-Fried's sentencing that he lost money he wanted to

spend on a family home and his children's education.

"Simply put, this is a continuous lie that we are all made

whole," Kavuri said.

Bankman-Fried has been detained at the Metropolitan

Detention Center in Brooklyn since August 2023, when Kaplan

revoked his bail after finding he likely tampered with witnesses

at least twice.

Wearing a tan short-sleeve jail t-shirt, Bankman-Fried was

led into the courtroom by members of the U.S. Marshals Service

before the hearing started. His parents, Stanford University law

professors Joseph Bankman and Barbara Fried, arrived at the

federal courthouse earlier.

'PROMISE OF FALSE HOPE'

A Massachusetts Institute of Technology graduate,

Bankman-Fried rode a boom in the values of bitcoin and other

digital assets to a net worth of $26 billion, according to

Forbes magazine, before he turned 30.

Bankman-Fried became known for his mop of unkempt curly hair

and commitment to a movement known as effective altruism, which

encourages talented young people to focus on earning money and

giving it away to worthy causes.

He was one of the biggest contributors to Democratic

candidates and causes ahead of the 2022 U.S. midterm elections.

But prosecutors say the responsible image he cultivated

concealed his years-long embezzlement of customer funds.

At trial, three of his former close associates testified

that he directed them to use FTX customer funds to plug losses

at Alameda Research.

Bankman-Fried testified in his own defense that he made

mistakes such as not implementing a risk management team, but

denied he intended to defraud anyone or steal customers' money.

In their sentencing memorandum, prosecutors said

Bankman-Fried could commit fraud again if released at a young

age.

They pointed to his personal writings in the weeks following

FTX's collapse, in which he mused about options for restoring

his image such as "come out against the woke agenda" or pushing

the idea that "SBF died for our sins."

"It is realistic that he will settle on a narrative, lean

into it, and convince other people to part with their money

based on lies and the promise of false hope," prosecutors wrote.