Sam Bankman-Fried, billionaire before 30 and now a possible 100-year prison sentence at 32: The downfall of the cryptocurrency king

The second week of November 2022 was full of ups and downs for Sam Bankman-Fried. The American tycoon, who was 30 at the time, failed to raise funding for his two main businesses, cryptocurrency exchange platform FTX and investment fund Alameda Research. It was too late for him to get anyone to invest with him. His fortune, which that Monday was estimated at $16 billion, was completely wiped out on Friday, and his companies filed for bankruptcy. However, the week of his sensational fall may not have been the worst week of his life. This week he faces the possibility of being sentenced to 110 years in prison.

Sam Bankman-Fried, or SBF as he is known, was convicted in November 2023 of using money he received from users of his platform to finance various personal projects, but his sentencing has yet to be determined. remains. On the one hand, the SBF is up against a judge who no longer views him favorably after attempts to manipulate witnesses throughout the trial. On the other hand, he hopes that his sentence could be reduced by returning the more than $8 billion lost to victims. The combination of factors shaping the case leaves considerable uncertainty regarding the final verdict.

So, how long can he stay behind bars? The seven counts of fraud and conspiracy for which he was convicted carry a maximum sentence of more than a century. Nevertheless, its enforcement is generally not ideal for this type of crime: most white-collar criminals whose sentences equate to the rest of their lives serve only a portion of their lives. An example is Elizabeth Holmes, who will serve only 11 years of the 80 years she faced for fraud involving the startup Theranos, which promised blood tests with a prick of the finger. If Bankman-Fried receives the maximum sentence, it would be the fifth highest sentence for financial crimes in the US, behind Bernie Madoff, who was fourth after receiving a 150-year sentence in 2009 for the largest Ponzi scheme in history. Are.

beyond punishment

The parallels with the Madoff case compromise Bankman–Fried's position. When sentencing the former case, Judge Denny Chin emphasized the importance of maximum penalties for crimes of this magnitude because of their symbolic importance: “The message that, in a society governed by law, people like Mr. Madoff will receive Considering their moral culpability, they deserve punishment.” The judge also underlined the deterrent role of the sentence: “It is important to send a strong message to those contemplating similar acts that they will be caught and punished to the fullest extent of the law.”

Bankman-Fried's fate is entirely in the judge's hands. The American judicial system grants magistrates absolute power to determine punishment, limited to maximums established for each crime. Whether or not he receives guidance from the defense, the prosecutor's office, and other stakeholders depends primarily on his own perception of the seriousness of the crime and the defendant's culpability. There is also a good possibility that the punishment given to SBF will not only serve as a sanction but also serve as an example to deter others.

The former cryptocurrency guru certainly hasn't kept a low profile in this process. SBF was initially placed under house arrest during the trial, but this privilege was revoked when he was found to have repeatedly violated the terms of his probation. He received multiple warnings on suspicion of money transfers, covert internet activities and inappropriate communications to conceal assets, until it was confirmed that he had used the private diaries of his former girlfriend and former CEO of Alameda Research, Caroline Ellison, a central witness. Had leaked. Case. The United States Department of Justice claimed that Bankman-Fried leaked the diaries to discredit and intimidate Ellison, who had confessed in his writings to feeling unfit to manage the Alameda Fund. Furthermore, SBF made false statements during his testimony and adopted the traditional strategy of answering “I do not remember” on more than 140 occasions to avoid incriminating himself when questioned by the prosecutor.

last attempt

However, Bankman-Fried is hopeful. For the final phase he appointed star lawyer Mark Mukasey to lead his defence. Mukasey previously defended Donald Trump in a case involving the validity of his candidacy, although he had a major breakthrough when he succeeded in getting the sentence for former Nikola CEO Trevor Milton reduced from 11 years in prison to just four years . Milton is accused of misleading investors about the progress of his electric truck company's first prototype, going so far as to make a video in which he tilted the camera to simulate the operation of his vehicle, while actually It was just rolling downhill.

Through a report containing various sections titled “Sam is not motivated by greed,” “Sam cares about individuals,” and “Sam's philosophy and philanthropy,” SBF's defense against tarnishing its client's image and Many are trying to blame the allegations on mismanagement. , rather than a deliberate plan to transfer money elsewhere, such as “false statement to obtain a bank loan, which is then planned to be repaid.” The report's final recommendation is that Bankman-Fried should be jailed for between five years and three months to six and a half years, arguing that “a sentence that would allow Sam to quickly reintegrate into a productive role in society.” will be sufficient (.. .) to fulfill the purposes of the sentence.”

SBF also has an ace up its sleeve. Some of their investments through FTX have performed well and through the efforts of the bankruptcy handling team they may be able to recover all the losses incurred by the users of the platform. Team attorney Andrew Dietderichs said the payment “should not be treated as a guarantee, but as an objective.” There is still a lot of work and risk ahead, but we believe the objective is within reach and we have a strategy to achieve it.” Reimbursing account owners on the now-defunct platform will help victims This would help offset damages and could be instrumental in reducing the length of Bankman-Freed's sentence.

Nevertheless, this situation would not invalidate the prosecutor's main argument: even if the effects could be mitigated, Bankman-Fried is still primarily responsible for the fraud that sent FTX into bankruptcy. Although the SBF may have argued that he failed to manage the business and did not commit any illegal acts in his companies, everyone else involved in the process contradicted his testimony. A notable example is the testimony provided by Caroline Ellison, who claimed that Bankman-Fried directly ordered user funds to be used to repay the loan. His former flatmates, Adam Yedidia, Gary Wang (FTX co-founder) and family friend Nishad Singh, also claimed that they acted under orders from Bankman-Fried.

The prosecutor's office is seeking 40 to 50 years for Bankman-Fried. According to the prosecution, SBF's recent behavior has been characterized by “unparalleled greed and arrogance, taking risks and repeatedly gambling with other people's money”. He believes that Bankman-Fried shows no remorse and that the seriousness of his crimes should not be ignored: “Justice requires that he receive a prison sentence commensurate with the extraordinary dimensions of his crimes.” Following the November verdict, Damien Williams, the U.S. Attorney for the Southern District of New York, said that, “The crypto industry may be new, but this kind of fraud, this kind of corruption, is as old as time.”

Many legal experts estimate that Bankman-Fried will spend at least several decades behind bars. As told by Michelle Epner, attorney at Rottenberg Lippman Rich forbes, It would be surprising if SBF gets less than 25 years in jail. Former federal prosecutor Paul Tuchman also predicted that the characteristics of the victim might lead to a higher sentence: “A lot of the losses in this case were to small investors, which really creates more pressure for a significant sentence,” he said. Told CNBC. John Coffey, law professor at Columbia University, said the new York Times Judge Kaplan is known for being “fair, but not overly lenient” and has estimated a minimum sentence of 20 years, but is not ruling out a sentence of up to 50 years.

Sam Bankman-Fried has a lot going against him. Even the time it took the jury to reach a verdict – only four hours – suggests that its members were thoroughly convinced. The crimes of which he was convicted did not even carry the possibility of a life sentence, which would provide a more realistic possibility of future parole, at least in New York State. The former billionaire now faces possible “death by imprisonment”, as the US media describes it, at the hands of a judge with whom he had developed the worst possible relationship. Faced with the uncertainty of the final verdict, Bankman-Fried can only be sure of one thing: even if the sentence falls short of expectations, it will cost him years of his life.

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