The second week of November 2022 was difficult for Sam Bankman-Fried.
The American tycoon, who was 30 years old at the time, failed to obtain financing for his two main businesses, the cryptocurrency exchange platform FTX and the investment fund Alameda Research.
It was too late for someone to agree to invest with him.
His fortune, which that Monday was estimated at about $16 billion, completely melted on Friday, and his companies declared bankruptcy.
But the week of his monumental fall may not have been the worst 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 for using money from users of his platform to finance various personal projects, but his sentence has yet to be defined.
On the one hand, SBF faces a judge who no longer views him favorably after his attempts to manipulate witnesses throughout the process.
On the other hand, he remains hopeful that the return of the more than $8 billion lost to the victims could reduce his sentence.
The mix of factors influencing the case maintains uncertainty about the decisive ruling.
More information
From the Forbes list to the abyss: power runs out for the three cryptocurrency visionaries
How long can you spend behind bars?
The maximum sentence for the seven counts of fraud and conspiracy for which he was convicted amounts to more than a century.
But its application is not usually the norm for this type of crime: most white-collar criminals whose sentences amount to the rest of their lives end up facing only part of them.
An example is Elizabeth Holmes, who will only serve 11 of the 80 years she faced for fraud with the
startup
Theranos, which promised blood tests with just a finger prick.
If he receives the maximum penalty, Bankman-Fried would have the fifth largest sentence for financial crimes in the United States, behind Bernie Madoff, who occupies fourth place after being sentenced to 150 years in 2009 for the largest pyramid scheme in history.
Beyond punishment
The similarities with the Madoff case compromise Bankman-Fried's situation.
In sentencing that case, Judge Denny Chin stressed the importance of a maximum sentence for crimes of this magnitude because of its symbolic meaning: “The message it sends is that, in a society governed by law, those like Mr. Madoff "They will receive the punishment they deserve, in accordance with their moral guilt."
The judge also highlighted the deterrent role of the penalty: “It is crucial to send a powerful message to those who contemplate committing similar acts, who will be caught and punished to the full extent in accordance with the law.”
Bankman-Fried's fate is left entirely in the judge's hands.
The American judicial system gives the magistrate absolute power to determine the sentence, limited only by the maximum established for each crime.
Although receiving guidance from the defense, prosecution, and other parties involved, the judge relies primarily on his or her own perception of the seriousness of the crime and the guilt of the accused.
And there is a good chance that the punishment of SBF will not only serve as a sanction, but also as an example to deter others.
The former cryptocurrency guru has not kept a low profile in the process.
He was initially granted release under house arrest during the trial, but this privilege was revoked when it was discovered that SBF had repeatedly violated the terms of his probation.
Suspicions of fund transfers to hide assets, covert internet activities and improper communications earned him several warnings, until it was confirmed that he had leaked the personal diary of his ex-girlfriend and former CEO of Alameda Research, Caroline Ellison, a key witness in the case. .
The US Department of Justice stated that Bankman-Fried leaked the diary to discredit and intimidate Ellison, who in her writings confessed that she felt incapable of managing the Alameda fund.
Additionally, SBF made false statements during her testimony and employed the standard strategy of responding “I don't remember” on more than 140 occasions to avoid incriminating himself in response to prosecutorial questions.
The last try
But Bankman-Fried still has hope.
For the final stages he hired star attorney Marc Mukasey to lead his defense.
Mukasey had already defended Donald Trump in a case related to the legality of his candidacy, but his great success came when he managed to reduce the sentence – from 11 years in prison to just four – for Trevor Milton, the former CEO of Nicholas.
Accused of misleading investors about the progress of his company's first prototype of electric trucks, Milton went so far as to produce a video in which he tilted the camera to simulate the operation of his vehicle, when in reality it was only going downhill.
Through a report with several sections titled “
Sam is not motivated by greed
,” “
Sam cares about people
,” and “
Sam's philosophy and philanthropy
,” SBF's defense seeks to soften its client's image and attribute many of the facts that are attributed to mismanagement, rather than a deliberate plan to divert funds, such as “false statements to obtain a bank loan that is planned to be repaid.”
The report's final recommendation is that Bankman-Fried spend five years and three months to six and a half years in prison, arguing that “a sentence that allows Sam to quickly reintegrate into a productive role in society would be sufficient [...] to fulfill the objectives of the sentence.”
SBF also has an ace up its sleeve.
Some of your investments through FTX
They have had a good performance and with the efforts of the team handling the bankruptcy they could be able to compensate for all the losses suffered by the users of the platform.
Andrew Dietderich, the team's lawyer, has stated that the payment should not be considered “a guarantee, but an objective.
There is still a lot of work and risk ahead, but we believe the goal is achievable and we have a strategy to achieve it.”
Refunding account owners on the now-closed platform would help repair the harm to victims and could be crucial to reducing Bankman-Fried's sentence.
However, this situation would not invalidate the main argument of the prosecution: although the effects can be mitigated, Bankman-Fried is still primarily responsible for the fraud that led FTX to bankruptcy.
Although SBF has argued that it simply failed to manage the business and did not order any illegal actions in its companies, its testimony was contradicted by all others involved in the process.
A prominent example is the testimony of Caroline Ellison, who claimed that Bankman-Fried directly ordered the use of user funds to repay loans.
Her former roommates Adam Yedidia, Gary Wang (FTX co-founder) and family friend Nishad Singh also claimed they worked under Bankman-Fried.
The prosecution is asking for between 40 and 50 years for Bankman-Fried.
According to the indictment, SBF's recent activity has been characterized by “unparalleled greed and arrogance, taking risks and repeatedly playing with other people's money.”
For them, Bankman-Fried shows no remorse and the seriousness of his crimes should not be ignored: “Justice requires that he be given a prison sentence commensurate with the extraordinary magnitude of his crimes.”
After the verdict in November, Damian Williams, US Attorney for the Southern District of New York, stated that “the crypto industry may be new, but this type of fraud is as old as time.”
Many legal experts anticipate that Bankman-Fried will spend at least a few decades behind bars.
As he told
Forbes
attorney Mitchell Epner, of the firm Rottenberg Lipman Rich, would be surprised if SBF received less than 25 years in prison.
Former federal prosecutor Paul Tuchmann also predicted that victim characteristics could increase sentencing: “Many of the losses come from small investors, which increases the pressure for a significant sentence,” he told
CNBC
.
Columbia University Law Professor John Coffee told
The New York Times
that Judge Kaplan is known for being “fair, but not excessively lenient,” and estimated a minimum sentence of 20 years, but does not rule out that the sentence could reach 50.
Sam Bankman-Fried has a lot going against him.
Even the time it took the jury to reach the verdict, just four hours, suggests that its members were completely convinced.
The crimes for which he was convicted do not even allow for the possibility of a life sentence, which would at least offer a more realistic opportunity for future parole in New York State.
The former billionaire now faces a possible “death by imprisonment,” as the American media describes it, at the hands of a judge with whom he cultivated the worst possible relationship.
With the final verdict uncertain, Bankman-Fried can only be sure of one thing: even if the sentence turns out to be below expectations, it will cost him too many years of his life.
You can follow ICON on
,
X
,
, or subscribe to the
Newsletter here
.