Former cryptocurrency billionaire Sam Bankman-Fried is facing the prospect of a lengthy prison sentence after being convicted of all seven fraud and money laundering charges against him. Bankman-Fried, the co-founder and ex-CEO of FTX, could face up to 110 years in prison if given maximum sentences and consecutive terms by Judge Lewis Kaplan. His sentencing is scheduled for March 28, 2024, and his lawyers have indicated they will appeal the guilty verdicts.
In addition to his legal troubles, Bankman-Fried still faces another trial for allegations of bribing Chinese officials, which is set to begin in March. He is not the only one awaiting their fate, as former Alameda CEO Caroline Ellison, FTX co-founder Gary Wang, and former engineering chief Nishad Singh have all pleaded guilty to criminal charges and cooperated with the prosecution against Bankman-Fried. The three individuals testified against him in hopes of receiving lighter sentences, but legal experts believe they are likely to serve prison time as well.
Chris LaVigne, the global co-chair of the digital asset group at the international law firm Withers Worldwide, stated that given their admissions, it is unlikely that Wang, Ellison, and Singh will receive non-incarceratory sentences. However, their cooperation may lead to shorter sentences than if they had been convicted after a trial. Judge Kaplan will consider factors such as intent, cooperation, remorse, and potential for rehabilitation when determining their sentences.
Bankman-Fried was found responsible for taking approximately $8 billion from FTX users without their consent and funneling it to Alameda Research. The funds were used to pay off Alameda’s lenders, fund FTX corporate sponsorships and a Super Bowl ad, and provide loans to corporate insiders, among other uses.
To address the losses suffered by FTX victims and creditors, there are two potential paths to recover funds. First, the U.S. government could establish a fund for FTX victims using proceeds forfeited by Wang, Ellison, and Singh. These individuals agreed to forfeit assets acquired during their time at FTX and Alameda, such as homes and investments. Additionally, U.S. Trustee Andrew Vara will pursue recovering funds through the bankruptcy process.
However, both processes can take a significant amount of time to play out. Trustee Irving Picard, who handled the Bernie Madoff Ponzi scheme case, spent a decade returning around $13 billion to victims. The U.S. government also returned $4 billion to the Madoff Victims Fund. The government can also target any individuals or companies it believes were complicit in the scheme, similar to the case of JPMorgan Chase in the Madoff case, where they paid over $2 billion in fines and penalties.
Overall, the legal saga surrounding FTX and its co-founders continues to unfold, with Bankman-Fried facing the possibility of a lengthy prison sentence and additional trials for other allegations. The fate of Wang, Ellison, and Singh will also be determined in due course, and various methods are being pursued to compensate FTX victims and creditors. The complexity of the case and the involvement of multiple individuals and entities suggest that the resolution process could extend over a considerable period of time.
