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Sam Bankman-Fried Jail Saga: Will SBF Go to Jail?
The collapse of the FTX empire in November 2022 was shocking both in its speed and scale, and now, a Sam Bankman-Fried jail sentence may be looming. On the surface, it appeared to be a well-run cryptocurrency exchange that offered a range of attractive services and barely any downtime.
However, as we now know, under the surface it was at best a disorganized mess and at worst, a criminal enterprise.
Former CEO Sam Bankman-Fried is now famous across the world as the face of the collapse and has had multiple criminal charges leveled at him from various U.S. regulators and law enforcement agencies. The question is, however, is a SBF jail sentence inevitable, or, as with another famous face who presided over a crypto exchange collapse, could he escape?
The Ghost of MtGox
When MtGox collapsed in February 2014, many instinctively thought that CEO Mark Karpeles was behind the loss of 745,000 bitcoins from the exchange.
When evidence emerged that someone had been using a trading bot to buy up hundreds of thousands of bitcoins in MtGox’s last days and that the accounts using those bots could only have been accessed by Karpeles, the writing was on the wall.
Karpeles was arrested in July 2015 and went on trial two years later for the use of trading bots. He was found guilty, but the judge believed Karpeles’ story that he was doing it to try and repair a hole in the company books and that he never stole the bitcoins.
Karpeles’ claims were backed up by convincing evidence not available at the time of his arrest, and he escaped with a four-year suspended sentence, much to everyone’s surprise, beating Japan’s 99% conviction rate.
A similar situation appears to be happening with the Sam Bankman-Fried jail sentence, albeit on a much more serious level.
Sam Bankman-Fried jail sentence and criminal charges
On December 12, 2022, Bankman-Fried was hit with eight charges by U.S. federal authorities:
- Securities fraud (multiple cases).
- Wire fraud (multiple cases).
- Money laundering.
- Conspiracy to avoid campaign finance regulations.
- Conspiracy to commit wire fraud.
- Conspiracy to commit securities fraud.
He was also hit with multiple other charges by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, but these would only result in financial penalties rather than putting Sam Bankman-Fried in jail.
Bankman-Fried’s Alleged Criminal Behavior
Bankman-Fried’s charge sheet is 13 pages long, so we won’t go into much detail on the alleged offenses. But what we can say, is that it all makes for a heady cocktail of financial skulduggery that would make even a mafia godfather wince.
In short, Bankman-Fried is said to have masterminded an operation designed entirely to enrich himself and his closest associates, chiefly by swapping funds at will between his various entities and giving his companies an unfair advantage over its customers, whose money he was taking as he exacted this advantage.
Even without the benefit of seeing the evidence, the odds seem stacked against Bankman-Fried from the outset. Each one of the eight charges against him might see SBF jail-birding with a prison sentence of multiple years.
If he were to be found guilty on all accounts, he could, theoretically, be looking at hundreds of years in prison.
We don’t yet know what argument his counsel is going to put forward in his defense, but it is going to have to be spectacular to get him off all the charges.
A Plea Deal Won’t Save Him
What is more likely is that the litany of charges has been put against him in the hopes that he cooperates as part of a plea deal. This would see the lesser charges get dropped if he agrees to help in the ongoing cases against Caroline Ellison (Alameda Research CEO) and Gary Wang (FTX co-founder).
The problem for Bankman-Fried is that he has already pleaded not guilty to all charges, whereas Ellison and Wang have taken the deals offered to them. This means that they are already opening up on everything they had to do with Bankman-Fried and FTX.
Of course, we don’t know the full scale of the evidence that federal prosecutors will use to put Sam Bankman-Fried in jail – the collection of which is going on right now. However, we have some great insight from John Ray III, who commented on what he found at FTX in the days after he took over:
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.
From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
Ray also revealed that high-ranking individuals at FTX had taken steps to “conceal the misuse of customer funds” and also referenced the “secret exemption of Alameda from certain aspects of FTX.com’s auto-liquidation protocol”, which meant that Alameda could not get liquidated if its trades went south when regular customers did.
Small nuggets like this give us an insight into where the activity at FTX crossed the line from mismanagement to illicit activity.
Writing on the Wall for Bankman-Fried
Excerpts like those from Ray allow us to see this case in a different light to MtGox. Karpeles may have (and did) make some bad decisions during his tenure, and he was terrible at communication, but from what we know since its collapse, there was much more nefarious activity going on at FTX.
Of course, everyone should be presumed innocent until proven guilty, but the sheer weight and severity of the crimes leveled at Bankman-Fried mean that, even if he changes his plea to guilty, a Sam Bankman-Fried jail sentence may still be imminent and he will almost certainly face decades in prison.
For example, just one count of conspiracy to commit wire fraud carries a maximum of 20 years in prison, and he is facing much more serious crimes than that.
The only way that SBF can avoid jail is by winning on every single charge or hoping the government’s case falls apart completely in the interim. While not impossible, the odds of either of these are remote, and it is much more likely that Sam Bankman-Fried’s jail sentence may see him spending the bulk of his adult life behind bars.