A decade-old fraud trial is set to begin next Tuesday, when a jury will be selected to hear charges against Sam Bankman-Fried, the disgraced founder of FTX cryptocurrency exchange. In the coming weeks, prosecutors will unveil a mountain of evidence, including documents and testimony from Bankman Fried’s own deputies, to show that he looted billions of dollars of client funds for personal purposes.
If the evidence holds up, Bankman-Fried will join Theranos founder Elizabeth Holmes and Ponzi schemer Bernie Madoff on a list of the most notorious con men of this century and, like them, receive a lengthy prison sentence imprisonment.Senior lawyer interviewed wealth Everyone agreed prosecutors appeared to have enough evidence to arrest him. So why did Bankman-Fried not plead guilty — a move that would have resulted in a significantly shorter sentence?
White-collar crime experts say there were both strategic and psychological factors in Bankman-Fried’s decision to risk going to trial. But whatever his motives, the outcome is likely to be the same: decades in prison, or even a lifetime.
‘Everyone is testifying against him’
Renato Mariotti, a former prosecutor in the Justice Department’s securities fraud unit, gave a succinct assessment of Bankman-Fried’s chances in front of the jury: “He’s screwed.”
Mariotti now Bryan Cave Leighton Paisner Trial PartnerTell wealth The evidence against Bankman-Fried is overwhelming, and the FTX founder doesn’t appear to have any obvious defense that can get him out of trouble.
Bankman-Fried’s attorneys say they will try to paint their client as a well-intentioned man who fell into trouble because of corruption and incompetence by former FTX attorneys. But so far, they have not formally proposed a so-called lawyer’s defense.
According to Mariotti, such a defense is rarely successful, and it’s unlikely that Bankman-Fried’s attorneys will actually present it to a jury. A big reason is that blaming FTX attorneys would undermine attorney-client privilege and potentially open the door for those attorneys to share documents and testimony, including further evidence of his guilt.
Other white-collar crime experts agreed with Mariotti’s assessment of Bankman-Fried’s chances in court.
“This appears to be a very strong case. Everybody is testifying against him,” said Randall Eliason, a former federal prosecutor who now teaches about white-collar crime. at George Washington University.
Those set to testify include Bankman-Fried’s ex-girlfriend, Caroline Ellison, who ran Bankman-Fried’s hedge fund and reportedly worked with Bankman-Fried Reed conspired to illegally exploit FTX customer funds. Other cooperating witnesses include Gary Wang, the former FTX chief technical officer and a long-time friend of Bankman-Fried, who allegedly tampered with the exchange’s accounting software to eliminate trading losses from hedge funds.
Given all this, it’s an open question why Bankman-Fried didn’t plead guilty to the charges after his arrest in December — a tactic that likely would have sealed a deal that would have shaved years off his sentence. However, that opportunity has now passed as the value of any potential plea deal diminishes the closer the case gets to trial.
Hope for “a compassionate juror”
There may be a simple explanation for Bankman-Fried’s decision to try his luck in front of a jury: He had nothing to lose. Given the scale of the crimes he is accused of, any agreement with prosecutors may not make sense given the potential sentence.
“If you’re told you can go to jail for 50 years or 30 years, is that really an option?” asked Chris Lavigne, a white-collar defense expert at Withers Law Firm.
George Washington Professor Eliason expressed a similar sentiment. He observed that even when defendants face long odds, all they need is a sympathetic juror to get a hung jury and avoid a guilty verdict.
“Some people roll the dice because if they plead guilty, they’ll go to jail — so they try to pull a rabbit out of a hat,” Eliason said.
In Bankman-Fried’s case, however, his plea of not guilty was likely based not on cold calculation but on a sincere belief that he was not responsible for the billions of dollars in lost client funds.
“You can’t take away individuality,” Lavigne said. “If SBF is convinced that he did nothing wrong, then he will believe that no matter what his lawyers tell him.”
Mariotti also suggested that Bankman-Fried may have sincerely believed he was not responsible, likening him to Holmes, who blatantly lied about the effectiveness of her blood-testing technology, defrauded Theranos investors, and Human lives are endangered in the process.
“The really good fraudsters believe their own bullshit,” Mariotti said.
The result is that, barring an extraordinary turn of events, Bankman-Fried will almost certainly be sent to federal prison. He is being held in a Brooklyn jail after a judge revoked his bail on a witness tampering charge. The bigger question is how long.
A “once-in-a-decade” case
After filing a series of preliminary charges in November, the Justice Department later filed another indictment against Bankman-Fried, accusing him of trying to bribe a Chinese official. The charges are set to go to separate trials next year, but by themselves, the original seven charges – ranging from fraud to conspiracy – carry a cumulative maximum sentence of more than 100 years.
Such an outcome is unlikely, but not impossible. When media headlines trumpet that defendants charged with nonviolent crimes could be jailed for a century or more, seasoned attorneys scoff. While it is possible to stack the maximum sentences for related crimes (such as the seven at issue in the upcoming Bankman-Fried trial) to arrive at eye-popping prison sentences, the reality is that judges often Combine the crimes and come up with a milder total.
Former federal prosecutor Jeff Schenk said Partner, Jones Day Law Firm, judges follow federal sentencing guidelines, which provide a scoring system based on a variety of criteria, including whether the defendant chooses to plead guilty. For fraud cases, guidelines call for a maximum penalty of three points for a guilty plea, meaning several years off the sentence.
Schenck added that Bankman-Fried’s decision not to enter the plea means he will not only lose those points deductions but may also be subject to what’s called a trial penalty, meaning the judge can add additional points based on what happens in court. time.
“‘Trial penalties’ often result in longer sentences because the judge learns more and empathizes with the victim during the trial,” Schenk said.
He noted that the nature of the victims could also affect sentencing, recalling witnesses in the Bernie Madoff trial who testified that they lost their life savings and had to take service-industry jobs in retirement. However, in the case of the Bankman-Fried case, the main victims may be cryptocurrency speculators, and the jury may find them less sympathetic.
However, the most important factor in determining sentencing in a fraud case is the amount of the loss, which could spell big trouble for Bankman Fried. Prosecutors determined the scale of the FTX fraud to be as high as $9 billion, dwarfing all but the worst scams.
If Bankman-Fried is convicted, the notoriety of his crimes would put him on the same level as Madoff, who was sentenced to 150 years in prison.
“This is a once-in-a-decade fraud,” Lavigne said. “You’ve got Enron, you’ve got Bernie Madoff, and now you’ve got Sam Bankman Fried. If he’s convicted Guilty, I think the judge will impose a pretty hefty sentence.”
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