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SBF Case A Warning To Others

SBF Case A Warning To Others


Good day everybody,

Welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at the recent sentencing of Sam Bankman-Fried for his role in the collapse of FTX, along with the warning it should pose for other potential fraudsters in the crypto space.

 

 

SBF Sentenced

The former CEO of cryptocurrency exchange FTX, Sam Bankman-Fried (SBF), was sentenced to 25 years in prison for crimes of fraud and conspiracy, on Thursday the 28th of March, 2024. Judge Lewis Kaplan issued the sentence in a Manhattan courtroom and went on to declare that the former billionaire committed a “very serious crime” while also noting how SBF lacked remorse.

The proceeding began with SBF arriving in the courtroom just after 9:40am in the morning. He was wearing a khaki prison jumpsuit while his hair was back to its general messy style. Judge Lewis Kaplan opened the hearing and noted the sentencing guidelines. Here he stated the he was rejecting the defence's argument that there “was no loss” as a result of the fraud at FTX.

Judge Kaplan also rejected the argument from SBF that customers could be paid back. The judge went on to compare SBF to a thief who takes his loot to Las Vegas who believes he deserves leniency by trying to use his winning to pay back what he stole. Judge Kaplan then noted that SBF had committed perjury numerous times during his testimony in the trial and listed three specific occasions and noted there were multiple more.

During the sentencing SBF's defence attorney, Marc Mukasey, argued that his client never intended to commit harm and “doesn’t make decisions with malice in his heart”. He went on to note that SBF was an "awkward maths nerd" who loves video games and animals. His statement focused on SBF's philanthropy, and painted the former crypto mogul as a sensitive, misunderstood figure who struggled with depression and social awkwardness.

SBF also delivered his own statement during the sentencing, awkwardly apologising for the fall of cryptocurrency exchange FTX by saying:

 

“I know a lot of people feel let down. I’m sorry about that. I’m sorry about everything that happened at every stage.”

 

He also claimed that he made “a series of bad decisions” that ruined the work of his cherished employees and colleagues, name-checking co-founder Gary Wang and his former girlfriend Caroline Ellison. Both of these testified against SBF during his trial. He went on to note that the fall of FTX was down to “mismanagement” and veered into what he saw as issues around the handling of the bankruptcy. SBF also noted how he wished to help customers get paid for their losses. 

The prosecutor for the government gave a statement rejecting Bankman-Fried’s apology while noting there was no remorse for the crimes. The judge agreed when the prosecutor noted how SBF showed no real acknowledgement of the harm he committed. 

Before judge Kaplan read the sentence, he give his own statement in which he noted Bankman-Fried came from an “exceptionally privileged background” and was extremely intelligent. The judge acknowledged SBF's autism and took that into consideration along with his condition and social awkwardness. Judge Kaplan also noted how SBF wanted political and financial power and influence, and was aware of his wrongdoing in his aims to get these influences and power.

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Judge Kaplan - https://upload.wikimedia.org/wikipedia/commons/thumb/6/6c/Lewis_A._Kaplan.jpg/1280px-Lewis_A._Kaplan.jpg 

 

Judge Kaplan sentenced Bankman-Fried to 25 years in prison, with three years of supervised release afterward. The judge recommended a medium-security correctional facility somewhere in the Bay Area, while also giving a period of time for SBF to appeal his sentence. SBF gave little reaction as the sentence was read. 

After the proceedings Judge Kaplan explained his decision to sentence SBF to 25 years in prison and not the 100 years suggested by the probation department. Judge Lewis Kaplan emphasised his decision was based on the potential for future damage as much as the existing harm which had been done by SBF. The judge noted:

 

"There is a risk that this man will be in a position to do something very bad in the future, and it's not a trivial risk, not a trivial risk at all. The judgement has to accurately reflect the seriousness of the crime. And this was a very serious crime"

 

The judge also noted that he wanted to ensure deterrence for potential future white collar crime, while also ensuring that his sentence was one that would retain trust in the criminal justice system. With many false statements given during SBF's testimony, the judge noted that in his 30 year-career he'd "never seen a performance quite like that".

Given the fallout from the collapse of FTX, where numerous customers lost access to their money, there has been a sense of fading hope for those out of pocket by the actions of SBF. Some of the claimants have opted to sell their claim, even though there had been a sense of optimism when a lawyer working on the separate bankruptcy case said in January he was “cautiously" optimistic that customers owed money could "eventually be paid in full".

Many customers remain unhappy as with the current plan they would receive what their holdings were worth in dollars at the time FTX failed. Given the rise of value in crypto assets since the collapse in November 2022, many would rise out on any potential recovery in price since. Some have sued over the proposal, and John Ray, the lawyer put in charge of FTX after its collapse, noted those concerns in his own letter to the court ahead of the sentencing.

The Attorney General Merrick Garland noted he was grateful to the US Attorney’s Office for the Southern District of New York and the FBI for their "outstanding work" in bringing Bankman-Fried to "justice". He also reacted to the sentencing by stating:

 

“There are serious consequences for defrauding customers and investors. Anyone who believes they can hide their financial crimes behind wealth and power, or behind a shiny new thing they claim no one else is smart enough to understand, should think twice."

 

 

Appeal Ahead

With SBF sentenced to a quarter of a century behind bars, Judge Kaplan also ordered SBF to forfeit over $11 billion. This followed on from his trial in November 2023 for nearly $8 billion in digital asset fraud. The U.S. Attorney Damian Williams wrote in an official statement that this sentencing will send an important message to potential fraudsters everywhere. He noted the FTX founder’s theft was “unprecedented” following the collapse of the crypto exchange and its sister company, Alameda Research.

 

A law professor at the University of Richmond in Virginia, Carl Tobias, noted that he believed SBF's sentence is appropriate. He noted that Judge Kaplan was very careful and comprehensive and used the 25-year prison sentence and the mandate that SBF return $11bn as a deterrent to him. but also others who might be disposed of engaging in the same kind of fraudulent behaviour. He also noted the need for tighter regulation within the cryptocurrency space.

SBF has vowed to appeal both his conviction and his sentence, and his team of lawyers will have 14 days to lodge the appeal from the day the sentence is entered into the record. According to judge Kaplan this may happen as soon as later on Thursday, the 28th of March. Sespite SBF being frustrated by the sentence, he clearly got the more generous side of sentencing compared to the 50 - 100 years others were hoping for. Kaplan also noted SBF's lack of violent history and the fact that his notoriety, autism diagnosis, and association with wealth would make him extra vulnerable in a maximum security prison.

As per the regulations established by the Sentencing Reform Act of 1984, SBF will be required to serve a minimum of 85% of his sentence. This means a maximum of 15% of a federal sentence can be removed for good behaviour. This is applied pre-emptively, usually within the first couple weeks of being in custody. Of course all of this will depend on the result of any appeal by SBF, but assuming the 25 year sentence is held, he would be forced to serve a minimum of 21 years and 3 months.

However, according to Christopher Zoukis, a federal prison consultant based out of Charleston, South Carolina, there are plenty more avenues for SBF to reduce his overall time behind bars. Firstly, he will be credited for the time he spent in prison before Thursday’s hearing, meaning roughly 7.5 months will be removed from his remaining time in incarceration.

There are other modes and steps which can be taken by SBF to cut down his time in jail. During his first 28 days in prison SBF will get what’s called a classification meeting for the First Step Act. This is a criminal justice reform bill signed into law in 2018 that aims to reduce the federal prison population and reduce recidivism. Through this Act SBF will be able to accrue Earned Time Credits (ETC) and these can be used to reduce the amount of time he will spend in secure custody/prison. 

During his first year in prison SBF will earn up to 10 days for every month he’s in the program. This can reduce his sentence by 120 days, while in the second year the earning can go up to 15 days for every month. This can bring him another 180 days, making its 300 days or almost an entire year off his sentence.

There are other modes for reducing sentencing time, such as if SBF had an alcohol or drug abuse problem and joined a treatment program. This could potentially reduce his sentence, although it is unlikely given that SBF has previously pushed back against allegations of rampant drug use at FTX.

Once again working from his 25 year prison sentence, with 15% time reduced for good behaviour, 7.5 months already served, and the potential of the First Step Act, SBF should be currently expected to serve 237.65 months behind bars, or 19 years and 10 months from his sentencing date. Assuming there are no successful appeals or any issues in regards to good behaviour behind bars, SBF could be expected to be released around January 2043.

 

There have been several voices within the crypto community who spoke up against the sentencing of SBF as being too lenient. When comparing SBF to another prominent figure from the cryptocurrency world, Ross Ulbricht, the sentencing is extremely lenient. Ross got sentenced with two life sentences behind bars back in 2015 for the creation of Silk Road, a website that let users anonymously buy and sell anything, including drugs and hacking tutorials. Transactions on the site took place using bitcoin, making it much harder to trace.

Bitcoin Magazine, a crypto publication with more than 3 million followers, posted on X shortly after SBF was sentenced on Thursday:

If you wish to read more on Ross Ulbricht, follow this link to my post: Who Is Ross Ulbricht?

 

 

Courtroom Sketches

As the public is not allowed to view the court proceedings via any form of digital recording device, courtroom sketch artists are commissioned to give the public a view into the proceedings. Below are a selection of the pastel drawings Bankman-Fried’s sentencing. Included within the sketches are Bankman-Fried in his prison clothing, his defence counsel, judge Lewis Kaplan on the bench, a victim of FTX’s fraud testifying, and Bankman-Fried reading his own statement. 

In this courtroom sketch, Sam Bankman-Fried sits during his sentencing in Manhattan federal court.

Sam Bankman-Fried sits during his sentencing in Manhattan federal court. Photograph: Elizabeth Williams/AP

Bankman-Fried sits between his defense attorneys Marc Mukasey and Torrey Young during his sentencing.

Sam Bankman-Fried sits between his defence attorneys Marc Mukasey and Torrey Young during his sentencing. Photograph: Jane Rosenberg/Reuters

Bankman-Fried stands before Kaplan as he is sentenced to 25 years in prison.

Bankman-Fried stands before Kaplan as he is sentenced to 25 years in prison. Photograph: Jane Rosenberg/Reuters

Victim Sunil Kavuri speaks at the podium as FTX founder Sam Bankman-Fried sits between his defense attorneys.

Victim Sunil Kavuri speaks at the podium as Sam Bankman-Fried sits between his defence attorneys. Photograph: Jane Rosenberg/Reuters

Bankman-Fried, second from right, stands while making a statement during his sentencing.

Bankman-Fried, second from right, stands while making a statement during his sentencing. Photograph: Elizabeth Williams/AP

 

 

SBF Memecoins

Memecoins have seen a resurgence in recent months, as the hyper-speculative investments which offer little to no utility continue to trend in the cryptocurrency space. From political figure heads to the Solana-based memecoin known as "Dog Wif Hat" (WIF), which spiked from a market cap of around $50,000 to $3.5 billion in four months, there have been several memecoins launched to take advantage of moments and trends within and outside of the crypto environment.

With the historic sentencing of SBF, the memecoin community saw a spark as a few hours before the sentencing a developer launch a token known as Sam Baseman Fraud with the ticker FTX. This was launched on the Coinbase layer-2 network Base and over the course of seven hours the coin managed to grow more than 23,300%. This saw a market capitalisation of $1.5 million on the 28th of March, 2024. The value began to fall off following the rapid rise, and it dropped more than 85% within the span of three hours. Its price was trading around the $0.06 mark.  

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Within about 2 hours of the sentencing a Solana based SBF memecoin was launched, which surged in a rally towards a market capitalisation of around $20 million. This saw a movement of 18,000% from its launch value of $30,000, but similarly to above this coin saw a 95% drop from its all time high, now trading at $0.0008.

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Have a great day.

Peace. CryptoGod-1.

 

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cryptogod-1
cryptogod-1

Writer, designer, creator, and life enthusiast. I love to read and write and enjoy sharing my passion for crypto, sports, literature and everything and anything I can enjoy in life.


CryptoGod-1 : Crypto & Blockchain
CryptoGod-1 : Crypto & Blockchain

Enthusiast here looking to share my ideas, thoughts, analysis, and experience when it comes to all things crypto

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