A jury of twelve convicted the founder of FTX, Sam Bankman-Fried, guilty of all seven criminal charges brought against him. The question of how long he will remain in prison, however, is one that Judge Lewis Kaplan will decide for himself.
The 78-year-old judge is a veteran of the Southern District of New York and has presided over some of the biggest cases ever heard at the courthouse at 500 Pearl Street in midtown Manhattan.
Kaplan is straightforward, strict and has no patience for “show” efforts by lawyers, defendants and witnesses, as CNBC explains in a report. If a witness deliberately avoids a question or a lawyer babbles, he will be quick to point out.
The testimony of Bankman Fried
The judge’s lack of patience with Bankman-Fried during the defendant’s four days on the stand was apparent to anyone who was there.
The 31-year-old graduate of the Massachusetts Institute of Technology used complex, repetitive and contradictory sentences. Very often he answered “I don’t remember”.
In many of these cases the prosecutor presented evidence that would either directly contradict the defendant’s testimony or provide an answer to the question that Bankman-Fried had avoided. The prosecution essentially proved that Bankman Fried illegally transferred many billions of FTX investors’ money to his investment firm Alameda Research in order to make risky investment bets and finance a life of luxury.
The verdict of the jury
Bankman-Fried was convicted of wire fraud and conspiracy to defraud FTX customers and Alameda Research lenders, conspiracy to commit securities fraud and conspiracy to commit commodity fraud against FTX investors, as well as conspiracy to commit money laundering.
The fact that jurors were able to reach a unanimous verdict in just a few hours suggests that they were truly convinced and that there were no reservations, Yesha Yadav, a law professor and associate dean at Vanderbilt University, told CNBC.
“This overwhelming consensus gives the judge the option of a stiffer sentence,” Yadav continued.
In the case, the statutory maximum sentence is about 115 years, but there is a sliding scale for sentencing under the recommended guidelines, given the scale of the crimes and the defendant’s criminal history.
“I wouldn’t be surprised if SBF passes the next 20 or 25 years of life in prison,” Renato Mariotti, a former prosecutor in the U.S. Department of Justice’s Securities and Commodities Fraud Division, told CNBC.
“The scale of his fraud was massive, he was defiant and lied while on the bench and Judge Kaplan had very little patience for his antics. He will have more sympathy for the victims than Bankman-Fried,” Mariotti added.
In August, Judge Kaplan revoked Bankman-Fried’s bail and sent him back to prison for attempted witness tampering.
“Federal sentencing guidelines will probably be high, but they are just that – guidelines. The judge must take into account all the circumstances surrounding the SBF and its illegalities in order to arrive at the sentence,” explains Mariotti.
Yadav added that the length of the sentence depends on how many have been harmed, the total amount, as well as the severity of the harm an accused has caused.
“Here, there are a number of factors that could push the judge to a very long prison sentence, probably close to the 110 years that the sentencing guidelines recommend,” Yadav said.
The sentence, however, will come down to what the judge believes is enough to punish Bankman-Fried, deter others and promote respect for the law, he added.
Former Assistant U.S. Attorney Kevin J. O’Brien, who specializes in criminal defense in New York, agreed, estimating his sentence at 15 to 20 years »
O’Brien added that given Bankman Fried’s age, he believes the judge will be inclined to give him a chance to live a full life after his prison term.
The comparison with Elizabeth Holmes and Bernie Madoff
Bankman-Fried’s case has been compared to that of Elizabeth Holmes, founder of the medical device company Theranoswhich ceased operations in 2018.
Holmes, 39, was convicted in early 2022 of four counts of defrauding investors. She was sentenced to more than 11 years in prison and began serving her sentence in May at a penitentiary in Bryan, Texas.
But former federal prosecutor Paul Tuchmann told CNBC he expects tougher terms for the former FTX CEO because “the amount of damage they suffered is just staggering.”
Tuchmann compared Bankman-Fried’s case to his own Bernie Madoff, who was convicted in prison for 150 years.
“Like Madoff, many of the losses in this case involved small investors. That tends to create more pressure for a significant penalty,” Tuchmann explained.
“Sam Bankman-Fried is very young. The judge may take this into account. Bernie Madoff went to prison for 150 years when he was obviously much older – with limited productive years left,” Yadav said of the Madoff comparison.
“Sam Bankman-Fried still has an opportunity to make some kind of positive contribution in his lifetime. His crimes are also non-violent in nature,” Yadav continued.
He also noted that “the sentencing announcement will take place in March 2024 – very close to the second criminal trial Sam Bankman-Fried faces for campaign finance violations and bribing foreign officials,” Yadav said. “The prosecution is likely to feel very confident going into this next trial. In other words, if he is found guilty of these additional charges as well, he could see an even longer sentence potentially than the multi-decade (at least) time currently being considered.”