Sam Bankman-Fried Arrested; What Could be Uncovered Next

Key Highlights:

  • Sam Bankman-Fried arrested in the Bahamas as the crypto industry sighs in relief;
  • US prosecutors working on extraditing SBF;
  • Bankman-Fried’s bail request gets turned down despite pleas by lawyers,
  • Based on US sentencing guidelines, SBF faces life imprisonment in federal prison if convicted.

Excitement Trails Bankman-Fried’s Arrest

After news broke on December 12 that disgraced former FTX CEO Sam Bankman-Fried (SBF) had finally been arrested in the Bahamas, the general reaction in the crypto community was one of relief, satisfaction, and a sense of justice. 

Sam Bankman-Fried Arrested; What Could be Uncovered Next

Image Source: Reuters

This odd moment of general schadenfreude is understandable, considering recent revelations showed that SBF ran what some have called a poorly thought-out fraud and Ponzi scheme. SBF was arrested after prosecutors with the US Attorney’s Office in New York forwarded an arrest warrant to a magistrate judge in the Bahamas. 

That said, as the industry finds succor in SBF’s arrest, what comes next for the infamous former CEO?

SBF Could Be In for Life

CNBC reports that SBF faces charges of wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering. The charges mounted against the former FTX boss could see him spend the rest of his life in jail without the possibility of parole. 

Sam Bankman-Fried Arrested; What Could be Uncovered Next 1

However, for SBF to serve time, he must be extradited from the Bahamas to New York. 

First, Extradition

Speaking on his extradition, former federal prosecutor Renato Mariotti said in a CNBC interview that the Justice Department would not have made the move if they weren’t sure extradition was on the cards. However, Mariotti said that the extradition process will likely take weeks to conclude. 

The US and the Bahamas signed an extradition treaty in 1931, with the most recent iteration codified in 1990. Since SBF hadn’t been charged or convicted in the Bahamas yet, US prosecutors needed to act fast and provide the necessary evidence that he was wanted for his crimes to secure an arrest.

Sam Bankman-Fried Arrested; What Could be Uncovered Next 2

Source: US Gov

That said, Mariotti stated that extradition, which could take weeks, was the first step in convicting SBF for his crimes, a process he believes could take years. This is because SBF’s case is unique and massive, and prosecutors and regulators could be handling numerous cases at the same time around the world. 

Mariotti explained: “The more that they charge, the bigger that the case is, the more time they’re going to need to get in motion.” He added: “I would say late 2023 is the earliest a trial would occur.”

Bail Has Been Rejected

SBF’s lawyers recently pushed for the judge handling the case to consider their client posting a $250,000 cash bail. They argued that Bankman-Fried was not a flight risk, had been a permanent resident of the Bahamas for years, and owned property in the country. 

However, US prosecutors were not having it and argued that the extradition treaty with the US mandated that the defendant (SBF) be held in custody

Bahamas Chief Magistrate JoyAnn Ferguson-Pratt, the judge handling the case, told the courtroom that she had a tough time deciding whether to grant SBF bail or not since she signed the warrant for his arrest. She joked:

“On a good day, I don’t drink. Ask anybody. But yesterday, I was sure gonna drink.”

SBF’s lawyers further argued that their client has had numerous opportunities to take flight “up from the moment the FTX issues became public,” but did not choose that route. The lawyers added that to assuage fears of a flight risk, the court could put “electronic monitoring systems” in place in addition to large cash bail. 

However, the seasoned judge did not budge, noting that she had personally seen several cases where defendants forfeited large cash bail and fled. 

Sam Bankman-Fried Arrested; What Could be Uncovered Next 3

SBF’s extradition hearing has been set for February 8, 2023, meaning the one-time crypto billionaire will spend the next nine weeks in a Bahamian prison. 

Possible Ruling Outcome for SBF

SBF’s sentence will be determined once the DOJ secures a conviction after several factors have been taken into account. 

Braden Perry, a partner at Kennyhertz Perry, an entity that specializes in advising clients on anti-money laundering, compliance, and enforcement issues, said that, taking the size of the loss into account, Bankman-Fried could be in prison for years and even the rest of his life if he’s convicted of any of the fraud charges. 

Perry, who’s a one-time senior lawyer for the CFTC, added that the length of any potential sentence is hard to predict. 

The US sentencing guidelines use a numeric system—between 1 and 43—to prescribe a minimum or maximum allowable sentence. In SBF’s case, Perry said in his interview with CNBC that mitigating factors and enhancements could influence the rating system. He said:

“The dollar value of [the] loss plays a significant role. Under the guidelines, any loss above $550 million adds 30 points to the base-level offense.”

Perry further explained:

“Having 25 or more victims adds 6 points, [and] use of certain regulated markets adds 4.”

As of earlier this year, FTX had a valuation of $32 billion and had over 1 million users at its peak in July 2021. Based on Perry’s assessment, SBF is looking at life in federal prison, without parole, if he’s convicted on only one of the offenses mounted against him. What a way to go!

What About Other FTX Bigwigs?

Many are asking what becomes of other FTX executives and former Alameda heads, such as Caroline Ellison and Sam Trabucco. Do they face trial too?

Sam Bankman-Fried Arrested; What Could be Uncovered Next 4

Image Source: Yahoo Finance

Speaking on this in another interview, Perry said “a lot depends on the sealed indictment.” He explained:

“If the US alleges conspiracy to commit any of the crimes, there could be a number of FTX executives charged. Based on the commingling concerns, I would not be surprised if Ellison, Trabucco, and potentially others are charged.”

Final Word

Sam Bankman-Fried Arrested Until extradition is ruled upon, the FTX matter remains in limbo. However, other FTX-related cases, such as the class action lawsuit against celebrities that endorsed the exchange, will run concurrently with what is expected to be a marathon lawsuit and investigation. 

Now, a part of the industry appears to have turned its focus on Binance CEO Changpeng Zhao, who has come under scrutiny. 

Sam Bankman-Fried Arrested; What Could be Uncovered Next 5

Price-wise, the broader crypto market is set to close the year—and begin the new year—on a bearish note. 

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