Sam Bankman-Fried, founder and former chief executive of failed cryptocurrency exchange FTX, could face more than 20 years in prison depending on the extent of potential legal violations related to FTX’s collapse and a conviction, two attorneys said forcast.
Several U.S. state agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of Justice (DOJ), are investigating Bankman-Fried and his Bahamas-based company following FTX’s abrupt implosion therein Month.
“In terms of criminal penalties, depending on the number of violations and the dollar value of the violations, under federal guidelines for conviction, you might consider potential criminal liability that could exceed 20 years in prison,” Richard Levin, chairman of Fintech and regulatory practices of the law firm of Nelson Mullins Riley & Scarborough forcast in an interview.
Braden Perry, former CFTC chief litigator and partner at the Kennyhertz Perry law firm, said forcast that Bankman-Fried could even face “life in federal prison with no possibility of supervised release.”
Levin and Perry offered professional opinions on unfolding events at FTX and neither is directly involved in current potential legal action against FTX executives. Both are based in the United States
At the time of publication, Bankman-Fried had not yet responded forcasts Please comment via Twitter.
An Eversheds Sutherland official said the law firm could not comment on FTX because it may play a role in the bankruptcy proceedings. A spokesman for the law firm Kobre & Kim said she could not comment because she may be involved in the case, and an attorney for King & Wood Mallesons also said she could not comment. The people did not want to be named.
Perry said that under federal sentencing guidelines, any loss over $550 million adds 30 points to baseline, 25 or more victims adds six points, use of certain regulated markets adds four, refined means adds two, and a judicial element would add two add more.
“With strict enforcement and assuming minimal mitigating factors, he would [Bankman-Fried] sits over 43 [points]what the maximum is according to the guidelines,” Perry added.
Perry said Bankman-Fried was more concerned about the potential regulatory and criminal actions.
Regulatory action could include requiring return, disgorging and imposing market bans, meaning Bankman-Fried could not actively participate in certain market activities, Perry said.
FTX’s alleged misconduct could result in various charges against Bankman-Fried and other executives, the attorneys added.
Levin said prosecutors are likely to file charges related to criminal violations of securities laws, such as securities fraud. “There could also be prosecutions related to wire fraud and money laundering.”
“Then you have the criminal penalties that could be imposed or the enforcement actions that could be taken by the SEC and CFTC,” Levin added.
Anthony Sabino, a professor at the law school at St. John’s University in New York, tells forcast FTX’s new CEO, John J. Ray III, has raised issues of misrepresentation, fraud, missing assets and wrongful assignments in the company’s recent filings with the Delaware Bankruptcy Court.
“Bankman-Fried could very well be charged with violating US securities laws, specifically the infamous Section 10, the most powerful weapon in US securities fraud laws, used to put insider traders behind bars,” Sabino said.
According to Sabino, if allegations of violations of U.S. securities laws are made, they would most likely focus on allegations of misleading investors, filing or disseminating false financial information. If criminal charges are brought, they will almost certainly involve mail and wire fraud, he said.
“If convicted, all of these laws carry long prison sentences, massive fines, and most importantly, confiscation of ill-gotten gains,” Sabino said.
“In sum, SBF could be impoverished — which might be poetic justice considering the same fate has apparently befallen some of its investors,” Sabino added.
mouth wide closed
Despite investigations by US and Bahamian authorities, Bankman-Fried has not shied away from speaking out publicly.
He spoke to Vox a few days after news of FTX’s collapse and is expected to speak virtually at the New York Times’ DealBook Summit on November 30.
Bankman-Fried, whose parents are both law professors at Stanford University, has parted ways with the attorneys at law firm Paul Weiss who represented him as he disrupted restructuring efforts with “incessant and disruptive tweeting,” Bloomberg reported last week.
Semafor, a US news site launched in October with Bankman-Fried investments, reported last week that the former FTX CEO is now being represented by Greg Joseph, a former president of the American College of Trial Lawyers. David W. Mills, a professor at Stanford Law School, is also part of his legal team.
“I do not represent Mr. Bankman-fried,” said Levin of Nelson Mullins. “However, if I did, I would tell him not to comment on FTX’s failure and his role in FTX.”
Levin added, “Every time FTX executives make public comments, they create evidence that could be used against them in a multitude of ways, whether in criminal or civil lawsuits.”
Perry agreed that Bankman-Fried should stop making public statements. “The more he speaks, the more potential admissions he has made to prosecutors.”
“No matter how much he wants to justify certain things, it hurts his potential legal defense,” Perry said.
Bankman-Fried “needs to shut up and let his attorneys do the talking,” Sabino said.
“He’s taking a huge risk and has virtually no hope of profiting from these public statements.”