Will Sam Bankman-Fried go to jail over FTX collapse?
Shock at FTX’s sudden collapse turns to anger as it emerges that CEO Sam Bankman-Fried has been using client funds from the exchange to offset losses at his failing crypto empire. The question now is what the consequences will be for the one-time icon known to all as SBF.
While there will be civil lawsuits as customers and investors try to recover what remains of FTX’s assets, the Justice Department is also said to be investigating, raising questions about whether the agency will file criminal charges and whether SBF could see the inside of a prison cell.
Although the facts may seem damning on the surface, lawyers are being contacted wealth listed two potential obstacles to a criminal conviction — although one of which prosecutors could likely overcome.
The first is jurisdiction. Since FTX is an offshore company headquartered in the Bahamas and does not target Americans, defense attorneys could argue that the actions of its executives are beyond the reach of US law enforcement.
But the Justice Department is good at finding a “nexus” that connects foreign defendants to American shores, according to Randall Eliason, a former prosecutor who now teaches law at George Washington University. Two other attorneys spoken to wealth reiterated this view, saying it would like prosecutors to find it easy to find a connection to the FTX case — in the form of a link between FTX and US banks, emails, meetings in the states, or other interactions.
The second possible obstacle to prosecution is intent. Specifically, Eliason says any conviction will depend on whether SBF wasn’t simply incompetent, but whether he intentionally misled investors.
“It’s not a crime to run your business badly and lose a bunch of other people’s money. It happens all the time. There has to be deception for a criminal case,” he said.
Eliason added that he is unfamiliar with the details of the FTX debacle, but that prosecutors can show deception by something like a smoking gun or by displaying a pattern of behavior that indicates fraudulent intent.
However, a longtime crypto advocate said wealth he has no doubt that SBF’s behavior and FTX’s business practices clearly indicate fraud. The attorney, who spoke on condition of anonymity, cited evidence such as FTX’s Terms of Service, as well as the company’s investor presentations and public statements by SBF.
The crypto attorney added that all the elements are in place for Justice Department prosecutors to bring a case under a federal criminal statute called Section 1343, which covers wire fraud — a term used to describe a variety of frauds committed using electronic tools . The law provides for a maximum sentence of 20 years in prison.
SBF, who is not currently charged with anything and would be presumed innocent pending a guilty verdict, did not immediately respond to a text message as to whether he was concerned about possible criminal charges or jail time.
If the Justice Department files criminal charges, the agency would also have to arrest any FTX executives it believes are complicit in wrongdoing, and that would mean locating them and potentially arranging extradition. An unconfirmed weekend report from Semafor said several FTX executives flew to Hong Kong but SBF remained in the Bahamas.
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