The bankrupt cryptocurrency exchange FTX’s founder, Sam Bankman-Fried (SBF), is expected to face trial next month. Due to the significant rise in the cryptocurrency market, creditors may receive full repayment, which could potentially result in a lighter sentence for SBF. CoinDesk, a cryptocurrency media outlet, interviewed several lawyers to discuss the potential impact of debt repayment on SBF’s sentencing.
Will SBF’s sentence be shorter than expected?
The rebound in the cryptocurrency market and the appreciation of certain investments held by FTX exchange may lead to full repayment for creditors (the claim amount is expected to be calculated based on the asset prices on the day the company applied for bankruptcy protection). This could affect the sentencing of SBF, who has been charged with multiple counts of fraud, in the upcoming month.
The rise in the cryptocurrency market is significant for the sentencing process, as compensation for victims is a consideration during sentencing. For instance, for low losses, sentencing guidelines suggest a range of 24 to 30 months, while according to Jordan Estes, a partner at the Kramer Levin law firm’s New York office, higher losses can result in severe sentences, including a term of over 20 years or even life imprisonment.
Estes expects the amount of losses to be a focal point of contention during SBF’s sentencing. She stated to CoinDesk:
However, in the U.S. sentencing guidelines, provisions for reducing a defendant’s sentence based on returning funds to victims only apply if the restitution was made before the crime was discovered. In SBF’s case, it is apparent that he did not return these funds, and the payments were made long after the crimes were discovered.
A possible analogous case is the well-known financial fraud case of Bernie Madoff, where the bankruptcy trustee recovered significant sums of money but did not receive any rewards as a result.
SBF may still face a lengthy sentence. According to Martin Auerbach, a lawyer at international law firm Withers, judges in the Southern District of New York typically impose sentences below the guideline range for white-collar crime cases (as sentencing guidelines are advisory rather than mandatory, making it easier to deviate from them), but they can also impose penalties above the guideline recommendations when the crimes are deemed extremely egregious.
Auerbach stated:
Related reports: “FTX Abandons Restarting Exchange, Plans Full Repayment to Cryptocurrency Clients” and “Jury Unanimously Convicts SBF on Seven Counts of Fraud and Conspiracy Charges.”
