As it becomes clear that CEO Sam Bankman-Fried used customer funds from the exchange to cover losses in his failing crypto empire, people are getting angry about the sudden collapse of FTX. The question now is what will happen to SBF, who used to be a famous person everyone knew.
Will Sam Bankman-Fried Go To Prison For The Sudden FTX Disaster?
Customers and investors will file civil lawsuits to try to get back what’s left of FTX’s assets. The Justice Department is also said to be looking into the situation, which makes people wonder if it will file criminal charges and if SBF will end up in jail.
Even if the facts seem bad at first glance, lawyers Fortune talked to pointed out two possible problems that could make it hard to convict someone, but which prosecutors could probably get around.
The first is who has power. Since FTX is an offshore company with headquarters in the Bahamas and didn’t do business with Americans, defense lawyers could argue that U.S. law enforcement can’t get involved in what its executives did.
Randall Eliason, a former prosecutor who now teaches law at George Washington University, says that the Justice Department is good at finding a “nexus” between foreign defendants and the United States. Two other lawyers who talked to Fortune agreed with this point of view. They said it would be easy for prosecutors to find a link between FTX and U.S. banks, emails, meetings in the U.S., or other interactions.
The intent is the second thing that could get in the way of a criminal case. Eliason says that a conviction will depend on whether SBF was not just bad at his job, but also on whether he lied to investors on purpose.
“It’s not illegal to run your business badly and lose a lot of other people’s money. It happens very often. “There has to be lying for there to be a crime,” he said.
Eliason also said that he didn’t know the details of the FTX mess, but he did say that prosecutors can show deception by showing something like a “smoking gun” message or a pattern of behavior that shows a person was trying to lie.
FTX aside, avoid businesses/exchanges/projects that:
– are not profitable (musical chairs)
– survive by selling their own tokens
– give high incentives for locking your tokens
– have a large total supply, but only a small circulation supply
– involves loans
Stay #SAFU 🙏
— CZ 🔶 Binance (@cz_binance) November 11, 2022
But a crypto lawyer who has worked in the field for a long time told Fortune that he has no doubt that SBF and FTX’s actions and business practices show fraud. The lawyer, who spoke on the condition of anonymity, pointed to evidence like FTX’s terms of service, as well as the company’s investor presentations and public statements by SBF.
The crypto lawyer also said that prosecutors at the Justice Department have everything they need to bring a case under a federal criminal law called Section 1343. This law covers wire fraud, which is a broad term for all kinds of fraud done with the help of electronic tools. The law sets a maximum prison sentence of 20 years.
SBF is not being charged with anything right now, and until he is found guilty in court, he is thought to be innocent. He did not respond right away to a text message asking if he is worried about being charged with a crime or going to prison.
— Mr. Diamondhandz1💎 (@MrDiamondhandz1) November 13, 2022
If the Justice Department does file criminal charges, it would also have to arrest any FTX executives it thinks are involved in wrongdoing. This would mean finding them and possibly making arrangements for their extradition. A report from Semafor over the weekend, which has not been confirmed, said that several FTX executives had flown to Hong Kong, but SBF was still in the Bahamas.
Why FTX’s Bankman-Fried Interviewed By Bahamas Police?
Sam Bankman-Fried of FTX was questioned by Bahamian police and regulators on Saturday, according to a person with knowledge of the situation.
Bankman-Fried didn’t answer right away when asked for a comment. In the Bahamas, just because the police are looking into something doesn’t mean that the person will be arrested or charged with a crime.
This month, FTX quickly went into crisis after the price of its own cryptocurrency token, FTT, fell and users rushed to withdraw their assets.
Since his FTX empire fell apart last week, Bankman-Fried has been under a lot of legal pressure. The questions from the Bahamian government only add to that pressure. In the US, the Securities and Exchange Commission is looking into whether he broke securities laws.
On Friday, more than 130 entities connected to FTX.com, FTX US, and the trading firm Alameda Research Ltd. were listed in bankruptcy filings at a federal court in Delaware. As part of the filing, Bankman-Fried gave up his job as CEO of FTX Group.
1) Hi all:
Today, I filed FTX, FTX US, and Alameda for voluntary Chapter 11 proceedings in the US.
— SBF (@SBF_FTX) November 11, 2022
Assisted by Joanna Ossinger.
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Jessa Martin is the author of Nogmagazine, A professional in writing by day, and novelist by night, she received her bachelor of arts in film from Howard University and her master of arts in media studies from the New School. A Brooklyn native, she is a lover of naps, cookie dough, and beaches, currently residing in the borough she loves, most likely multitasking.