SBF found guilty of FTX fraud but experts worry that judgment won’t include recovery of users’ funds

In the late hours of yesterday, Former FTX CEO Sam Bankman-Fried (SBF) was found guilty of all seven charges of fraud by a jury in his criminal trial in New York, per reports.

SBF was found guilty of two counts of wire fraud, two counts of wire fraud conspiracy, one count of securities fraud, one count of commodities fraud conspiracy and one count of money laundering conspiracy. 

United States Attorney Damian Williams called his crimes “a multibillion-dollar scheme designed to make him the king of crypto” and one of the biggest financial frauds in American history.

However, his attorney, Mark Cohen, said in a statement: 

“We respect the jury’s decision. But we are very disappointed with the result. Mr. Bankman Fried maintains his innocence and will continue to vigorously fight the charges against him.”

What does this mean for the crypto industry? 

A legal practitioner and Managing Partner at The Law Suite, Lekki Lagos, Prince Nwafuru, who spoke to Technext said SBF risks over a 100-year jail term if the Judge imposed the maximum sentence. However:

“The Judge may consider some factors in the course of sentencing which may make him not impose the maximum punishment. Such factors will include the severity of the offence, past criminal records of the defendant, and the need to send a message to other crypto players who may want to defraud their users in the future. In the end, it is up to the Judge to decide the number of years and whether the sentences will run concurrently,” he said.

According to Lucky Uwakwe, founder and CEO of Sabi Groups who spoke with Technext, the sentencing of SBF sends a clear message that self-regulation is paramount in the industry.

“And it also means that as players we cannot take users’ funds to fund other endeavours outside the purpose it was meant for.”

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Also, he believes that if the sentence is pronounced, it will instil confidence in the general public. However, what is more concerning for him is the recovery of users’ funds or monetary compensation, especially for victims in Africa. 

“What aspect of the conviction or sentence will focus on settlement to victims? I believe beyond sentencing to jail the focus for any victim who probably wants justice will be if they can get back their assets or part of the assets.”

Also, this is a call to industry players and crypto exchange providers to never misappropriate client money which is in their possession. 

“Temporary custody service via exchange does not equate to ownership. There is a difference between caretaker and landlord.”

What is next for SBF

Sam Bankman-Fried’s crimes each carry a maximum sentence of between five and 20 years in prison with the wire fraud, wire fraud conspiracy and money laundering conspiracy carrying a maximum 20-year sentence.

Currently, SBF is back in his federal prison cell in Brooklyn but will return to court for sentencing by New York District Judge Lewis Kaplan on March 28, 2024. Government prosecutors will recommend a sentence, but Judge Kaplan will have the final say.

If Bankman-Fried served the maximum sentences for his crimes back-to-back he would be in jail for 110 years. 

Kaplan, however, could instead decide that Bankman-Fried will serve his sentence concurrently. If so, his wire fraud, wire fraud conspiracy and money laundering conspiracy crimes alone each carry a maximum 20-year sentence.

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If Bankman-Fried follows through then he may appeal after being sentenced. The first step would see the FTX co-founder file a notice of appeal in the New York District Court where he was just found guilty.

However, SBF still faces the possibility of another criminal trial which is slated for March 11 on five charges of bribery conspiracy, conspiracy to operate an unlicensed money-transmitting business, bank fraud conspiracy along with derivatives and securities fraud. New York District Court Judge, Lewis Kaplan gave government prosecutors a Feb. 1, 2024 deadline to confirm if they will still pursue the second trial.