Sam Bankman-Fried’s Likely to Get Out of Jail Early

Despite the hefty 25-year sentence handed to Sam Bankman-Fried, legal nuances and the U.S. federal correctional system’s policies might offer pathways to a reduced term behind bars.

Bankman-Fried’s sentencing on Thursday by the U.S. District Court for the Southern District of New York follows his conviction on charges including fraud, conspiracy, and money laundering, drawing a close to a saga marked by high-stakes risk-taking and financial mismanagement.

However, civil attorney Nicole Brenecki told Newsweek that the FTX co-founder could see his 25-year sentence potentially reduced, based on factors like his non-violent, first-time offender status and restitution plans for the victims.

“Bankman-Fried’s sentence could have been much longer,” Brenecki told Newsweek on Thursday in the backdrop of Federal prosecutors recommending a sentence of between 40 and 50 years. “However, he is a non-violent first-time offender which not only led to some leniency in determining the sentence but will also likely contribute to his early release,” she said.

“Given that he is a first-time non-violent offender, and given that he will likely be on his best behavior while in prison, his sentence could be reduced by 15 percent to 50 percent,” she said.

A 15 percent reduction in Bankman-Fried’s sentence would see the former billionaire exit prison in the winter of 2045, and a 50 percent reduction in his sentence would see him exit in the fall of 2036.

Such reductions are common in the federal system for inmates who exhibit good behavior and engage in rehabilitative activities. The legal mechanisms at play include the possibility of earning Good Conduct Time, which can reduce a sentence. Involvement in programs under the First Step Act could further decrease his time in prison.

“The role of the criminal justice system is to punish offenders and to deter others from committing similar offenses,” Brenecki said. “Bankman-Fried’s sentence fulfills both roles. It is a harsh punishment for him and deterrence for others.”

“In the post-Madoff, and now post-Bankman-Fried landscape, such individuals should not allow greed and recklessness to influence their actions if they want to stay out of prison,” she said.

What Happened with FTX?

The collapse of FTX, a once-dominant force in the cryptocurrency exchange realm, added to the list of ‘black swan’ moments in the crypto industry, leading to its bankruptcy announcement in November 2022.

The unraveling began with a leaked report, revealing a substantial portion of Alameda Research’s (FTX’s affiliated firm) assets were in FTT, FTX’s own token, raising concerns about the entwined finances of the two entities. The situation escalated when its competitor, Binance, the largest crypto exchange, decided to offload its FTT holdings, triggering a sharp decline in FTT’s value and massive withdrawals from FTX.

Attempts at a bailout by Binance failed due to due diligence concerns, pushing FTX into a liquidity crisis and subsequent bankruptcy filing on November 11, 2022, with Bankman-Fried resigning as CEO.

Post-bankruptcy, the focus shifted to legal proceedings against the embroiled former CEO, arrested in December 2022 and facing charges of fraud and money laundering.

Following the spectacular unraveling of FTX, the focus now shifts to the issue of customer reimbursements based on November 2022’s crypto prices, disregarding any market gains the customers would have had if FTX hadn’t failed.

The bankruptcy exposed a gap between FTX’s assets and the total claims, with $31.4 billion in claims and only $13.7 billion in identified assets to cover. That restitution and recovery of assets is ongoing.

FTX’s downfall has prompted a reevaluation of crypto investment risks and the regulatory landscape, pushing retail and institutional investors to platforms like Coinbase which is publicly traded and highly regulated.