First, shoutout to innercitypress. It would be a massive pain to follow this through docs. One of the best accounts for court reporting out there. Second:
SBF gets over 25 years, but some major scandal breaks about the decision to not charge him with campaign donation violations (which furthers Trump’s campaign)
Not gonna lie, nailing the over/under feels pretty damn good, given that sentencing is all over the place for these novel, massive white collar crimes.
Now that I’ve gotten my self-congratulations out of the way, I do want to mention a couple things. First, the sentence itself. Given the guidelines — 105 from Probation, 40-50 from the Government — I don’t think 25 years is a lot, nor do I think it is a little (as there’s no Federal parole.) He will serve that time. But the campaign finance charges were dropped last year:
The charge, which carries a potential for up to five years in prison after a conviction, pertained to the government’s claim that Bankman-Fried enabled over $100 million siphoned from Alameda Research to fund over 300 political contributions that were unlawful because they were made in the name of straw donors or came from corporate funds.
I don’t really mind that Caroline Ellison and Gary Wang seem to have faced no publicly known punishment. I don’t think anyone should be out for blood when this is what testimony made me think:
Reading Wang’s testimony, I began to feel a little bad. Here’s a guy whose deskmate did not hear Wang speak more than 6 words directed at him over the course of 6 months (according to Michael Lewis)
claiming, very convincingly, that he pretty much just did what he was asked to. And by all means, the actual FTX product even with the speed bump was a really fluid, fantastic trading experience. None of the drawbacks — predatory liquidation, leverage, and products offered — were unique to FTX in the space, and objectively their core exchange was pretty great stolen money notwithstanding.
Even Sam Trabucco, who seems to have disappeared into the ether, doesn’t really bother me as long as they returned the money (which, presumably, was in the terms of the private nonprosecution agreements.) But the parents enabled so much of this that they were complicit too. My “hopeful” take was that they would be charged after SBF’s trial, but of course, we like our fall guys:
As I get older, I realize that slippery slopes are a very real thing. Here’s the funny part about 2008 and the NBA betting scandal — in both cases, only one person went to jail over it all, and everyone knows it was much bigger than implied.
The same goes for Tom Hayes for LIBOR and Nav Sarao for the flash crash. Are you really telling me that the industry-wide rigging of LIBOR was one trader’s sole fault? That the flash crash was triggered by one guy spoofing from a bucket shop?
Here, the crime is simply so large that I have to assess what “fall guy” really means. Multiple people went to jail for Enron, though Lou Pai pulled off one of the greatest train dodges I’ve ever seen:
Pai's frequent strip club visits during his time with Enron led to an affair with stripper[24] Melanie Fewell (who was also married), and resulted in a pregnancy. Upon learning of the affair, Pai's then-wife of over 20 years, Lanna Lee, with whom he has two biological children, filed for divorce.[3] To satisfy the financial terms of his divorce settlement, Pai cashed out approximately $250 million of his Enron stock[24] just months before the company's stock price dramatically collapsed and it filed for bankruptcy protection.[10] After the divorce, Pai and Fewell married
And, of course, Madoff got 150 years for his fraud.
Here, the 25 year sentence is the fall guy. In a vacuum, I don’t think this is unfair: 25 years is a long time and I truly believe a lot of the nonsense that happened in the crypto world is going to be long-forgotten due to how much the world has changed by that point. That being said, given the scale of egregious conduct and compulsive lying not only by SBF, but by his parents — who, may I remind you, were longtime law professors on tax and ethics at Stanford University — is conduct that deserves to be punished on the record.
The final part of my 2023 prediction was that a scandal would break out over how these charges got brushed under the rug, and it remains to be seen whether this will happen (which is also the only way I will revisit this topic). Personally, I have met enough financial crimes prosecutors to know that some people were definitely rubbed the wrong way by the inside baseball that led to this. Perhaps the crypto mob justice mentality will be satiated, but they did the crime as well — they should also do the time.
Malt Liquidity is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
