After SBF's conviction, how did the court decide to testify against his "close friends"?

by Bob Van Voris, Bloomberg

Compilation: Odaily 0xAyA

The jury handed down the verdict against FTX co-founder Sam Bankman-Fried, but what really convicted him was the arguments of three of his former friends. Now, the question of how grateful the prosecutions are for their help has become a question hanging over them.

Caroline Ellison, CEO of Alameda Research, Gary Wang, co-founder of FTX, and Nishad Singh, head of engineering at FTX, were among the star witnesses in the SBF trial. All three said Bankman-Fried instructed them to commit fraud by helping transfer billions of dollars in FTX customer funds to Alameda, an affiliated hedge fund in which Bankman-Fried owns 90%.

As part of a cooperation agreement with prosecutors, they have confessed to their crimes, which supports their testimony.

Cooperating witnesses are often treated with leniency, which is nothing new, especially if they help the government catch bigger fish. SBF is a former superstar in the crypto industry, and his conviction definitely meets that criterion.

For example, mob leader Sammy "the Bull" Gravano was sentenced to only five years in prison, even though he confessed to 19 murders, and the reason for such a light sentence was because he testified against the more notorious John Gotti, who was sentenced to life in prison. Another example is Enron's massive fraud, where its chief financial officer, Andrew Fastow, was sentenced to just six years in prison for testifying against CEO Jeffrey Skilling. The sentences they received were below the general standard for their actual crimes.

Several criminal defense attorneys concerned about the case said the testimony of Ellison, Wang and Singh could have resulted in them not being sentenced, or a lighter sentence, compared to the fact that SBF could face decades in prison when it was sentenced in March.

The three are likely to be sentenced after him, and prosecutors will present a letter to the judge outlining the value of their cooperation. Judges are not bound by such letters, but they usually agree, in part to encourage witnesses in other cases to testify actively.

During the trial, Wang said that when questioned by prosecutors, he hoped that "it would be better not to go to jail."

Justin Paperny, a former UBS broker who served 18 months in prison for fraud, said that if they do go to jail, the sentence could be relatively short, and there is a good chance that they will serve their sentence in a minimum security camp that only holds non-violent offenders.

But even if they are spared jail, Ellison, Wang, and Singh are likely to face other forms of punishment. The government may force them to return the proceeds of the fraud and pay compensation to the victims. This could be a heavy burden given that the government says FTX's customers have lost billions of dollars. Fastow was ordered to hand over $20 million for his role in Enron's $60 billion bankruptcy.

Tim Howard, a former federal attorney in Manhattan, said, "In the United States, you have to make financial compensation that matches the facts. At this point, you won't get a respite."

Paperny now works as a consultant for white-collar defendants facing jail time. After his release, he said he answered the phone at minimum wage to help pay a $535,000 restitution order. The Department of Justice has a 20-year retroactive call.

"Regulation has been very aggressive in terms of collections," Paperny said. "You can't sell or refinance because the proceeds go to the government." He said he finally paid off the compensation in 2019.

Singh has agreed to hand over many of the assets he acquired while working at FTX or Alamada, including a $3.7 million home he purchased in the scenic San Juan Islands in Washington state. He also agreed to hand over a stake in AnthropicPBC, an AI startup he bought for $40 million, an investment that has only increased in value since the collapse of FTX.

Since Ellison, Wang, and Singh are all relatively young, they will face further challenges in starting new ventures, as their involvement in the collapse of FTX could leave a stigma in the minds of their future employers.

All three attended prestigious universities – Ellison graduated from Stanford University, and Wang was SBF's roommate at MIT, but cryptocurrency, finance, and other fields of practice that could hold other people's money could be off-limits to their future.

Chris Rice, a partner at Riviera Partners, a technology executive recruitment firm, said: "The stakes are simply too high for investors. I don't think they'll be able to be reused as much as they used to. ”