A federal judge on Thursday ordered Sam Bankman-Fried to repay more than $11 billion as part of his sentence for defrauding customers and investors in his failed crypto exchange FTX.
Experts say this amount will likely financially incapacitate him for the rest of his life.
“This forfeiture is designed to make certain that if SBF ever makes money, it goes not to him but to the government and the victims,” Mitchell Epner, a former federal prosecutor, told CNN. “He will never be able to accumulate funds in his life, and forfeiture cannot be eliminated through bankruptcy.”
The court has some discretion in determining forfeiture amounts, but they’re largely based on how much money a defendant is found to have earned in the course of their crimes, not how much they can reasonably be expected to pay.
In their sentencing memorandum earlier this month, federal prosecutors laid out their reasoning for seeking $11 billion in forfeiture. They said $8 billion represents how much Bankman-Fried made from “wire fraud and conspiracy to commit wire fraud on FTX’s customers, and the property involved in his conspiracy to launder the proceeds.” Another $1.72 billion represents the amount FTX raised from investors on false pretenses, and $1.3 billion accounts for the money that Bankman-Fried’s cryptocurrency trading firm owed lenders, prosecutors said.
Unlike restitution, where the money from seized assets goes directly to victims, the money from forfeiture is taken by the government and absorbed into the US Treasury.
On Thursday, U.S. District Judge Lewis Kaplan said it would be “impractical” to order restitution because the complicated nature of the case and the number of victims involved. But he ruled that the government could compensate victims of the FTX collapse with the forfeited assets.
“In a case like this, the government and court is going to have a pretty good idea of (Bankman-Fried’s) assets and how much they’re worth,” said Anthony Capozzolo, a former assistant US attorney in the Eastern District of New York.
It is unclear how much Bankman-Fried is currently worth, but it’s likely not anywhere near $11 billion.
Determining how much victims will receive is part of an internal process within the Department of Justice’s Money Laundering and Asset Recovery Section. This could delay the amount of time it would take victims to see any sort of payment.
Securing compensation for victims of white collar crimes can drag out for years.
Last June, lawyers for Elizabeth Holmes, the disgraced former Theranos CEO, said she had “limited financial means” and should not be forced to pay $250 a month to victims of her crimes after she is released from prison. Holmes and former Theranos COO Ramesh “Sunny” Balwani were ordered to pay restitution of roughly $452 million to victims.
Bernard Madoff, who was sentenced to 150 years behind bars for the $20 billion Ponzi scheme he led, was ordered to forfeit more than $170 billion when he was sentenced in 2009. The reverberations of that scheme are still being felt more than 15 years later, as the latest payout totaling about $158 million was announced in December 2023. So far, the Department of Justice has redistributed about $4 billion to Madoff’s victims.
As he heads into his 25-year sentence, Bankman-Fried’s assets will be handed over to the government, and the rest of the money he owes will sit on the figurative shelf until he is released.
“The reality of it is that it’s irrelevant right now,” said Peter Katz, a former attorney at the Department of Justice’s fraud section.
When the 32-year-old Bankman-Fried gets out of prison, the government could theoretically take a portion of any income he earns, but Katz says it might not be worth their time.
“Theoretically, they could go after anything he makes, but the practical reality is that if he ended up with a job where he makes millions of dollars or if he has some financial windfall, they’ll go after him,” Katz said. “If he goes and gets a job at 7-Eleven and makes $20 an hour he’s going to be able to be able to live.”
“The government doesn’t want a defendant to become ward of the state but they’re not generous,” said Capozzolo. “They’ll look at how much he’s making and how much he’s spending on necessities and rent.”
The magnitude of the forfeiture order means that Bankman-Fried will never be able to become too comfortable financially, as the government could pursue him for money and assets for eternity.
Read the full article here
