As the sentencing of Sam Bankman-Fried, founder and former CEO of FTX, looms, Yuliya Guseva, director of the Fintech and Blockchain Research Program at the Rutgers Center for Corporate Law and Governance, has drawn parallels between Bankman-Fried's fraud and the actions of Bernie Madoff. Madoff was a former Nasdaq chair who orchestrated a colossal Ponzi scheme. Guseva suggested to Federal Newswire that Madoff's sentencing could provide a guideline for an appropriate sentence for Bankman-Fried.
"The magnitude of fraud in the case against FTX and its founder reminds us of the Madoff case," said Guseva. "Both are instances of massive fraudulent schemes involving various assets, financial instruments, commodities, etc. In both cases, charismatic executives attempted to convince the general public and regulators of their bona fides and touted novel and profitable approaches to markets and trading. The underlying analogy is staggering, which may suggest what is a fair outcome and what is not in this case."
Bankman-Fried was convicted in November 2023 on seven criminal charges, including wire fraud and conspiracy to commit money laundering, as previously reported by Federal Newswire. Damian Williams, the U.S. attorney for the Southern District of New York, stated in a December 2022 press release that Bankman-Fried's charges stemmed from an alleged "wide-ranging scheme" to misuse billions of dollars of FTX customers' funds while misleading FTX and Alameda investors. Williams said at the time, "As today’s charges make clear, this was not a case of mismanagement or poor oversight, but of intentional fraud, plain and simple."
Following the collapse of FTX in November 2022, it emerged that approximately $10 billion in FTX customer funds were missing according to CNBC. It is reported that Bankman-Fried used this money to hedge investments and fund his lavish lifestyle. His sentencing is scheduled for March 28th while FTX customers are still awaiting repayment.
According to Slate, Bankman-Fried's convictions could result in over 100 years in prison. A probation officer recommended in a presentencing report that the judge should sentence him to exactly 100 years. However, his attorneys recently argued that FTX investors and customers could recover their lost money which they believe should lead to a less severe sentence. "The harm to customers, lenders, and investors is zero," the lawyers wrote in a February filing. Bankman-Fried has officially requested a sentence of between 63 and 78 months.
Investopedia reports that Madoff was sentenced to 150 years in federal prison for his convictions of fraud, money laundering, and other related charges. In addition, his assets were seized and sold, and he was ordered to pay $170 billion back to investors. Madoff died in prison in 2021 at the age of 82.
Guseva's work involves academic and policy research on subjects including securities law, financial regulation, and digital innovation as per the Rutgers Law School website. She coauthored the second edition of the textbook "Regulation of Cryptoassets," published in 2022. She previously served as vice dean of Rutgers Law School.
