Sam Bankman-Fried could get 100 years in prison. What is fair?
By Ephrat Livni
After a monthlong trial and about four hours of deliberation, a jury convicted FTX founder Sam Bankman-Fried of seven counts of fraud and conspiracy last week. He had been accused of stealing billions of dollars from his cryptocurrency exchange’s customers and investors, funneling the money into his investments and extravagant spending.
Now, Judge Lewis Kaplan of the Southern District of New York will decide how many years in prison, if any, those crimes warrant. The looming sentencing raises age-old questions about the appropriate punishment for economic crimes.
The maximum term is more than 100 years for Bankman-Fried, who will turn 32 in March, the month when he’ll be sentenced. But federal sentencing guidelines, meant to ensure consistency across courts around the country, also allow for flexibility. Sentences for the same crimes can vary greatly, depending on factors like the severity of the offense, the convicted person’s cooperation and the judge’s inclinations.
White-collar crimes tend to be punished less severely than violent crimes because offenders aren’t a physical threat to society. In 1990, Michael Milken, known as the “junk bond king,” pleaded guilty to six felony counts of fraud and conspiracy and was sentenced to 10 years in prison. He was released in about two years after cooperating with the government, and then-President Donald Trump pardoned him in 2020. Bernie Madoff, who pleaded guilty to 11 criminal counts for a 30-year $64 billion fraud, was sentenced to 150 years in prison in 2009. He died in custody in 2021. Theranos founder Elizabeth Holmes went to trial and was sentenced last November to about 11 years in prison after being found guilty of four counts of defrauding investors. Her recommended sentencing range was 11 to 14 years, with a maximum of 20.
What is fair? That depends in part on how a judge views the purpose of punishment. There are three classic theories:
— Deterrence: Severe sentences send a message to would-be criminals and prevent crimes. “If you’re going to deter, you have to reach an audience,” said John Coffee, a Columbia University law professor and an expert on white-collar crime. Bankman-Fried’s is a “rare case” that gets lots of media coverage, he said, so millions will hear of his punishment, serving deterrence goals.
— Retributive justice: Wrongdoing must always be punished. Proponents argue for harsh sentences that exact what they consider commensurate vengeance.
— Rehabilitation: The goal is to restore offenders so they can reenter the community. That means less severe sentences generally and, for economic crimes, perhaps higher fines and restitution to victims, all premised on the notion that people can be redeemed if given the opportunity.
Coffee said Bankman-Fried’s economic crimes may be second in severity only to Madoff’s, warranting an extensive sentence, though he considers Madoff’s sentence unjust because it was not servable at his advanced age. The professor said that Bankman-Fried could conceivably serve 50 years, given his age, his offenses and the attention his punishment is bound to get in the media, but that he would probably be sentenced to 20 years or more. He said that Kaplan was known to be “very fair,” but that he was not “overly lenient.”
First-time white-collar offenders rarely get extensive sentences, much less the maximum, said Jennifer Taub of Western New England University’s law school, who is the author of “Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime.” She thinks Bankman-Fried could be sentenced to about 25 years and released much sooner if he behaves well. Taub noted that maximum sentences outlined in the guidelines didn’t reflect the ultimate punishments in most cases, though the stark possibilities can persuade defendants to make a deal with the government. Bankman-Fried’s former colleagues at FTX and its sister firm, Alameda Research, who pleaded guilty and testified against him may serve little or no time in prison.
Incarceration for economic crimes has an “expressive value,” Taub said. Financial frauds cause real harm, she said, “so you need the threat and reality of prison time.” Too lax an approach would erode trust in the legal system and suggest that the wealthy and well-connected had an unfair advantage, Taub said, but financial offenders also owe fines and restitution for victims, so keeping them locked up for a long time may not always serve justice. Bankman-Fried was famously obsessed with calculating risk — an effective sentence would signal to others like him that it’s not worth rolling the dice.