Will SBF Soon Be Wearing an Orange Jumpsuit?

The over-under on SBF’s criminal risk.

- ANKUSH KHARDORI

THE LEGAL ONSLAUGHT facing Sam Bankman-Fried has only just begun, but it’s already a doozy. The revelations in the wake of FTX’s demise have been filled with red flags for prosecutors who specialize in financial crimes. A massive amount of money has apparently evaporated, and nothing approximating a decent explanation has been offered by SBF or anyone else. There are early but classic markers of criminal fraud: the secret back door he reportedly created to move customer deposits to his hedge fund, Alameda Research, which appears by itself to have resulted in more than $1 billion in lost customer funds; billions of dollars in recently discovered “loans” from Alameda to Bankman-Fried and other company executives; the lack of financial records across the sprawling corporate FTX family; and apparent misrepresentations to FTX customers and investors about the most fundamental aspects of the platform. There is also an undeniable, pent-up demand among crypto skeptics in Washington and the public for a major crackdown on the industry, which is rife with fraud and con artists who have been scamming people all over the world for years.

The criminal investigation, at least at the outset, is likely to focus on getting to the bottom of the transfer of FTX customer funds to Alameda and the source of the post-bankruptcy hack of FTX, which reportedly resulted in the loss to customers of more than $600 million. Even assuming SBF had nothing to do with the hack, he faces the considerable possibility of criminal wire-fraud charges based on the mishandling of deposits if the government can establish that he deliberately lied about how customers’ money would be held in custody and managed.