Federal Judge Orders Sam Bankman-Fried to Pay $11 Billion

A federal judge has mandated Sam Bankman-Fried, the embattled founder of the now-defunct cryptocurrency exchange FTX, to repay more than $11 billion.

by Faruk Imamovic
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Federal Judge Orders Sam Bankman-Fried to Pay $11 Billion
© Getty Images/Micahel M. Santiago

A federal judge has mandated Sam Bankman-Fried, the embattled founder of the now-defunct cryptocurrency exchange FTX, to repay more than $11 billion. This sum represents the losses incurred by customers and investors due to fraudulent activities associated with FTX.

Legal experts believe this forfeiture will effectively render Bankman-Fried financially insolvent for the remainder of his life. Mitchell Epner, a former federal prosecutor, elucidated the purpose of such a hefty forfeiture to CNN, stating, “This forfeiture is designed to make certain that if SBF (Sam Bankman-Fried) ever makes money, it goes not to him but to the government and the victims”.

This implies that Bankman-Fried's ability to accumulate any future wealth has been permanently curtailed, with bankruptcy offering no respite from this obligation.

The Complex Path to Victim Compensation

The nature of the forfeiture means that, rather than directly reimbursing the victims, the seized assets will be absorbed by the US Treasury.

This mechanism contrasts with restitution, where recovered funds are directly allocated to the victims. The decision by US District Judge Lewis Kaplan not to order restitution was based on the complex case particulars and the extensive number of victims, making direct compensation impractical.

However, the government has been authorized to use the forfeited assets to aid those impacted by the FTX collapse. Victim compensation in cases of white-collar crime is notoriously slow, often stretching over years. The Justice Department's Money Laundering and Asset Recovery Section oversees this intricate process, which could delay any payouts to victims.

This slow-moving process is evident in other high-profile cases, such as those involving Elizabeth Holmes and Bernard Madoff, where efforts to reimburse victims are ongoing years after sentencing.

The Future for Bankman-Fried

With Bankman-Fried facing a 25-year prison sentence, his assets will be relinquished to the government.

Any outstanding debt will remain pending until his release. The practicalities of recovering this forfeiture from Bankman-Fried once he is a free man are complex. While the government retains the right to claim a portion of any future income, the feasibility of such endeavors depends on Bankman-Fried's earning potential post-incarceration.

Former Department of Justice attorney Peter Katz pointed out the potential futility in pursuing small-scale earnings, noting that if Bankman-Fried finds modest employment, it's unlikely the government will intervene. The government's approach, as outlined by another former assistant US attorney, Anthony Capozzolo, will consider Bankman-Fried's earnings and essential living expenses in any future financial assessments.

This forfeiture order marks a significant moment in legal history, emphasizing the severe consequences of financial crimes while also highlighting the complexities involved in compensating victims of such offenses. The ruling against Bankman-Fried not only punishes him for his crimes but also sets a precedent for the handling of similar cases in the future.

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