Sam Bankman-Fried’s trial has ended, but the fallout has just begun

It was Thursday night, and the jury in Sam Bankman-Fried’s federal fraud case had been deliberating for more than four hours. In weeks of testimony, the jurors had heard from Bankman-Fried’s former friends, employees, and girlfriend at FTX, his crypto exchange, and Alameda Research, his trading firm. Accused of stealing billions in customer deposits on FTX, and lying to customers, investors, and lenders about that, Bankman-Fried—once a magazine cover star who hobnobbed with Katy Perry and Bill Clinton—was now jailed pending the outcome of his trial. He’d taken the stand in testimony that lasted three days to defend himself.

The 26th-floor courtroom gallery with its hard wooden benches, packed for most of the trial was half-empty. Then, at 7:37 p.m., a member of Judge Lewis A. Kaplan’s staff announced to the courtroom that the jury had reached a verdict. The room filled and Bankman-Fried was brought from an interior room to sit between his two lead lawyers. His parents sat in the second row of the gallery, courtroom artists turning around to sketch them, his mother, Barbara Fried, visibly shaking and burying her head against the shoulder of his father, Joe Bankman. After the dramatic, high-profile trial, which I’d attended from the first day of jury selection and covered for Fast Company, it had come down to this. 

The courtroom was completely silent as the jury entered, and juror number four, the forewoman, handed a sealed envelope containing the verdict to a courtroom staff member for the judge to review. None of the jurors looked at Bankman-Fried as Kaplan said, “Mr. Bankman-Fried, please rise and face the jury box.” He did so. Fried and Bankman both lowered their heads while Sam Bankman-Fried showed no outward sign of emotion as the forewoman said “Guilty” seven times, for the seven counts he faced. He had gambled, and he had lost.

Bankman-Fried’s trial saw hugely dramatic moments: Former Alameda CEO and ex-girlfriend Caroline Ellison testifying against him, tearing up when she described the stress of hiding the fraud; his deputies at FTX and longtime friends Gary Wang and Nishad Singh, who, like Ellison, pled guilty to conspiracy charges, also testifying against him; Bankman-Fried taking the stand and trying to explain himself. Evidence included a Katy Perry Instagram post (Bankman-Fried socialized with her at a Super Bowl game); photos of the $35 million Bahamas penthouse where Bankman-Fried, Wang, Singh, and Ellison all lived; and a spreadsheet Ellison prepared for Bankman-Fried with the real balances on one tab and on others, seven alternatives intended to hide the money Alameda had taken from FTX, and the loans it had given to insiders like Bankman-Fried, she testified. 

For Bankman-Fried, his co-conspirators, the crypto industry, startups, investment firms, and more, the fallout has only just begun. Here’s what’s next.

A lengthy sentence for Bankman-Fried

Judge Lewis A. Kaplan set Bankman-Fried’s sentencing for March 28. In federal sentences, judges must consider (but are not bound by) sentencing guidelines, which give a numerical score based on a number of factors—is this the defendant’s first offense, how many victims were there, and so forth. White-collar sentences can bring particularly high sentencing guidelines, as the dollar amount of the fraud affects the guideline sentence.

With Bankman-Fried, given the billion-dollar fraud, experts expect the sentencing-guidelines calculation to be off-the-charts high, an effective life sentence (it’s not a literal life sentence as none of the crimes he was convicted of carry a life sentence). “From my back of the envelope calculation, I believe it is likely that the government asserts that the applicable guidelines sentence is life imprisonment and argues for the same,” says Sarah Krissoff, a former federal prosecutor and a member at law firm Cozen O’Connor, but she expects Kaplan “will ultimately impose a significant sentence—perhaps even several decades long—that will allow Bankman-Fried to walk out of prison eventually.”

Douglas Berman, a sentencing expert and professor at Moritz College of Law at The Ohio State University, said that comparable sentences for white-collar defendants may shorten the sentence length prosecutors suggest. “A bunch of other comparable financial frauds have led to sentences in the 20- to 30- to 40-year range,” he says, with some far below that, like Elizabeth Holmes’ sentence of 11 years, three months. “My guess is they’ll ask for something awfully severe but not max him out on everything.”

It’s the judge, not the prosecutor, who issues the sentence, and two elements could especially influence Kaplan, who oversaw Bankman-Fried’s trial. Judges may have differing views on the severity of punishment for white-collar offenders. But almost any judge takes interference with the justice system itself quite seriously. Here, Kaplan has already said that Bankman-Fried likely attempted to commit witness tampering—including when he gave writings of Ellison’s to The New York Times while out on bail—and an appeals court upheld Kaplan’s judgment. Additionally, Kaplan may well find that Bankman-Fried lied under oath during his own testimony, meriting an increase in sentence length. “The judge is the final arbiter of Bankman-Fried’s sentence, and has wide discretion to vary from the guidelines, and, simply put, those findings aren’t going to help Bankman-Fried when he is asking for leniency from the court,” Krissoff says.

Bankman-Fried’s strategy leading up to sentencing will be key, Berman says. “Will he do a 180 and throw himself on the mercy of the court and say, ‘This whole experience has taught me that I can’t get away with things and I’m sorry’ or does he go defiant [and say], ‘I didn’t do anything wrong’?” (So far, it seems to be the latter; in remarks outside of court after the verdict, Bankman-Fried’s lawyer said his client maintained his innocence.) “My sense would be, if SBF could get something under 20 years, that would be a pretty good outcome” for him, Berman says. 

Bankman-Fried’s defense team has not yet publicly said whether they will appeal elements of the case, but an appeal is all but certain. They seemed to be lining up items to include in a potential appeal during the trial. And speaking to reporters after the verdict, Cohen said that “My client, Mr. Bankman-Fried, maintains his innocence, and we’re going to continue to vigorously fight.” Bankman-Fried, who’s at a federal jail in Brooklyn, will likely stay there until he is sentenced and moved to a federal prison. While he could ask to be moved to a different jail in the area, there aren’t too many options, Krissoff said (the Manhattan federal jail is currently closed), and there are likely security concerns given that he’s a well-known defendant.  

Prison time isn’t off the table for other FTX execs

Though the three high-ranking executives—Caroline Ellison, who ran Alameda, and Nishad Singh and Gary Wang at FTX—pled guilty to conspiracy and other fraud charges, and testified against Bankman-Fried at trial, that doesn’t guarantee a pass on prison time. Berman says he expects them to tell Kaplan that they only acted at Bankman-Fried’s direction, and that their felony convictions have seriously impacted their lives. “I think Judge Kaplan will be understanding, if not so sympathetic, to those kinds of arguments, though again, I suspect the enormity of the fraud and what I perceive to be the complicity” of the trio “is likely to lead Judge Kaplan to think, some prison time would send an important message but presumably something limited, in the five years or less range,” Berman says. He expects those sentences to be tailored to what prosecutors, and Kaplan, see as each cooperator’s role in the scheme: Did one act independently to cover this up? Did one know about it before the others?

Lawyers often try to move sentencing dates, and Berman says to expect more shuffling and strategy as March 28 approaches. Bankman-Fried’s lawyers will likely want to delay his sentencing until after the cooperators are sentenced, to give insight into what Kaplan is focusing on and a framework for suggested prison time. The cooperators, meanwhile, will want Bankman-Fried to be sentenced first for similar reasons. 

A warning for other entrepreneurs—and investors

Bankman-Fried and his defense lawyers tried to argue that his actions at FTX and Alameda were permissible—for “valid business reasons,” as his defense lawyer Mark Cohen put it in his closing argument—and that he “wasn’t entirely sure” of the details of the accounting. The jury soundly rejected that argument. Legal experts say they don’t expect a Bankman-Fried-esque approach to catch on, and that startups that want to obey the law, will. “The verdict made it pretty clear that there was outright wrongdoing; this wasn’t a matter of moving fast and breaking things—this was fraud and stealing,” says Jill E. Fisch, a professor of business law at University of Pennsylvania’s Carey Law School. While Bankman-Fried misled established investors like Sequoia Capital, Fisch said that “any investor who has been burned is going to try to be more careful going forward,” but there are lots of examples of reputable investors backing what turn out to be companies with fraudulent elements. “Thankfully, I don’t think it’s all that common, and I don’t think it’s a matter of regulatory failure or the startup environment or anything else. I think there are just some bad apples out there.”

The crypto industry is eager to move on

The crypto industry is breathing a sigh of relief with Bankman-Fried’s conviction, and have painted him as the bad guy in an nascent industry. “The actions of Sam Bankman-Fried and FTX have cast a shadow on crypto’s reputation and set back the industry by years. However, it’s important to remember that SBF was a bad actor who committed fraud and does not define the crypto sector or what we aim to achieve,” says Bobby Zagotta, U.S. CEO of crypto exchange Bitstamp. He says he looks forward to seeing the industry rebound, and to seeing better regulatory clarity in the U.S.

Bankman-Fried is still facing more charges

Bankman-Fried still faces five other charges, which Kaplan has scheduled for a March 11 trial. These include a charge that Bankman-Fried bribed a Chinese government official to unfreeze Alameda accounts, which came up at trial when Ellison described a “bribe” of what she said was around $150 million. Kaplan set these for a later trial after the Bahamas—where Bankman-Fried lived and was arrested—resisted U.S. prosecutors adding those charges after Bankman-Fried was extradited to the U.S.

At the start of the federal trial, prosecutor Nicolas Roos said that the government had not offered Bankman-Fried a plea deal. However, prosecutors may shift gears as the second trial approaches. “If SBF thinks that he has a viable appeal, he may not want to plead to any additional charges. If the government is confident that this conviction is going to hold up on appeal, they may not want to devote the needed resources to the second trial,” Krissoff said. “I would expect the government to seriously consider making a plea offer in connection with the second trial.  Given the outcome here, they may be more willing to compromise.”

Expect federal prosecutors to build on this victory

After Bankman-Fried’s conviction, Damian Williams, U.S. attorney for the Southern District of New York, gave remarks outside the courthouse. “This case moved at lightning speed; that was not a coincidence. That was a choice. It is also a message; it is a warning,” he said. While complex cases sometimes take years to put together, here, the month after FTX’s collapse, prosecutors had arranged for the arrest of Bankman-Fried, and gotten guilty pleas and cooperation deals from Ellison and Wang.

“The SDNY clearly prioritized this case and it executed the prosecution very skillfully. In a relatively short period of time, the government combed through mountains of complex material to produce a compelling story that proved the case that FTX, under SBF’s leadership, was a criminally tainted enterprise,” says Yesha Yadav, a professor of law at Vanderbilt Law School. ”That it came from crypto seemed to be more a question of detail, rather than a signal that the Justice Department is going after crypto specifically. It felt to me like the message was much broader: that the financial markets are protected spaces and that SDNY will be willing to take on a case even if it attaches to an industry known for being risky and operating in the relative absence of traditional regulation.”