Sam Bankman-Fried. Source: Screenshot from a video, FTX Official / YouTubeFTX founder and former CEO Sam Bankman-Fried should be “very worried about jail time” after the collapse of his crypto empire, a former US federal prosecutor has said.
In an interview with CNBC, Renato Mariotti, a former federal prosecutor and attorney who has represented clients in cases involving financial derivatives transactions, made it clear that the FTX case looked like "a case of impeachable fraud."
“If I were representing Mr. Bankman-Fried, I would tell him that he should be very concerned about prison sentences. That should be a main concern for him," Mariotti said in the interview.
According to Mariotti, fraud is a criminal offense that can land people in prison for life. And in the case of FTX, the central question in determining whether there was fraud will be whether Bankman-Fried misled customers into believing that their funds were available, when in fact they were used for other purposes, such as guaranteeing loans.
“The argument would be that Alameda was tricking these people into getting their money so they could use it to support another business,” Mariotti said. He added that prosecutors could argue that FTX breached its fiduciary duty by using client funds for other purposes, such as taking positions in FTT, an exchange token issued by FTX.
Three legal threats in the United States
According to Richard Levin, a partner at the Nelson Mullins Riley & Scarborough law firm, Bankman-Fried could potentially face three different legal threats in the United States.
The first of Bankman-Frieds' legal threats would be criminal action by the U.S. Department of Justice for potential "criminal violations of securities laws, bank fraud laws, and wire fraud laws," explained El vino.
Second, Bankman-Fried could also face civil lawsuits. According to Levin, this could be provided, for example, by regulators such as the SEC or CFTC, as well as various regulators at the state level.
Third, Levin noted that potential class action lawsuits remain a threat to the FTX founder as well.
In other words, "there are various levels of potential exposure for executives involved with FTX," Levin said.
Bankman-Fried: 'That's not what I'm focusing on'
The question of whether fraud has been committed at FTX was posed directly to Sam Bankman-Fried during his highly publicized interview with CNBC's Andrew Ross Sorkin at the DealBook summit. In his response, the former FTX boss was indifferent to criminal liability.
"I don't think obviously, personally I don't think I have, I think the real answer is no, it seems strange to say, but I think the real answer is it's not what I do." I am focusing. It is – there will be a time and a place where I can think about myself and my own future. But I don't think that's all,” Bankman-Fried told Sorkin.
He added that he never attempted to commit fraud, noting that FTX was a real business.
“I never tried to defraud anyone, I saw it as a successful business and I was shocked at what happened this month,” Bankman-Fried said.