Finance

Will Sam Bankman-Fried Have A Second Act?

It's not just his youth that leaves SBF with a potential opportunity to turn over a new leaf.

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FTX Founder Sam Bankman-Fried Attends Court

(Photo by Yuki Iwamura/Bloomberg via Getty Images)

In late March, Sam Bankman-Fried was sentenced to 25 years in prison for defrauding investors and customers of his cryptocurrency exchange FTX. In addition to the relatively lengthy prison term, the former King of Crypto was ordered to pay $11 billion in restitution.

Bankman-Fried is appealing his conviction. I don’t like his odds.

Bankman-Fried’s journey through the appellate system may not look promising. Still, while SBF lacks any immediately apparent way of reversing his conviction on appeal, he does have something most other white-collar offenders could only dream of: a relatively good shot at climbing back to the top during his lifetime.

Consider, first of all, that 25 years in the American criminal justice system does not mean 25 years. I don’t imagine Bankman-Fried is going to start randomly shanking other inmates during his prison term, and federal inmates can typically shave up to 54 days a year off their sentences for good behavior.

There are also a variety of other measures that can help reduce the amount of time non-violent offenders spend in federal prison. “SBF may serve as little as 12.5 years, if he gets all of the jailhouse credit available to him,” former federal prosecutor Mitchell Epner told CNN.

Bankman-Fried is now 32 years old, which means he could conceivably be out when he’s 44-and-a-half years old. That would leave him with a lot of life left to live.

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But it’s not just his youth that leaves SBF with a potential opportunity to turn over a new leaf. Elizabeth Holmes was convicted on four charges related to defrauding investors in her defunct blood testing company Theranos. Despite the fact that she was sentenced to only 11 years and is just 40 years old, nobody will ever let her anywhere near the leadership roles in a major company again.

That is because Holmes was a total fraud. Her company was not doing the things it said it was doing, and was nowhere near being able to deliver. Holmes built Theranos on hype sustained by lies. There was perhaps some promise to the general idea of expanding the tests which could be done on a very small quantity of blood, though it should not have been all that surprising that it would take rigorous, peer-reviewed science to get anywhere with it — that is not what Holmes was doing at Theranos.

SBF, on the other hand, lied about something very different. The jury convicted Bankman-Fried in large part because they were convinced he had taken billions from customers (without telling them) and used that money to make risky bets. The thing is, those risky bets kind of paid off.

While he was clearly extremely dishonest, SBF’s crypto empire was not based solely on lies. It had equity — a lot of equity. FTX’s creditors will very likely get all their money back.

Of course, this does not excuse anything Bankman-Fried did, nor does it assuage the righteous anger of many of his victims. What it does mean, unpalatable though it may be to articulate, is that in spite of his lies, his crimes, and his lack of remorse, SBF proved pretty adept at making money.

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When has Wall Street ever failed to overlook a rainmaker’s grievous shortcomings? Before he ventured into crypto, SBF was a trader at Jane Street Capital. He left because he thought he could make even more money on his own, and he was right. Bankman-Fried has proven himself a successful capitalist in several contexts, and amorality rarely proves to be a total disqualification where finance is concerned.

As a convicted felon SBF will face many restrictions on his business dealings, and regardless of what happens after prison he will be very closely watched in any future business role. Yet, if SBF still has some fire in his belly when he gets out, there is probably some wealthy individual or entity out there with enough risk tolerance to give him a second chance.

All that being said, supposed wunderkinds are cheap these days, and whatever special insights Sam Bankman-Fried had into the financial world might very well be obsolete by 2036. Perhaps he’ll get the opportunity to pay back a chunk of that $11 billion, or maybe he’ll quietly fade away into obscurity like so many nameless convicts before him. We’ll see if SBF can successfully play the probabilities yet again in a few years.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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