After a monthlong trial and about four hours of deliberation, a jury convicted the FTX founder Sam Bankman-Fried of seven counts of fraud and conspiracy last week. He had been accused of stealing billions of dollars from his cryptocurrency exchange’s customers and investors, funneling the money into his investments and extravagant spending.
Now, Judge Lewis Kaplan of the Southern District of New York will decide how many years in prison, if any, those crimes warrant. The looming sentencing raises age-old questions about the appropriate punishment for economic crimes.
The maximum term is more than 100 years for Bankman-Fried, who will turn 32 in March, the month when he’ll be sentenced. But federal sentencing guidelines, meant to ensure consistency across courts around the country, also allow for flexibility. Sentences for the same crimes can vary greatly, depending on factors like the severity of the offense, the convicted person’s cooperation and the judge’s inclinations.
White-collar crimes tend to be punished less severely than violent crimes, because offenders aren’t a physical threat to society. In 1990, Michael Milken, known as the “junk bond king,” pleaded guilty to six felony counts of fraud and conspiracy and was sentenced to 10 years in prison. He was released in about two years after cooperating with the government, and President Donald Trump pardoned him in 2020. Bernie Madoff, who pleaded guilty to 11 criminal counts for a 30-year $64 billion fraud, was sentenced to 150 years in prison in 2009. He died in custody in 2021. Elizabeth Holmes, the founder of Theranos, went to trial and was sentenced last November to about 11 years in prison after being found guilty of four counts of defrauding investors. Her recommended sentencing range was 11 to 14 years, with a maximum of 20.
What is fair? That depends in part on how a judge views the purpose of punishment. There are three classic theories:
Deterrence: Severe sentences send a message to would-be criminals and prevent crimes. “If you’re going to deter, you have to reach an audience,” John Coffee, a Columbia University law professor and an expert on white-collar crime, told DealBook. Bankman-Fried’s is a “rare case” that gets lots of media coverage, he said, so millions will hear of his punishment, serving deterrence goals.
Retributive justice: Wrongdoing must always be punished. Proponents argue for harsh sentences that exact what they consider commensurate vengeance.
Rehabilitation: The goal is to restore offenders so they can re-enter the community. That means less severe sentences generally and, for economic crimes, perhaps higher fines and restitution to victims, all premised on the notion that people can be redeemed if given the opportunity.
Coffee said S.B.F.’s economic crimes may be second in severity only to Madoff’s, warranting an extensive sentence, though he considers Madoff’s sentence unjust because it was not servable at his advanced age. The professor said he thought 50 years would be appropriate for Bankman-Fried, given his age, his offenses and the attention his punishment is bound to get in the media. He said that Judge Kaplan was known to be “very fair,” but that he was not “overly lenient.”
First-time white-collar offenders rarely get extensive sentences, much less the maximum, said Jennifer Taub of Western New England University’s law school, who is the author of “Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime.” She thinks Bankman-Fried could be sentenced to about 25 years and released much sooner if he behaves well. Taub noted that maximum sentences outlined in the guidelines didn’t reflect the ultimate punishments in most cases, though the stark possibilities can persuade defendants to make a deal with the government. Bankman-Fried’s former colleagues at FTX and its sister firm, Alameda Research, who pleaded guilty and testified against him may serve little or no time in prison.
Incarceration for economic crimes has an “expressive value,” Taub said. Financial frauds cause real harm, she said, “so you need the threat and reality of prison time.” Too lax an approach would erode trust in the legal system and suggest that the wealthy and well-connected had an unfair advantage, Taub said, but financial offenders also owe fines and restitution for victims, so keeping them locked up for a long time may not always serve justice. Bankman-Fried was famously obsessed with calculating risk — an effective sentence would signal to others like him that it’s not worth rolling the dice. — Ephrat Livni
We want to hear from you: How should judges approach sentencing for white-collar crime? Let us know here.
IN CASE YOU MISSED IT
President Biden got a boost after a bad set of poll ratings. Democratic candidates did well in votes on Tuesday in Virginia, Kentucky, Ohio and Pennsylvania, winning re-election and scoring well in ballots on abortion rights. The results were good news for Biden after a Times/Sienna poll showed he trailed Donald Trump in key battleground states ahead of the 2024 election.
Hollywood studios and actors reached a deal to end a punishing strike. The SAG-AFTRA union tentatively agreed to a new contract with studios that could bring an end to the union’s longest-ever work stoppage. The deal includes increased pay for streaming content, better health care and limits on the use of artificial intelligence.
Women dominate this year’s Grammy nominees. SZA, Billie Eilish, boygenius and Taylor Swift are among the artists up for awards. SZA leads with nine nominations, but Swift could set a record by becoming the first artist to win in the album-of-the-year category four times.
Google’s antitrust fight with Epic Games went to court. The tech giant is accused of unfairly forcing Android users into its Google Play app store, which developers say costs them too much in commission. Epic says the tactics harm “competitors, innovators and customers,” but Google argues that Epic wants “the benefits of Android and Google Play without having to pay for them.”
The hunt for white truffles gets pricier
Gram for gram, the white truffle is one of the most expensive delicacies on the planet. In Italy, fresh white truffles run as high as 4,500 euros per kilogram (or nearly $2,200 per pound), according to Coldiretti, Italy’s biggest agricultural trade group. Once they are shaved onto a plate of risotto or roast quail in the finest restaurants in the world, the price will multiply again, underscoring their “white gold” reputation. Acquerello in San Francisco offers a $495 truffle tasting menu (excluding wine and tax). Trufflephiles in London and Dubai can expect a similarly pricey check.
With more extreme weather, and a shrinking woodland habitat, sky-high prices will be the norm, truffle experts say.
At an auction last year in Alba, Italy, a one-and-a-half-pound specimen fetched a record price of €184,000 (nearly $200,000). Bidders are set to converge on Italy’s truffle capital on Sunday to do it all over again.
The Tuber magnatum Pico, or white truffle, is hard to find, adding to its rarefied price. (Efforts to grow it in truffle farms have resulted in some breakthroughs by scientists, but they’re not enough to feed truffle fans’ soaring demand.) In Italy, the truffles grow in select spots, colonizing near the roots of oak, beech and poplar trees. They draw nutrients from their woody neighbors and nourish them, too. Given enough moisture and cool air, they ripen and fruit underground, signaling to dogs and woodland creatures where they are. Truffles are like nature’s tiny sentinels. When they can’t be found, something’s wrong.
A bone-dry summer and an autumn drought in central Italy have messed with the truffle trade. The same could be said of last year, and the year before that. “The climate’s no good,” said Alessio Galiè, a 38-year-old tartufaio, or truffle hunter, near Amandola in the central Italian region of Marche. (The climate is also being blamed for Italy’s olive oil crisis.)
Meanwhile, demand is as high as ever. Ancients called these aromatic fungi, which come to market a few weeks each autumn, “the food of the gods.” Some consider them aphrodisiacs. Michelin-starred chefs design tasting menus around them. “The calls start coming in the summer,” months before the official mid-October start to the season, said Roberto Saracino, founder of Liaison West Distribution, a Vernon, Calif.-based distributor of Italian truffles whose clients include top restaurants in Las Vegas, San Francisco and neighboring Los Angeles. It is important that he manage their expectations, he said. “I don’t have a crystal ball.”
Neither does Galiè. He invited DealBook’s Bernhard Warner and Warner’s dog, Scilla, to accompany him and Primo, a determined pointer, on a hunt. The dogs patrolled, nose to the ground. Every now and then, they picked up a scent. The anticipation of a score seemed as thick as the morning mist. But there were no truffles that day, Galiè eventually concluded.
Last year was even worse when the usual spring and autumn rains stayed away, and yield was down. The price hit €5,000 a kilogram. “With global warming, or whatever we want to call it, it’s definitely creating a downtrend on the availability of truffles,” Saracino said.
That market dynamic was evident at a truffle fair in Amandola last Saturday. DealBook inquired about one fine specimen. The vendor removed it from under glass and weighed it: 16 grams, no bigger than a walnut. Price: €40. She refused to negotiate. Sold!
Streaming businesses look a little less red
Recent earnings reports by media giants revealed positive news about their streaming operations, which they are striving to make profitable to please Wall Street. (Warner Bros. Discovery succeeded in the third quarter.)
That doesn’t erase the billions that Hollywood companies — except Netflix — have lost on streaming, even as they insist that it’s a core part to their futures. But the trend lines for the business have been improving, to investors’ relief.
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