Prosecutors sought a sentence of five to seven years for ex-FTX executive Ryan Salame, while the defendant asked for only 18 months.
But the final sentence came as a surprise to both sides. Salame will now spend seven and a half years in prison, more than the U.S. prosecutors wanted. This result comes despite his cooperation in a plea bargain and his testimony against his former employer, Sam Bankman-Fried.
Salame’s defense claimed that he was completely unaware of FTX’s misuse of consumer funds, despite the sudden suspension of withdrawals in November 2022, which led to widespread financial losses when the company declared bankruptcy. They claimed that he was misled into believing that the group’s businesses were legitimate, financially stable, and highly lucrative.
But this narrative only scratches the surface. The primary charge against Salame was his involvement in campaign finance fraud, specifically extravagant contributions to politicians. He had pledged to donate tens of millions of dollars to lawmakers to promote FTX’s interests and advocate for a more favorable stance on crypto adoption in Washington. However, a significant problem arose: these donations were funded by customer funds and were made without their consent or knowledge.
Information obtained from the Federal Election Commission showed that Salame emerged as one of the top donors in the 2022 midterm elections, committing $22 million to Republican candidates. Although these contributions were categorized as loans from FTX’s affiliate, Alameda Research, Salame confessed that he had no plans to repay these funds.
The severity of Salame’s sentence, which exceeds even the prosecution’s demands, carries considerable weight and provides a glimpse into the potential outcomes for other members of SBF’s inner circle. In particular, this group includes his on-again, off-again girlfriend, Caroline Ellison, and the head of engineering, Nishad Singh.
It’s worth noting that although prosecutors had sought a 50-year prison sentence for Bankman-Fried, the judge presiding over his fraud case was considerably more lenient, sentencing him to 25 years instead. Salame’s sentence, on the other hand, exceeds the requested sentence.
FTX’s donations to U.S. politicians have caused considerable embarrassment in Washington. Lawmakers were urged to return the funds to compensate victims, but in many cases the money had already been spent. Even President Joe Biden was caught up in the controversy, as SBF was the second-largest donor to his 2020 presidential campaign. Many of Salame’s contributions were made secretly on behalf of Bankman-Fried, with the true origin obscured to avoid disclosure requirements.
While this aspect may not have influenced the judge or jury during Tuesday’s sentencing, the FTX auditor’s report was highly critical, revealing Salame’s misuse of funds during his tenure at the exchange. He has already pledged to repay $5.59 million to the exchange’s creditors, including a $5 million withdrawal he made shortly before the platform collapsed. In addition, the former executive is surrendering the keys to his luxurious Bahamas apartment.
Even more damning was Salame’s misuse of FTX’s assets for extravagant purchases. In addition to his luxurious residence, he had ventured into restaurant investments and even purchased a private jet.
The Securities and Exchange Commission responded strongly to the verdict. U.S. Attorney Damian Williams said:
“Salame’s involvement in two serious federal crimes undermined public trust in American elections and the integrity of the financial system. Today’s sentence underscores the substantial consequences for such offenses.” – Damian Williams
The exact reasoning behind the judge’s decision to exceed the prosecution’s recommendations is unclear. However, it’s plausible that Salame’s refusal to testify against SBF during last year’s high-profile trial may have influenced the outcome, resulting in a higher sentence.
Personally, this must be a particularly difficult time for the executive, especially with a newborn son. However, it’s likely that Judge Kaplan had a similar goal in mind as he did when sentencing SBF: to incapacitate Salame and protect crypto investors from potential harm in the future. Sending a strong message to other individuals who engage in misconduct within the industry would certainly have been another motivating factor.
Given that FTX victims will only be compensated with cryptocurrency based on November 2022 prices, the degree of comfort this verdict will provide remains uncertain.
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