A U.S. District Court judge has imposed a 7.5-year prison term on Ryan Salame, the former co-CEO of FTX Digital Markets, following his guilty plea to two felony offenses.
This marks a pivotal moment in the legal repercussions of the FTX collapse, which was previously among the globe’s leading cryptocurrency exchanges.
The Sentencing and Charges
Judge Lewis Kaplan of the Southern District of New York delivered the sentence on May 28, recognizing Salame’s participation in a conspiracy to run an unlicensed money transmission business and commit campaign finance fraud. In September 2023, Salame conceded to these charges and has been embroiled in legal procedures ever since.
While prosecutors sought a sentence of up to seven years, acknowledging Salame’s significant involvement in the misappropriation of FTX user funds and fraudulent activities associated with Michelle Bond’s congressional campaign, his defense advocated for a mere 18-month term. They argued that Salame played a lesser role in the wider conspiracy and presented a minimal risk of recidivism.
Other Key Figures in the FTX Collapse
Salame’s sentencing follows the high-profile conviction of FTX founder Sam Bankman-Fried, making him the second major figure from the FTX saga to be sentenced.
Other key executives, including former Alameda Research CEO Caroline Ellison, former FTX engineering director Nishad Singh, and FTX co-founder Gary Wang, have also pleaded guilty to various charges and have cooperated with prosecutors in Bankman-Fried’s trial. Their sentencing dates had not been confirmed at the time of publication.
Since his guilty plea, Salame had been released on a $1 million bond. As part of his plea agreement, he is required to pay approximately $6 million in penalties to the U.S. government and an additional $6 million to FTX debtors.
He will also surrender two properties and a business as part of the forfeiture process. However, court filings indicate that Salame might retain ownership of a 2021 Porsche, which lacks sufficient equity for forfeiture.
The Downfall of FTX
FTX, once a leading cryptocurrency exchange, experienced a dramatic downfall in late 2022. The company’s troubles began when reports surfaced of significant financial mismanagement and fraudulent activities. FTX had been using customer funds to cover risky bets made by its sister company, Alameda Research, also founded by Sam Bankman-Fried.
The crisis deepened when a leak revealed that a large portion of Alameda’s assets were tied up in FTT, a token issued by FTX. This revelation triggered a crisis of confidence, leading to a massive withdrawal of funds by customers. Within days, FTX was unable to meet the demand for withdrawals, exposing a severe liquidity crisis.
Salame played a notable role in the downfall of FTX by reporting the company’s fraudulent activities to the Securities Commission of the Bahamas on November 9, 2022, just days before Bankman-Fried resigned as CEO and the company filed for bankruptcy. Bankman-Fried was subsequently extradited to the U.S., where he faced trial and was convicted on seven felony counts.
On November 11, 2022, FTX filed for bankruptcy, and Bankman-Fried resigned as CEO. The bankruptcy filing disclosed that FTX owed billions of dollars to its creditors and had a substantial shortfall in its assets. The collapse of FTX sent shockwaves through the cryptocurrency market, leading to a significant drop in the value of various cryptocurrencies and eroding investor trust.
Subsequent investigations revealed extensive fraud, misuse of customer funds, and poor corporate governance. Several key executives, including Bankman-Fried, were charged with various financial crimes. Bankman-Fried’s trial culminated in his conviction on multiple felony counts, resulting in a 25-year prison sentence.
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