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Comment by pclmulqdq | Hacker News Reader

I'm going to go out on a limb here and say that the AUSA's performance here was not particularly impressive. Yes, they constructed an airtight case, but to do that, they handed out immunity deals like candy to all of SBF's co-conspirators. Sure, they got their guy, but it almost looks like they wanted to craft a narrative that puts all of the blame on him. Because of that, several other huge fraudsters here (eg Caroline Ellison) get to walk. The US attorneys seem to have set up SBF to be the fall guy, while being far too soft on everyone who conspired with him.

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> several other huge fraudsters here (eg Caroline Ellison) get to walk

Caroline Ellison pleaded to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.

Looking at the Federal Sentencing Guidelines[1], even accepting for her being a cooperating witness, she's very likely going to prison too for a fair amount of time. Just for (probably much) less time than SBF.

[1] Run your own calculations: https://www.sentencing.us

Right! Justice dept doesn’t handout plea deals where you don’t plead guilty to the most serious of the crime - even when you’re a cooperator. The sentencing might be lighter for cooperation.

I would rather trust the opinions of experienced criminal lawyers than someone who gets their information by running a "sentencing points" calculator:

https://www.bloomberg.com/news/articles/2023-11-03/sbf-s-inn...

"Ellison, Wang and Singh will likely get no or very little prison time for their testimony, several criminal defense lawyers who’ve followed the case said."

Defense lawyers who did not sign their name to this prediction?

Here's a quote from a former federal prosecutor on the record: https://techcrunch.com/2023/10/24/ex-sdny-prosecutor-says-ca...

All the concrete examples in that article are of cooperating witnesses who “only” got five years when they were facing life. Gary wang might not get any time but Caroline Ellison pled to charges carrying 110 years. Leniency for her means 3-5 years incarcerated.

You mean the one concrete example of the mob boss who got 5 years for 19 murders because he cooperated, right? In your mind, are 19 murders equivalent to 7 counts of fraud?

Do you realize that those 19 murders likely carried 19 consecutive life sentences as a maximum sentence?

That's not how sentencing guidelines work. The judge won't look at what was handed out to a murderer to decide how to handle a fraud case. They'll look at fraud cases to decide that.

The parent commenter had decided that "life for 19 murders = 110 years for fraud," so she would get 3-5 years. I agree with you that they are not analogous.

However, all of the expert opinion I have seen on this suggests that there will be no jail time.

There was a murder example and a fraud example in the article. Comparison is different than equation.

Well, no, the way the guidelines work is that they’ll look at the guidelines themselves.

But presumably there will be at least some effort to secure a substantial downward departure from the guidelines sentence.

Well yes but that’s kind of a roundabout way of comparing fraud sentences with fraud sentences ;-)

And fraud is nonviolent! Plus no repeat offender, and soft slush money and influence that the judicial system is awash in.

SBF even if he gets a huge sentence will just get eventually pardoned after 6-10 years. Again, soft slush money.

> even if he gets a huge sentence will just get eventually pardoned after 6-10 years

According to you? Because “trust me bro”? What are basing this on?

Well, you see, when presidents come out of office, a bunch of things start happening which the general public is pretty ignorant of:

- they go visit the Saudi rulers. Yes, the most powerful political leader goes TO SAUDI ARABIA to kiss ass. Why?

- they begin planning/fundraising for a "presidential library"

- they plan their "offices", often with donations

- they have the power to pardon people with no restriction

- ye old speech circuit

- in a similar vein, the Trump inauguration exposed the various inauguration slush funds used by presidents over the years when they get elected.

In case you don't get it, all of this involves slush money and backchannels and the like. Granted the pardon power is more visible than most since Clinton pardoned a lot of white collar stuff: https://www.justice.gov/pardon/pardons-granted-president-wil... particularly Marc Rich.

And the old game of announced sentences vs the actual amounts served is often hilarious.

Between "good behavior", connections to get in lower security facilities, reduction on appeal, and of course there are tricks like only having to show up to actual prison months after sentencing (Elizabeth Holmes took 5 months before actually having to report to prison).

Yeah the feds don't do as lenient good behavior, but you can still get 54 days credit per year served.

There's other tricks. SBF might be able to help recover funds if he cooperates after conviction, and that can lead to prison being delayed further.

So sure it seems like SBF is getting his comeuppance, and he's way too famous for reductions, but the news cycle is remarkably fast, and the public will forget about him in a year or two.

Kenneth Lay allegedly died of a heart attack before going to prison. Now, I would like to assume that was above board, but based on a couple of my relatives dying, death is a bunch of forms and a cremation of ... some body.

> In your mind, are 19 murders equivalent to 7 counts of fraud?

Well, it was a very big fraud.

If the median prison sentence for nonviolent theft of a $30,000 car is 2 years, why shouldn't the prison sentence for stealing $3 billion be 200,000 years?

Because that's not how any of this works.

Surely it's because anything over ~100 years is the "maximum punishment": you die before you see freedom. Sentences are scaled to the human lifespan.

Hey, that mob boss has a Youtube channel!

https://www.youtube.com/@officialsammythebull

There are good and bad reasons for. Ellison getting off.

Good - she was SBF's girlfriend and was told what to do by him.

Bad - her dad, an MIT economist worked with Gary Gensler, head of the SEC. They probably have connections

That "good" reason sounds pretty sexist to me, when she was also a Stanford-educated Jane Streeter before their polycule ran off to do the kimchi arbitrage and later found FTX.

I would agree with you that it's a good reason if there were evidence of the coercion. I don't think we can assume it outright.

> Jane Streeter before their polycule ran off to do the kimchi arbitrage and later found FTX.

what does any of that mean?

* She worked at Jane Street.

* She and a few other people were in relationships with SBF and/or each other at the time. A polycule is generally a connected graph of n > 2 people (the nodes) in romantic/sexual relationships (the edges).

* The kimchi arbitrage was a trade where you bought BTC for USD somewhere other than Korea, transferred them from the non-Korean exchange to a private wallet, then sold those BTC for Won in Korea, and then sold those Won for USD (and repeat the cycle). It worked because Korea had strict capital controls for its citizens that meant that the price of bitcoins on native exchanges was substantially higher than outside. It also carried tremendous risk because you had to wait for those bitcoins to settle in your private wallet at each cycle, effectively exposing you to risk associated with fluctuations in the bitcoin price.

Physical movement in and out of South Korea is part of the Kimchi arbitrage, so you have to "run off" to do it.

Thanks for the translation. Now that I understand what what the commenter said, I agree.

> kimchi arbitrage

Is this a real thing, or just a finance joke I just don't understand?

https://news.ycombinator.com/item?id=38130203

So it's both a real thing, and a finance joke I didn't understand!

I love a good arbitrage technique, but this one really just reads like an excuse to go to South Korea with your friends (or your polycule).

There was potentially a lot of profit as Bitcoin traded for 10-20% more in S Korea and the liquidity in the market was in the billions. The tricky bit would be once you've sold your Bitcoins for Korean Won, how easy would it have been to change the Won back to USD given S Korea had capital controls at the time. I'm not sure how many you could get away with changing by going there as a tourist. Probably a limited amount. Not sure if anyone knows how much?

My understanding of this trade is that you can trade unlimited amounts of Won for USD as a person outside of Korea (beyond the jurisdiction of the Korean government), and as a non-Korean you can bring out an unlimited number of Won as long as you don't carry it as cash. However, this is all a set of "loopholes" that aren't exactly illegal but aren't explicitly legal, which is why no reputable bank or trading firm could do this trade.

The risk that you end up getting banned from entering Korea for doing this trade too much was real, but I don't think anyone who tried this trade faced any of the possible consequences.

>The US attorneys seem to have set up SBF to be the fall guy

The fall guy? Come on.

Some low-level bank executive commits fraud and this place calls for the CEO's head. SBF was in charge an knew everything that was happening. IT sounds like he orchestrated most of it. There was zero element of rogue employees, or anything of the sort.

The fall guy is usually someone high up in an organization where the entire organization does something bad. In 2008, chief risk officers, CEOs, and COOs were the fall guys over the failures of their respective banks.

> chief risk officers, CEOs, and COOs were the fall guys over the failures of their respective banks

only two things wrong with this claim:

1. no CROs, CEOs or COOs were judicially punished in any way for the failure of their banks.

2. CROs and CEOs were clearly responsible for those failures. That's literally their whole job for which they were typically paid 7 to 9 figures annually.

The fall guy is someone who "takes the fall" (ie the responsibility) for the misdeeds of someone else. You're not the fall guy if you're convicted of something when you're the person who did the thing.

This is a very weird argument you're making. They successfully prosecuted the main perpetrator of a massive and very complex fraud in spite of him being (pre collapse) the absolute golden child of the industry. That's a huge win.

Getting time for anyone else is far less important than getting guilty on all charges for the main perpetrator.

> They successfully prosecuted the main perpetrator of a massive and very complex fraud in spite of him being (pre collapse) the absolute golden child of the industry.

Not OP, but as a layperson like myself, what is the compelling proof that "complex fraud" actually happened? Last night I clicked 3 different articles--including Wikipedia's page on the trial--and it was a really long read. I should be able to read somewhere in a single paragraph, what was the main crime, and what was the best/crucial evidence for it. The Wiki page for instance began by listing a litany of alleged crimes--which for lay understanding is the wrong level of detail. I would like a clear, simple, compelling summary but it actually not that easy to find this information written concisely in a neutral article.

FTX functioned as a vault for user funds as an exchange, while Alameda, sharing common ground with FTX, was granted the privilege to borrow these user funds. Already off to a bad start because of the conflict of interest.

Alameda was also allowed to borrow far more money than other borrowers, because they were deeply in debt. Also bad.

Though this arrangement might initially evoke traditional banking practices with eg mortgages, the situation becomes even more problematic as Alameda secured their loans using tokens minted by FTX.

The easiest analogy here might be: A failing real estate mogul, who has an intimate personal relationship with a bank head, using stock shares of the bank as collateral for mortgages instead of the properties themselves—a clear conflict of interest, wrong way risk, and a shaky foundation for financial stability.

Edit: The bank in this case could play dumb and insist it had no idea that was fiscally irresponsible, which is basically what SBF argued, but at a certain level of incredulity you stop receiving the benefit of the doubt.

But that's exactly my problem--there are countless examples of banking crises the result of colossally irresponsible and negligent financial and economic decisions. Yet the government bails those out and does not call those fraud.

The issue that I have is the correct concept and the correct argument. The proof of fraud, I think, requires forensic evidence and proof beyond reasonable doubt. Not the optics and my personal level of credulity.

And I say this as a Marxist leftist, so it's not like I'm any supporter of cryptocurrencies, etc. I might even argue that under capitalism, people's notions of 'responsibility', 'stability', 'fraud' etc. are already so distorted that they don't have a coherent theory of what things are crimes and what things are just morally bad, socially bad, and so on.

Things going badly for investors is not in and of itself fraud even if it causes a crisis. That's why the hedge fund Alameda losing investors money is not by itself a fraud. FTX taking customer money and spending it is however fraud. That's just like if you put money in a bank and they just spend it that's fraud.

Fraud has a specific meaning [1] but you could think about it as being a negligent misrepresentation of some fact for unjust financial enrichment. So if I say to you I'm a billionaire[2] that's just a lie not a fraud. But if I say to you "I'm a billionaire, invest with me and I'll make you a billionaire" and I take your money and just go spend it or whatever, that's a fraud because you were relying on a fact I negligently misrepresented and you were harmed. The complexity comes because there are lots of seperate laws under which fraud is illegal. So if you lie on a loan application that's a different type of crime to if you tell someone they are buying shares in a potato farm and the potato farm doesn't exist and you just spend their money on blow instead. They're both fraud but they are different kinds of fraud.

If I honestly get your cash for an investment, make that investment and lose all your money because it just doesn't work out, that's not a fraud.

Hope that's clear. The meaning of the word fraud doesn't change from a capitalist vs a Marxist perspective. It's just "fancy lieing for financial gain" either way.

[1] Here's a US-specific summary https://www.law.cornell.edu/wex/fraud

[2] I'm not. As far as I know at least.

The situation with Alameda resembles the Enron scandal more closely than a banking crisis like that of 2008.

Portraying Alameda as a typical borrower, while concurrently implementing a code change that singularly permitted them to maintain a negative account balance, is outright fraud.

Further, it seems like what you’re arguing is that more people should be prosecuted for banking crises, not that SBF shouldn’t be charged. Those two things aren’t mutually exclusive.

The best one I saw today (can't remember the source): Suppose you gave your broker money to invest for you, and she bought herself a really nice house instead. That's basically it.

I think you want mutually incompatible things.

1)If you want to know the full facts of what he did and how the court case went you'd need to do more than read the wikipedia page.

https://www.courtlistener.com/docket/66631291/united-states-... is the full docket of original source materials if you want to find out for yourself.

It was a complex case so there are a lot of documents etc but all the actual facts of what happened in the case are there. IF you want to read who said what, what all the documents to and from the judge were etc, go nuts.

2)If you want a simplified version, it's basically what a sibling said. FTX was an exchange. That's supposed to look after people's assets that they place in custody so they can use those assets for investments. Alameda was a hedge fund. It's supposed to use investor's assets to make investments. Instead, FTX loaned customer assets to Alameda to invest. That in and of itself is no bueno right off the bat. It's a violation of the contract with customers when they deposit and is improper use of customer funds.

Secondly they kind of spent 8bn of the customer assets. On getting celeb endorsement, private jets, parties, conferences with big-wig speakers, real estate and other stuff. That's called stealing, and is also considered a no-no.

Third there were campaign finance violations. He took customer money and improperly used various front individuals and companies to make political donations. That's not legal.

Fourth he seems to have violated money-laundering laws either by part of the third thing or in some other way.

Fifth there was probably also wire fraud because everything is wire fraud and also because they actually had a Telegram Chat channel called "wire fraud" (they say irony is dead).

That's probably not all but it's enough.

Thats not true, Caroline and the main conspirators pled guilty and took plea deals, this is not immunity, they will still be sentenced to prison.

They handed Elison a plea deal waving all charges except criminal tax violations, which she's unlikely to be found guilty of.

However, she was the principal co-conspirator, presiding over a bucket shop that drained 7 billion directly out of the accounts of FTX. As a Stanford finance graduate with trading experience, it's ridiculous to claim she was not aware of the "backdoor" source of Alameda's liquidity and the massive loses they accrued gambling with the money of FTX customers.

> They handed Elison a plea deal waving all charges except criminal tax violations

This is false. She pled guilty to wire fraud, conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering. The crimes she pled to carry a maximum sentence of 110 years. She was never charged with tax violations. She will receive credit for her testimony but she will certainly do prison time.

https://www.documentcloud.org/documents/23495753-caroline-el...

https://www.justice.gov/usao-sdny/pr/united-states-attorney-...

Agreed -- I believe the confusion comes from this sentence in the document:

"Moreover, if the defendant fully complies with the understandings specified in this Agreement, the defendant will not be further prosecuted criminally by this Office for any crimes, except for criminal tax violations, related to her participation in [the FTX scandal]."

IIUC, by "further" they mean "in addition to the 7 counts she pled guilty to [and could serve jailtime for]."

It's not false, it's my conjecture. Ellison just spent a total of 14 hours testifying against SBF and, according to court reporters present, denying her own responsibility for planning the fraud and saying she was simply directed to perform various criminal actions she was not aware the full implications of. It's nonsensical to believe she accepted responsibility for anything more in her plea deal, which will be the sole basis of her sentence.

The charges she faces before the plea deal carried a maximum sentence of 110 years and no mandatory minimum. According to several experts (*, she will likely walk away with no jail time or, at most, a few years in a minimum security jail. The prosecution against her was basically stayed - again, my conjecture - as we will find out in a few weeks time.

(* https://www.bloomberg.com/news/articles/2023-11-03/sbf-s-inn...

No, it's just false. She pleaded guilty to 7 charges already. We don't know what she'll be sentenced to for those crimes. That's a completely separate issue. She's already pleaded guilty. The source is the Justice Department.

https://www.justice.gov/usao-sdny/pr/united-states-attorney-...

"CAROLINE ELLISON, 28, is charged with and has pled guilty to two counts of conspiracy to commit wire fraud, each of which carry a maximum sentence of 20 years in prison; two counts of wire fraud, each of which carry a maximum sentence of 20 years in prison; one count of conspiracy to commit commodities fraud, which carries a maximum sentence of five years in prison; one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison. ...

"The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge. "

> They handed Elison a plea deal waving all charges except criminal tax violations, which she's unlikely to be found guilty of.

As someone else said, this is factually false on the charges she pled to.

Mainly, though, I don’t know what you mean by “which she’s unlikely to be found guilty of”. When someone pleads guilty, if the judge accepts the plea, there is no other finding of fact. She already is guilty. That’s what pleading is.

She’s already been found guilty (by virtue of her plea). What hasn’t happened is her sentencing.

They seem to be confusing an agreement not to seek further FTX-related charges except potential tax fraud charges with waiving the existing charges which she instead actually pled guilty to.

I believe she studied mathematics, not finance fwiw

had similar POV but changing my mind after talking with someone this AM

their POV is that this is net good for society. outcome we want = no crime

how to deter? 1/ big punishment for main actor 2/ get complicit actors to cooperate

and so by giving plea deals the gov shows that cooperation can save you

Yeah... but otoh, being a lower level peon shouldn't be a get out of jail free card. The incentive is then 'well as long as i flip on the big guy if he gets caught, i can make some nice piles of money in the mean time and maybe i can exit before it blows up anyway'

she wasn't a lower level peon, she had actual rank, and enough education and experience to know what's going on.

and she got a sweet deal, but she's not getting away scott-free, and will likely see real prison time and huge fines. yeah she may have another $2 million hidden away as Monero somewhere, but her career is busted -- no one is ever going to trust her after this -- and if the Feds get wind of cash they didn't know about that could end in more charges.

it certainly isn't a get out of jail free card, just a "dont spend 60 years in prison" card.

>but her career is busted -- no one is ever going to trust her after this

Don't forget -> book deal. She's still capable of making money off the outcome and transitioning into a career as more of an evangelist for what NOT to do.

> Yeah... but otoh, being a lower level peon shouldn't be a get out of jail free card.

The other involved principals pled guilty to multiple federal felonies, and are likely to spend at least some time in prison even if their sentencing gives them large reductions in what their sentence for those crimes otherwise would be for their cooperation.

> being a lower level peon shouldn't be a get out of jail free card

At some point, every society has to decide where to draw the line at "this much punishment is enough punishment" when the crime is basically setting value on fire. If you don't, you end up with the whole society on trial ("Why aren't we prosecuting the people who gave them the money? Surely had they done their homework, they would have known...").

... and we end up drawing the line slightly on the side of "let the least-powerful guilty go" because there's heavy incentive to get them to turn on their bosses so our society can hold the most powerful (most equipped to hide their bad behavior and understand how to subvert the law) accountable at all. This is very much a problem at the intersection of justice and the realpolitik of enforcement.

(... technically, every German citizen was a Nazi. They didn't end World War II by nuking Germany until it glowed).

I agree, didn't they admit they knew what they were doing? They should all do the same amount of time.

You’re basically getting rid of prisoner’s dilemma. No one will ever snitch.

Speaking as a victim, this seems to have been basically Sam's doing. Fair enough his underlings didn't shop him but that's a lesser offence.

That would absolutely remove the incentive for anyone to cooperate with the government ever again.

Such a system would make it nearly impossible to proesecute the higher levels of a criminal enterprise.

It’s easy to prosecute the foot-soldiers of a criminal enterprise with outside evidence. The leadership of it typically requires testimony from others within the enterprise.

So, your approach of eliminating all benefits to criminal defendants for cooperating with the government would *massively* enable organized crime, and would end with a criminal justice system that comes down hard on the low-level members, while giving the organizers and planners a walk.

SBF could simply have chosen to plead guilty, then this would have been roughly what happened.

Carolin pleads guilty on multiple counts of charges, and per her words on the witness stand, her corporation with the AUSA would get her a letter to the judge from the AUSA that acknowledges her corporation.

They didn’t get immunity, they just haven’t been sentenced yet.

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