FTX exec Ryan Salame got a harsher sentence than what the U.S. wanted. Why?
Ryan Salame’s sentence insight into the fates that lie ahead for SBF’s inner circle, which also includes his on-off girlfriend Caroline Ellison and head of engineering Nishad Singh.
Prosecutors had sought five to seven years for former FTX executive Ryan Salame. The defendant put in a request for just 18 months.
But the eventual sentence ended up surprising both parties. He will now serve seven-and-a-half years behind bars — surpassing what the U.S. wanted — despite entering a plea deal and turning against his former boss Sam Bankman-Fried.
Salame’s legal team had attempted to argue that he had absolutely no idea that FTX, which suddenly halted withdrawals in November 2022 and left millions of people out of pocket as it tipped into bankruptcy, was misusing consumer funds. They claimed he was duped into believing that businesses within the group were “legitimate, solvent and wildly profitable.”
Yet this doesn’t tell the entire story. The main charge levied against Salame was that he had engaged in campaign finance fraud — in other words, making lavish donations to politicians. He had pledged tens of millions of dollars to lawmakers in an attempt to further the interests of FTX, and encourage a more relaxed attitude to crypto adoption within Washington. There was one big problem here: this was done using customer funds without their consent or knowledge.
Data from the Federal Election Commission even revealed that he was one of the biggest donors during the 2022 midterm elections — pledging $22 million to Republican candidates. And while these funds were recorded as loans from FTX’s sister company Alameda Research, Salame admitted that he had no intention of paying these funds back.
The fact that Salame received a much harsher sentence than what even prosecutors had been asking for is significant, and offers an insight into the fates that lie ahead for SBF’s inner circle, which also includes his on-off girlfriend Caroline Ellison and head of engineering Nishad Singh.
It’s interesting that while prosecutors had wanted Bankman-Fried to spend 50 years in jail, the judge in his fraud case had opted to be much more lenient, opting for 25 years instead. Here, Salame’s punishment exceeds what was asked for.
The donations made by FTX to U.S. politicians have caused plenty of red faces in Washington. Lawmakers have faced calls to return the funds so victims could be made whole, but in many cases, the cash had already been spent. Even Joe Biden was embroiled in the fiasco, as SBF was the second-largest donor during his 2020 presidential campaign. Many of the donations that Salame made were secretly on Bankman-Fried’s behalf, but the true source was obscured to sidestep disclosure requirements.
While this wouldn’t have been a consideration for the judge or the jury during Tuesday’s sentencing, the report by FTX’s examiner was damning as it laid bare how Salame had misused funds while working at the exchange. He’s already agreed to pay $5.59 million in restitution to the doomed exchange’s debtors — and that factors in a $5 million withdrawal that he made mere days before the embattled trading platform went bust. What’s more, the young former executive is now handing over the keys to his fancy Bahamian apartment.
Perhaps more damning was how Salame had misappropriated assets belonging to FTX assets to make exceedingly lavish purchases. Beyond his plush pad, he had also invested in restaurants and even snapped up a private jet.
The Securities and Exchange Commission was uncompromising as it reacted to the sentence. U.S. Attorney Damian Williams declared:
“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
It’s difficult to know exactly why the judge decided to exceed the recommendations put forward by prosecutors — but it’s possible that Salame is paying a tax after refusing to testify against SBF during his blockbuster trial last year.
On a personal level, it must be particularly painful for the executive, who has a newborn son. But it’s probable that Judge Kaplan had a similar objective in mind as he did when sentencing SBF: disabling Salame and preventing him from potentially harming crypto investors for years to come. Sending a clear message to other bad actors in the space would have undoubtedly been another incentive.
Given how FTX victims are only going to receive crypto based on November 2022 prices, it’s unclear how much comfort this verdict will bring.
