FTX Co-Founder Gary Wang Escapes Prison Sentence by Testifying Against SBF

The court has sentenced the co-founder of FTX and Sam Bankman-Fried's longtime friend not to prison and only to three years of supervision.

The authorities acknowledged Wang's assistance in quickly extraditing the former CEO from the Bahamas in December 2022.

Cooperation with the prosecutor helped Wang avoid a prison sentence

On November 20, Gary Wang was sentenced for his involvement in the collapse of the cryptocurrency exchange FTX in 2022. Wang became the second witness to avoid prison, along with former FTX Chief Technology Officer Nishad Singh, who was sentenced in October.

"You did the right thing for yourself and for the country. If this is not the biggest financial fraud in American history, it's certainly in the top two or three. This court has determined that you will be supervised for three years,"

Judge Lewis A. Kaplan said during the hearing.

Former FTX CEO Sam Bankman-Fried is serving a 25-year sentence for embezzling more than $11 billion from customers and investors. The court convicted him on 7 counts of fraud, money laundering, and conspiracy. He has filed an appeal.

The authorities have also charged former Alameda CEO Caroline Ellison in September. They demanded she forfeit the money and sentenced her to two years in prison. Last year, Wang testified in the case, detailing how Alameda Research, FTX's sister company, illegally withdrew funds by using an unlimited credit line.

According to Wang's testimony, Alameda had special access to the 'allow negative balances' feature due to changes in FTX's source code. This meant their withdrawals could come from borrowed assets from the exchange.

The FTX co-founder created the software that powered the company's widely used cryptocurrency trading platform. Wang wrote the code that allowed Bankman-Fried to carry out fraudulent activities, enabling Alameda to borrow unlimited funds from customer accounts. On the path to redemption after the scandal, he later used his technical skills to assist the authorities in the future.

"Gary has worked with the Government to design and build a new software tool aimed at detecting potential financial fraud in public markets,"

Wang's lawyers wrote in a letter.

Not everyone appreciates Wang's efforts to rebuild his reputation after the incident. Some believe his cooperation should not be seen as a "get out of jail free card". Wang's assistance in exposing the fraud was significant but still criticized.

The critics believe his leniency sets a concerning precedent for future cases. Dennis Kelleher, CEO of Better Markets, released a mnemonics addressing Wang's legal protection.

"While Wang appears to have cooperated extensively and continues to cooperate in meaningful and important ways, no criminal should be given a 'get out of jail free' card. That would create perverse incentives for future criminals to continue committing their crimes in the hope of not being caught but, if caught, to rush to the prosecutor's office to be the first one through the door to get the lightest possible sentence, if any,"

the CEO argued.

FTX has emerged as a controversial figure in one of the largest financial frauds in American history. As the FTX collapse fades, the legal and ethical consequences of the actions of those involved remain a subject of debate. Meanwhile, the broader cryptocurrency industry is striving to restore its reputation and implement stronger safeguards against similar abuses.

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