The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The former head of FTX Bahamas did not receive “any brownie points for being a whistleblower” to local regulators as a New York judge yesterday sentenced him to seven-and-a-half years in prison.

The 90-month jail term imposed on Ryan Salame by Judge Lewis Kaplan, sitting in the southern New York district court, was greater than the seven-year maximum demanded by US federal prosecutors and shattered the ex-FTX Digital Markets chief’s bid for a lighter sentence.

Tribune Business understands that Mr Salame, his family and legal team had been hoping for a three to three-and-a-half year sentence after he previously pled guilty to breaches of US campaign finance laws and operating an unlicensed money transmission business as part of a deal to co-operate with prosecutors.

A source who was present in the New York courtroom for the sentencing, speaking on condition of anonymity, said Judge Kaplan gave Mr Salame little to no credit for alerting the Securities Commission of The Bahamas to FTX’s multi-billion dollar fraud in the hours leading up to the crypto exchange’s collapse as investors stampeded for the exit.

They added that the judge also showed little love for The Bahamas, suggesting that Mr Salame’s main job as head of FTX Digital Markets was to “curry favour” with local officials and that all his actions were directed towards this goal and his own self-interest.

With FTX’s disgraced founder, Sam Bankman-Fried, unable to be charged with violating US campaign finance laws because such claims were not included in the extradition warrant that secured his removal from The Bahamas, Mr Salame took the brunt of the court’s wrath on this aspect.

According to sources, he was described by Judge Kaplan as the “mastermind” behind these law breaches. And the judge “didn’t give any brownie points for being a whistleblower to the Securities Commission”, with his sentencing indicating that the character references supplied by multiple Bahamians, including Allyson Maynard-Gibson KC, FTX’s former attorney and an ex-attorney general, had made little impression.

“Basically, the judge said Ryan’s job was to curry favour with Bahamian officials and his attempt to be a whistleblower was always a side step aimed at creating a life raft for himself,” the source said, referring to US prosecutors’ allegations that Mr Salame sought “withdrew a substantial amount of money” - including $5m in crypto assets - during FTX’s final hours.

They added that Judge Kaplan also asserted that “Ryan’s job was to get close to the Government, to curry favour, and he tried to use that favour when the exchanged collapsed to get everything done in The Bahamas’ courts versus the US courts” - although no evidence has previously been produced on this. Mr Salame was said to have apologised to friends, family and FTX investors when he addressed the court.

The judge, in not endearing himself to The Bahamas, appears to have largely agreed with the analysis by Damian Williams, the southern New York district attorney and his team, whose sentencing submissions sought to counter Mr Salame’s actions in alerting the Securities Commission and Bahamian authorities to the extent of the multi-billion dollar fraud and misuse of client funds perpetrated by Bankman-Fried and his inner circle.

They argued that the former FTX Digital Markets chief was instead acting “in his own financial interests”, using his inside knowledge of the crypto exchange’s impending collapse to withdraw more than $5m in digital assets from accounts he controlled just prior to its Chapter 11 bankruptcy filing. These funds were purportedly spent on hiring a public relations firm and settling bills and debts.

“While Salame did not know of Bankman-Fried’s theft of customer funds or the related dire financial condition of FTX before November 2022, he withdrew a substantial amount of money upon learning of such circumstances,” the US district attorney and his team alleged.

“Salame argues that when he did learn of those facts in November 2022, he solely acted benevolently, informing Bahamian authorities and blowing the whistle. But his November 2022 transfers also indicate that he acted in his own financial interests, withdrawing and later spending millions of dollars that appropriately belonged to FTX’s creditors.”

Mr Williams, in reacting to Mr Salame’s sentencing yesterday, said in a statement: “Ryan Salame agreed to advance the interests of FTX, Alameda Research and his co-conspirators through an unlawful political influence campaign and through an unlicensed money transmitting business, which helped FTX grow faster and larger by operating outside of the law.

“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 offences.”

Alameda Research was the private trading entity controlled by Bankman-Fried, who has already been sentenced to 25 years in prison, and to which he misappropriated funds belonging to the crypto exchange’s clients to finance its speculative, risky investments and repay loans it had taken out.

“They were expecting a three to three-and-a-half year sentence,” one source said of Mr Salame and his legal team, who had previously urged Judge Kaplan to impose a jail term of just 18 months in their own sentencing submissions. What they received, at seven-and-a-half years or 90 months, is five times’ as long.

However, this newspaper was told that Mr Salame is ultimately likely to serve only five of those seven-and-a-half years. It is understood that his co-operation will reduce the length of sentence by about 15 percent, while another year will be taken off for participating in a substance abuse treatment programme and rehabilitation.

Once his sentence is served, the former FTX Bahamas head will face three years’ probation or supervised release. “You will participate in an outpatient treatment programme approved by the US Probation Office, which programme may include testing to determine whether you have reverted to using drugs or alcohol,” the sentencing terms state.

Fines totalling $500,00, together with the $5.593m restitution he must pay to FTX’s Chapter 11 bankruptcy estate, take the total financial penalties imposed on Mr Salame to just over $6m. His Albany property will be sold to meet this, and he must surrender to the US Bureau of Prisons by August 29, 2024. Judge Kaplan recommended he serve his time in a facility “as close to the Washington D.C. area as possible”.

Mr Salame’s attorneys, in their own sentencing submissions, argued that the FTX Digital Markets chief was not part of the “innermost circle” surrounding Bankman-Fried. They asserted their client was “duped” - along with thousands of FTX customers - into believing the enterprise was “legitimate, solvent and wildly profitable”.

“Indeed, when he finally understood the FTX fraud, he was the first person to blow the whistle to authorities in The Bahamas who regulated FTX Digital Markets, FTX’s Bahamian subsidiary that Ryan headed,” Mr Salame’s sentencing submissions stated.

“Ryan contacted the Securities Commission of the Bahamas, FTX Digital Markets’ regulator, as soon as he learned about the fraud that Bankman-Fried and others had committed. Ryan contacted the Securities Commission to alert them to the fact that ‘assets which may have been held with FTX Digital were transferred to Alameda Research’, and that ‘such transfers were not allowed and therefore may constitute misappropriation, theft, fraud or some other crime’.

“Ryan further informed the Securities Commission that the only three people who had the necessary codes or passwords to transfer clients’ assets were Bankman-Fried, Nishad Singh and Gary Wang. This information appears to have initiated the Bahamian investigation into FTX and those three individuals.”