In the ongoing criminal trial of former FTX CEO Sam Bankman-Fried, the role of cooperating witnesses has become a focal point. Adam Yedidia, a former software engineer at FTX, and Gary Wang, cofounder and former CTO of the crypto exchange, have already testified against him, and it is expected that former Alameda Research CEO Caroline Ellison and former FTX engineering director Nishad Singh are next.
This week, all eyes were on Wang, who told the jury that he had pleaded guilty to wire fraud, securities fraud, and commodities fraud as part of a cooperation agreement. And he didn’t hesitate to point at FTX founder Bankman-Fried, along with former FTX director of engineering Nishad Singh and Alameda Research CEO Caroline Ellison, as co-conspirators.
Legal experts say that witnesses who cooperate with the government are likely to serve little to no prison time, a practice especially prevalent in the United States District Court for the Southern District of New York, where the trial is being held.
Brian Klein, partner at law firm Waymaker, spoke about the practice of federal prosecutors writing a 5K motion, which basically informs the court that a witness has cooperated with the government and is often used to solicit a more lenient sentence for their offenses.
“If someone cooperates and they get this letter, most often they don’t get prison time,” Klein said in a recent episode of the Unchained podcast. “There’s a strong chance that Gary [Wang] won’t get any prison time, or he’ll get very little. This is something that we will expect to happen. When he gets sentenced, he will get sentenced. That’s going to happen. And [the prosecution] will write a letter discussing not only his cooperation at trial but [also] his prior cooperation.”
Sam Enzer, partner at law firm Cahill Gordon & Reindel, added: “In the world of white-collar crime, judges like Kaplan understand that in order for the government to make cases, the cooperators have to get a payoff.” It’s hard to know for certain what the judge will decide, and these outcomes are not guaranteed but are based on the observations of legal experts familiar with SDNY.
According to experts, the extent of the “payoff” can depend on various factors such as the timing of their cooperation and its significance to the case. This includes whether the cooperator was the first to come forward or if they only did so after the government had sufficient evidence, which could ultimately weigh on the judge’s decision.
The practice is prevalent in white-collar crime cases, where insider testimony is often crucial for the prosecution’s argument. While it’s hard to predict the exact outcomes for Wang, and other potential cooperators like Caroline Ellison and Nishad Singh, who have also agreed to plead guilty, the general practice in SDNY suggests they may very well avoid prison time.
Catch up on Unchained’s coverage of the trial so far:
- Sam Bankman-Fried Trial: Here’s Everything That Happened So Far
- SBF Trial, Day 1: Possible Witnesses Include FTX Insiders, Big Names in Crypto, and SBF’s Family
- SBF Trial, Day 2: DOJ Says Sam Bankman-Fried ‘Lied’ While Defense Claims His Actions Were ‘Reasonable’
- SBF Trial, Day 3: Why a True Believer in FTX Flipped Once He Learned One Fact
- SBF Trial, Day 4: SBF’s Lawyers Annoy Judge Kaplan, While Wang Reveals Alameda’s Special Privileges
- Did Sam Bankman-Fried Have Intent to Defraud FTX Investors?
- Here’s How Sam Bankman-Fried’s High-Stakes Trial Could Play Out
- SBF Trial: How Sam Bankman-Fried’s Lawyers Might Try and Win His Case
- The High-Stakes Trial of Sam Bankman-Fried Begins: What to Expect
- In the SBF Case, Elite Corruption Is What’s Really on Trial