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A key accomplice to one of the largest frauds in history has been spared a prison sentence in return for his "outstanding cooperation" with US prosecutors.
Gary Wang, co-founder and former chief technology officer of FTX, walked free following his sentencing hearing in New York on Wednesday (November 20).
Judge Lewis Kaplan, sentencing, said that Wang had aided and abetted the FTX fraud to the end, but had later ensured that his former boss, Sam Bankman-Fried, was put behind bars.
"You're entitled to a world of credit for facing up to your responsibility," said Kaplan. "The period of your culpability was, in comparison to the culpability of the other defendants, extremely small."
Last month, Wang testified that Bankman-Fried had instructed him to make changes to FTX's software code, which enabled its trading affiliate, Alameda Research, to secretly withdraw billions in customer funds from the exchange.
Wang pleaded guilty to two counts of wire fraud, one count of conspiracy to commit commodities fraud and one count of conspiracy to commit securities fraud.
As part of his plea agreement, Wang must forfeit any and all proceeds derived from his crimes to the US government — a bargain that will effectively leave him penniless but out of jail.
He is jointly liable for $11bn in forfeiture, alongside Bankman-Fried, former Alameda CEO Caroline Ellison and former director of engineering at FTX, Nishad Singh.
Judge Kaplan has previously authorised the Department of Justice (DOJ) to use the assets acquired by forfeiture to compensate those who lost money to the FTX fraud.
Compliments for Wang
As covered by Vixio, US prosecutors signalled last week that Wang was likely to be rewarded for his “crucial testimony” and early cooperation with the investigation.
Prior to his sentencing, the prosecutors were joined by John J. Ray, current CEO of FTX, and Renee Philip, assistant attorney general of New York’s Investor Protection Bureau, in calling for leniency.
In a memo to Judge Kaplan, Ray credited Wang with helping to salvage $800m in customer assets when FTX was being “looted” by hackers after filing for bankruptcy.
“Mr. Wang’s early assistance was vital in ensuring that assets were preserved for the benefit of creditors, and his expertise and knowledge of the FTX system helped prevent further dissipation of estate assets,” said Ray.
“Given Mr. Wang’s senior position within FTX and his extensive knowledge of FTX’s systems and processes, the debtors expect that his cooperation will continue to be important to maximize recovery.”
Philip noted that Wang had “volunteered” to cooperate with the New York Office of the Attorney General (OAG), providing valuable information regarding FTX’s transactions and systems.
“He never conditioned his assistance on any reciprocal benefit, such as immunity, a non-prosecution agreement or deferred prosecution,” said the assistant attorney general.
“Mr. Wang has been forthcoming, cooperative and flexible, and has assisted in advancing OAG’s investigation.”
However, other observers were not so pleased with Wang’s final sentence.
Dennis Kelleher, president and CEO of Better Markets, a financial reform lobby group, had called for Wang to serve a year in prison, in addition to financial penalties.
“While Wang appears to have cooperated extensively and continues to cooperate in meaningful and important ways, no criminal should be handed a ‘get-out-of-jail-free’ card,” said Kelleher.
“No amount of rhetorical whitewashing by the government should obscure the fact that Wang was a knowing and critical participant in the criminal enterprise, could have stopped it, and could have prevented the loss of billions of dollars.”
FTX sentences recap
Wang is the second former FTX executive to avoid a prison sentence, following in the footsteps of engineering director Singh, who was sentenced to three years of supervised release last month.
Ellison was sentenced to two years in prison following extensive cooperation with US prosecutors, including testifying against her former boss (and former lover) during trial.
Ryan Salame, former CEO of FTX’s Bahamas subsidiary, was sentenced to seven and a half years after pleading guilty to making unlawful political contributions on behalf of FTX and Bankman-Fried, and operating an unlicensed US money transmitting business.
Bankman-Fried, the only FTX executive to plead not guilty, received 25 years in prison plus three years of supervised release.
If he were to serve his entire sentence, Bankman-Fried would not emerge from prison until his late 50s.
