Three prominent figures once hailed as titans in the crypto industry are now facing starkly different fates within the U.S. legal system.
The recent sentencing hearings for former FTX CEO Sam “SBF” Bankman-Fried and former Binance CEO Changpeng “CZ” Zhao have sparked widespread comment both within and outside the crypto community. And yesterday, Roger Ver, one of the early Bitcoin Ogs was arrested in Spain and indicted for tax fraud, according to a press release from the U.S. Department of Justice.
Bankman-Fried faces a potential prison term extending into his fifties, likely emerging with fewer assets than Zhao, who is slated to be released by year’s end and boasts an estimated net worth of $33 billion, according to Forbes.
Bankman-Fried’s legal saga began in 2022 when he was arrested, extradited to the United States, and pleaded not guilty to various financial crimes relating to the implosion of the crypto exchange FTX, of which he was CEO. Following a period of house arrest, he was remanded to jail amid allegations of witness intimidation.
Subsequently, he underwent a six-week trial, was found guilty of seven felony charges related to defrauding investors and misuse of customer funds, and was ultimately sentenced to 25 years in prison.
CZ Pleads Guilty
In contrast, Zhao was charged in 2023, pleaded guilty, remained free on bail, and was sentenced to just four months in prison. He is expected to surrender himself in the coming days.
Bankman-Fried’s charges stemmed from allegations of wire fraud and the secret diversion of billions of dollars in crypto custody with FTX to support Alameda. Conversely, Zhao faced a single charge pertaining to the failure to maintain an effective Anti-Money Laundering program at Binance.
Mark Bini, a former assistant U.S. attorney, emphasized the discrepancy between their crimes, noting that while both are serious, Bankman-Fried’s offense was deemed much more severe.
Throughout his legal ordeal, Bankman-Fried has largely maintained that he acted within his perception of what was right. However, Judge Lewis Kaplan accused him of deceit and described his testimony as evasive during the sentencing hearing.
Conversely, Zhao refrained from public commentary on the case, opting instead to submit extensive letters of support from industry leaders and family members. To Zhao’s credit, and benefit, unlike Bankman-Fried, he did not lose customer’s money.
During the 2 1/2 hour sentencing hearing, the judge, defense attorneys, and even prosecutors acknowledged Zhao’s multifaceted character. Despite being a first-time lawbreaker, the 47-year-old billionaire was portrayed as a philanthropist, a family man, and a do-gooder who voluntarily surrendered himself to face the consequences of his actions.
A Reputation Resurrection
This surprising resurrection of Zhao’s reputation significantly influenced his sentencing outcome: a remarkably lenient four-month prison term, far less than the three years sought by prosecutors for what they described as a severe violation of the Bank Secrecy Act (BSA).
However, U.S. Judge Richard Jones, 74, remained unconvinced. He expressed skepticism towards the overwhelmingly positive portrayals of Zhao’s character and history, noting the extensive support letters submitted by friends and family. Despite Zhao’s genuine efforts to redeem himself, Judge Jones underscored the seriousness of the charges, insisting that wealth and status do not exempt individuals from legal obligations.
While Zhao will spend four months in prison for his failure to implement effective money-laundering controls at Binance, the judge’s remarks hinted at a potential rejuvenation for him post-incarceration. With a clean past and a track record of cooperation with the government, Zhao’s future endeavors, including his global online education initiative for children, may see him return to his philanthropic work sooner rather than later.
Despite speculation, it is improbable that Zhao and Bankman-Fried will share a cell during their incarceration, let alone inhabit the same facility. Bankman-Fried may be assigned to a San Francisco Bay Area prison, with the possibility of staying in New York pending his appeal, while Zhao is expected to serve his four-month term at the Federal Detention Center SeaTac in Washington.
Luck runs out for Bitcoin Jesus
Meanwhile, Roger Ver, often dubbed “Bitcoin Jesus,” has been indicted for tax fraud, accused of neglecting to pay capital gains on the substantial proceeds he garnered from selling bitcoin in 2017, according to a press release from the U.S. Department of Justice.
Ver, who transitioned from being an early bitcoin (BTC) investor to a bitcoin cash (BCH) advocate, was apprehended over the weekend in Spain and faces extradition back to the United States.
Allegations suggest that Ver failed to file tax returns on the sale of assets or pay an “exit tax” on capital gains after renouncing his U.S. citizenship and establishing businesses and citizenship in St. Kitts and Nevis.
The indictment asserts that Ver liquidated “tens of thousands” of bitcoins in November 2017, amassing $240 million in cash. Despite not holding U.S. citizenship at the time, he was obligated to report and pay taxes on certain distributions, including dividends from U.S. corporations MemoryDealers and Agilestar.
Ver purportedly concealed from his accountant that he had received and sold bitcoins from these corporations, resulting in his 2017 individual income tax return inaccurately reporting zero gains or tax payments related to these distributions.
Previously entangled in legal issues, including serving time for selling explosives on eBay, Ver now faces further legal scrutiny.
Bryan Skarlatos, Ver’s lawyer, expressed surprise and disappointment over the arrest, emphasizing Ver’s reliance on tax professionals and his intent to comply with U.S. tax obligations.
The timing of Ver’s indictment coincides with the sentencing of Changpeng Zhao, founder of Binance, to four months in prison for money laundering. Ver’s history includes defending Charlie Shrem against money laundering charges in 2014, asserting that governmental intervention infringes on individuals’ financial autonomy.
By renouncing his U.S. citizenship and becoming a citizen of St. Kitts and Nevis, Ver was obligated to file tax returns reporting capital gains from asset sales, including bitcoin. Prosecutors allege that Ver provided false or misleading information about his cryptocurrency holdings to his law firm, resulting in undervalued tax returns and the evasion of owed taxes amounting to $48 million from 2014 to 2017.
