Sam Bankman-Friedthe disgraced founder of the cryptocurrency exchange FTX now bankruptmaybe he could have spent less time doing it media interviews while playing video games in recent weeks and instead spent more time googling extradition treaties. At the very least, he could have spent less time on media interviews where he said he didn’t think he would be arrested.
In a Twitter Spaces on Monday, Bankman-Fried She said“I don’t think I’ll be arrested,” referring to the scandal that engulfed his business since November, leaving FTX bankrupt and its customers unable to withdraw funds. Hours later, authorities in the Bahamas, where Bankman-Fried lives and FTX is headquartered, arrested him following criminal charges filed by the U.S. Attorney’s office in the Southern District of New York. The SEC and CFTC are also looking for Bankman-Fried, often referred to as SBF.
In the multitude of interviews and Twitter chats Bankman-Fried has had with the media in recent weeks, he has been cautious but casual in discussing his responsibilities in the situation. “What happens happens. It’s not up to me,” he told Teddy Schleifer of Puck in a early December interview, when asked if he thought anyone should go to jail for the FTX debacle. When Andrew Ross Sorkin of the New York Times asked him days earlier if he was concerned about a potential criminal conviction, He answeredafter some bumbling, “It feels weird to say that, but I think the real answer is that that’s not what I’m focusing on.”
Arrogance is impossible to ignore.
The 30-year-old MIT grad has squandered the funds of hundreds of thousands of his clients, most of whom are unlikely to get much of their money back. He’s continually said he’s sorry and that he “fucked up,” but an oops doesn’t excuse or explain missing billions of dollars, misused funds, or the serious fraud allegations against him. His apology also conflicts with many of his actions, before and after the collapse of FTX, as he has continued to blame elsewhere for what happened.
FTX appears to have been the exact opposite of the secure and honest crypto institution that Bankman-Fried said it was. His refusal to take full responsibility, even now, speaks to the size of his ego.
Bankman-Fried’s words do not reflect his actions during his time at Alameda and FTX
Bankman-Fried has spent huge amounts of money and personal capital building his profile and brand. He slapped the FTX name on everything he could, including the arena of the Miami Heat, and put his face in commercials. He launched as a super benefactor, making tons of money in cryptocurrencies to direct them towards philanthropic endeavors that he and others in his inner circle preferred. (Disclosure: This August, the Bankman-Fried philanthropic family foundation, Building a Stronger Future, awarded Vox Future Perfect a grant for a 2023 reporting project. That project is now on hold.)
All the while, he was, presumably, committing serious crimes, Included wire fraud, securities fraud and money laundering and mixing funds from his cryptocurrency exchange, FTX, with those from the trading company he founded, Alameda Research. According to The SEC Complaint against Bankman-Fried, “Since FTX’s inception, Bankman-Fried has been diverting FTX client funds to Alameda, and continued to do so until FTX collapsed in November 2022.”
In other words, Bankman-Fried’s claims that he was unaware of what was happening with FTX and Alameda mixing funds and that the exchange failed because he slept at the wheel are, if the allegations against him are to be believed, a lie. “As he spent lavishly on office space and condominiums in the Bahamas, and sank billions of dollars of client funds into speculative venture investments, the Bankman-Fried house of cards began to crumble,” the complaint reads.
After positioning himself as the serious and confident face of cryptocurrencies on Capitol Hill and among regulators, Bankman-Fried has also been accused of campaign finance violations and allegations that he made donations in excess of the permitted amount, including using the names of other people. It’s an image of a guy who was well aware of the rules and the guardrails around him – he’s quite fluent in regulatory talk – and seemed to believe they didn’t or shouldn’t apply to him.
In a interview with Vox’s Kelsey Piper in November conducted via direct message on Twitter, he said: “Fuck the regulators. They make everything worse.” Those are words he may regret as regulators are now going after him. Then again, given the dismissive attitude of him, who knows?
The blame game continues
Testimony he was to deliver before a House Financial Services Committee hearing prior to his arrest published by ForbesBankman-Fried pretends to accept responsibility for FTX’s collapse, but repeatedly throws the blame elsewhere. It begins with the quip that has become signature for Bankman-Fried—”I screwed up”—and then continues on a tortuous path that oscillates between accepting blame and abdicating responsibility.
Bankman-Fried reiterates his regret that FTX filed for Chapter 11 bankruptcy and complains that the company, which is now run by John J. Ray III, who helped manage Enron after the 2001 crash, rejected his offers to help fix the mess he created. He claims that he would have been able to “easily pick up some pieces of data” that FTX couldn’t find. In Trump’s fashion, he sometimes reflects an “only I can fix it” attitude—although at other times in this saga, when it’s convenient for him, he’s been very careful to note that on some objects he wasn’t paying attention.
Bankman-Fried says it is still aware of “billions of dollars of serious financing deals” to make customers “basically whole,” but that would require restarting the company as an exchange. It is not clear who these offers are supposed to come from. And then, his testimony once again places the blame on others for those new magical and mysterious funds that do not appear. “I admit I’m not optimistic about some parts of the process,” he says. “I myself have not witnessed any progress from Mr. Ray’s team towards raising substantial funds or restarting the exchange.”
Ray was sharp and candid in his analysis of what happened with FTX as he learns more details. In his testimony before the House Financial Services Committee on Tuesday, Dec. 13 (the hearing Bankman-Fried was also expected to appear at), Ray said FTX went on a $5 billion “spending binge” amid end of 2021 and 2022, and that loans and other payments in excess of $1 billion have been made to insiders. He stated that FTX’s collapse resulted from the “utter concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who have failed to implement virtually any of the systems or controls necessary for a company to which they are trust other people’s money or assets.” Ray also told the House hearing that FTX used QuickBooks for accounting. There was, he says, “no refinement” and an “absence of any management” in FTX.
Many of Bankman-Fried’s words and actions in recent weeks have been mean at the very least and often borderline delusional. Punched Binance, the competitor that partly spurred the collapse of FTX, accusing his CEO of lying and stating that the company, which briefly entertained the purchase of FTX, never intended to go through with the deal. (Bankman-Fried aside, Binance is deal with their own problems.)
In his prepared testimony, he says FTX’s new leadership is “destructive.” He appears to regard Ray and others as racist, declaring that their move to seize assets from FTX outside the Bahamas and in the US amounts to “malicious intent and incompetence on the part of other races, cultures and governments” which would be “deemed deeply offensive if directed to American minorities”.
Maybe he thought he was getting away with it because that’s often the way things work
In retrospect, it’s hard not to look at Bankman-Fried now and wonder how he pulled it off. The answer is simply that they were allowed to.
He managed to raise $2 billion from investors, including big names like Sequoia, Tiger Global, and SoftBank, all of which have apparently failed to get a very close look under the hood. He was the subject of multiple largely flattering profiles who marveled at his unkempt appearance and apparent commitment to the philosophy of effective altruism and philanthropic causes. The media keeps pointing out that his parents are law professors at Stanford and that he was raised in intelligent, wealthy, liberal circles, as if that upbringing had some sort of important significance.
Given all of this, it makes sense why Bankman-Fried certainly before and even now has shown such boldness in his business decisions and personal actions. If you tell everyone that you’re awesome and you totally get this, and everyone around you is constantly reiterating that you’re awesome and you totally get this, you may very well be inclined to accept that. If the rules have never applied to you, why would they start now? You reach prodigy status and notice that no one around you is really kicking their tires about how you got there, so you move on, even if that might involve some supposedly big crimes.
What awaits Bankman-Fried is unclear. He appears to be in trouble and will have a team of probably very good lawyers to defend him in court (although how much he will listen to their advice is an open question). At the very least, he’ll probably have to relax for a while with the media interviews and tweets. Though given his love of talking to the press — and the press’ love of talking to him — this probably won’t be the last we hear from him.
Perhaps the bigger question to ask beyond Bankman-Fried himself is how he was able to achieve such status in the first place, to display such hubris without ever caring that it would come before a downfall. Perhaps the scariest thing is that guys like this always get away with stuff like this. There may be an SBF 2.0 lurking around the corner, but more likely there are a few hiding in plain sight right now.
Andrew Ross Sorkin and Sam Bankman-Fried on stage at the New York Times 2022 DealBook conference on November 30, 2022 in New York City, weeks after the collapse of FTX.Thos Robinson/Getty Images for The New York Times
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