As much as it might be entertaining in a perverse way, I hate giving Sam Bankman-Fried any more attention than he is already getting. Based on available information, particularly SBF’s hour-long interview with the New York Times’ Andrew Ross Sorkin, the fallen crypto-king looks to be trying to outdo the classic corporate defense “I’m the CEO and I know nothing” by adding in a layer of pretending to be stoopid, or at best pathologically disingenuous.
After reading even itty bits of SBF’s record, it is not hard to conclude that he is an inverterate liar, and a particularly effective one given his mien of innocence. Even so, at this juncture, it’s simply bizarre to see his bafflegab and earnest pretenses be taken at face value. It’s as if people who have reputable parents, went to the right schools, and even better yet, have baby faces and the affect of techie nerds can’t possibly have no genuine concern about the impact of their actions on others.
We’ll skip over the big claim taken from the interview, “I didn’t ever try to commit fraud on anyone” and leave that for “actions speak louder than words.”
Let’s start with one of SBF’s claims to Sorkin, that he has only $100,000 in his bank account, which by implication meant everyone should feel sorry for his big fall from Master of the Universe levels of lucre. Gee, so what about the at least $121 million of Bahama real estate purchased by SBF’s parents and other FTX execs?
It’s instructive to see that SBF tried the same “only $100,000 in the bank” claim in the now-obviously-cringe-making Lunch with the Financial Times interview earlier this year, then to affect monastic indifference to money and signal his real interest was charity. But even the captured pink paper effectively called him out:
Bankman-Fried offers an alternative narrative, focused on how crypto can do good and give ordinary people control of their money. He plans to give away at least 99 per cent of what he earns as fast as he can. “I have about $100,000 in my bank account. And I think we have given away about $100mn so far this year,” he says. (Still, he revealed on Thursday that he had found the cash in recent months to buy up a 7.6 per cent stake in online stock brokerage Robinhood for $648mn.)
So BlockFi is a creditor to FTX that lent to Alameda that lent to Emergent which is a shell company owned by SBF that bought Robinhood shares that were pledged as collateral to guarantee to BlockFi the loan to FTX that was used to bailout BlockFi itself
— ayko2718 (@ayko2718) November 29, 2022
Even at the 50,000 foot level, it’s hard to buy SBF’s sudden claims of extreme ignorance, like not knowing that boatloads of FTX customer monies were going to the loss-hemorrhaging Alamada hedge fund, as well as over $3 billion in loans to SBF personally and a solely-owned entity going missing. The FTX enterprise was a very closely held set of companies, with a tiny executive team where nothing was secret, including the appearance of private parts of the principals. They off and on lived in a six bedroom apartment, which looks to mean regular bed-sharing. They ordered ginormous amounts of vegetarian food together, and most were believed to believe to be availing themselves of the in-house doctor’s Rx pad:
a) stimulants when you wake up, sleeping pills if you need them when you sleep.
b) be mindful of where your headspace is: I often nap in the office so that my mind doesn’t leave work mode in between shifts.
— SBF (@SBF_FTX) September 15, 2019
Mind you, SBF continuing to talk to the press is deranged given that he is under criminal investigation. As we pointed out a few days ago when it seemed clear he was not cancelling the Sorkin invite: “…it would either indicate that his judgement is severely impaired and he is ignoring legal advice or he has good reason to believe that his risk of being prosecuted is extremely low.”
Per the Coindesk transcript of the talk, SBF told Sorkin he was making public appearances against the advice of counsel.
Nevertheless, SBF seems to think, like the kid who is used to talking his way out of trouble in the principal’s office, that if he just keeps doggedly maintaining that he didn’t know he was doing anything bad, he can’t be found guilty of fraud, because fraud in most contexts requires intent.
However, intent can also be inferred. Let’s look at this passage from the interview:
I didn’t knowingly commingle funds. And again, one piece of this you have the margin trading you have you know, customers borrowing from each other, Alameda is one of those. I was frankly surprised by how big Alameda’s position was, which points to another failure of oversight on my part. And a failure to appoint someone to be chiefly in charge of that. But I wasn’t trying to commingle funds.
Huh? First, not all customers at FTX had signed up to trade on margin. And even if they had, that did not amount to an authorization to lend or transfer funds to an external entity.
This “I wasn’t trying to comingle funds” is tantamount to:
SBF: “I wasn’t trying to steal money.”
Interviewer: “But the money on the table wasn’t your money. Yet you picked it up and put in one of your accounts.”
SBF: “But I wasn’t trying to steal money.”
Or perhaps more to the point from the perspective of FTX customers who lost most or all of their money:
SBF: “I wasn’t trying to kill the bunny.”
Interviewer: “But you filled a sink with water, put the bunny in it so its head was submerged, and held it while it was struggling until it stopped moving.”
SBF: “But I wasn’t trying to kill the bunny.”
Even the normally very deferential Sorkin, faced with SBF’s obfuscation, resorts to talking about stealing:
I think the question is whether you were supposed to have access to these accounts to begin with, you know, if you give if I worked at a bank and was a bank teller, and I decided to leave the bank, at the end of the evening attend to the cash that I sent that we had access to, even if I intended to bring it back to the bank later, even with more money to give them back. I still stole the money.
SBF misdirects by talking about Alameda, how it wasn’t really under his control, he didn’t know what was up there. Huh? The money came from FTX! FTX had to authorize and enable its movement to Alameda! How dumb does he think people are?
This posture of doe-eyed stupidity is going to be even harder to pull off given that SBF’s fellow FTX top brass have already said they knew what was afoot, and are unlikely to stand for him trying to scapegoat them, which is what his “I had no idea there was gambling in Casablanca” amounts to. Again from the interview, this bit from Sorkin:
Well let me ask you this: the Wall Street Journal reported that Carolyn Ellison told Alameda staffers, Alameda used FTX client funds to cover loans that were being recalled because of the Luna-triggered credit crunch. Carolyn says that she, Sam and Gary, were aware of this. How do you square that with what you originally said over Twitter, that this was an $8 billion accounting mistake?
If you read SBF’s reply, he does not deny that at the time of his Twitter statement that he knew otherwise. He does a lot of tap dancing that roughly translates as “We were relying on dashboards that didn’t accurately represent our financial condition and the hole was bigger than we realized.” That completely sidesteps the key issue, of the Alameda use of customer monies that were then being recalled. SBF misleadingly focuses o the size of the number and the accounting issue, and not that the hole, regardless of how big it was, resulted from misappropriation of customer monies.
I could go on but let’s pull out another wowsers from later in the talk. SBF makes it sound as if the marks on FTT and Solana were made up based on metrics in SBF’s head:
I don’t think I was marking them the way I wish I had from a risk perspective.
In the crisis, we called that “mark to make believe”. That ended in a lot of pain.
In other words, if an able prosecutor were serious about taking SBF down, I suspect it would not be hard to go through SBF’s record and show that he routinely said things that were false, and that he’s too smart and finance-seasoned to pretend he didn’t know that at least a fair bit of the time. Showing that SBF had a persistent indifference to truth when it came to advancing his interests would go a long way in puncturing his claims of naivete.
As a sanity check, take a gander through CoinDesk’s rap sheet, FTX’s Collapse Was a Crime, Not an Accident. Its well-supported section headers tell quite the tale:
The Alameda connection [they weren’t remotely “wholly separate” entities as SBF maintained to Sorkin. This is a key plank in SBF’s self-defense.]
The FTT print and ‘collateralized’ loans [“This use of an in-house asset as collateral for loans between clandestinely related entities can be best compared to the accounting fraud committed by executives at Enron in the 1990s. Those executives served as much as 12 years in prison for their crimes.’]
Alameda’s margin liquidation exemption [“The exemption could be considered criminal from a number of angles. Above all, it means that FTX as a whole was fraudulently marketed.”]
Alameda front-running FTX listings
Immense personal loans to executives
The ‘bailouts’ of entities holding FTT or loans
Secretive purchase of a US bank [probable misrepresentations in purchase process]
Author David Z. Morris has produced a very accessible piece. And he’s livid that the press is continuing to buy SBF’s “aw, shucks” act.
Hopefully there are enough connected victims to keep SBF from skating. We’ll see in due course.