Unpacking S(c)am Bankman-Fried - Part 1
Abraham George Crypto Musings
The New York Times DealBook Summit was one of the most anticipated conferences of this year. It is conducted by Andrew Ross Sorkin a leading journalist at The New York Times and the co-anchor of CNBC’s Squawk Box. He also authored the book “Too big to fail”. The video conference panel included some biggest names: US Treasury Secretary Janet Yellen, former US Vice President Mike Pence, former Israeli Prime Minister Benjamin Netanyahu, Ukraine President Zelenskyy, Meta CEO Mark Zuckerberg, Netflix’s Reed Hastings, Amazon CEO Andy Jassy, actor Ben Affleck and so many more. None of their presence made any dent as much as the participation of Sam Bankman-Fried (SBF) of the bankrupt cryptocurrency exchange FTX.
Considering the stratospheric level of corruption, fraud, and an absolute lack of basic corporate controls in running an exchange that has caused the loss of billions of dollars of customer funds, it is unbelievably sickening that SBF is getting so much of a public platform and airtime.
The first question Sorkin should have asked SBF is “Why aren’t you still behind bars”? Instead, he was treating him like a celebrity footballer a la Christiano Ronaldo who missed a penalty shootout in the finals of the World Cup. Disappointing. Despicable. Deleterious. It was CNBC’s Squawk Box and Fortune Magazine that elevated and anointed him to the throne as heir-apparent to JP Morgan and Warren Buffett.
The New York Times had an eyebrow-raising article titled “How Sam Bankman- Fried’s Crypto Empire Collapsed” which didn’t mention anything about his fraudulent, criminal, and shady dealings at FTX and Alameda Research. The Washington Post went a few notches further and proclaimed unabashedly, “Before the FTX collapse, the founder poured millions into pandemic prevention”. And even the Wall Street Journal whom we would have thought wanted to expose one of the biggest financial crimes in recent history solemnly pronounced that, “Sam Bankman-Fried wanted to give away billions. Broken promises are all that’s left”. Can you really believe what you are reading? There are invisible hands visibly supporting this kid.
He had no idea about running a fund or modicum of elementary risk management. FTX had no CFO, no accounts department, no HR department, or any basic bookkeeping. This guy who preached “(d)effective altruism” lives in a $37 million penthouse in a cozy place with a Toyota Corolla parked outside his ostentatious residence. The mainstream media and his powerful law school professorial parents who teach ‘governance’ are weaving a story to help him avoid jail time. They are making it look like a Lehman story where no one went to jail. But actually, this is way bigger than Enron, Bernie Madoff, or Elizabeth Holmes.
Worst of all, Congresswoman Maxine Waters, Chairwoman of the House Committee on Financial Services wrote as follows on Twitter while SBF was making his apology tour, “We appreciate that you’ve been candid in your discussions about what happened at FTX. Your willingness to talk to the public will help the company’s customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th”. You couldn’t have expected anything different from this Congresswoman as she was blowing kisses at SBF at the conclusion of a congressional hearing last year.
And hear what SBF’s reply was. “Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the Committee and explain. I am not sure that will happen by the 13th. But when it does, I will testify”. Can you believe this? This guy is living on a different planet and he is deafeningly delusional! As he told in the Sorkin interview “I had a bad month”. Yup, bad month! After losing money for millions of customers and misappropriating billions of dollars stealthily, the guy doesn’t want to take any responsibility. On top of that, he wants to take no responsibility for Alameda Research where he was a 90% shareholder and his former lover Caroline Ellison was the CEO. He threw her under the (Bahamian) bus. He probably thought he was playing Dungeons and Dragons with other people’s money.
Firstly, how did he get to this position? He advertised himself as the world’s most generous billionaire as a mere 28-year-old. With his Einstein looks and halting speech patterns, he stuck many as a genius. He had a strategy and I don’t think he was alone in this whole fiasco. He started to pay off all the people that mattered along the way. He paid nonprofits, media companies, University research projects, and politicians. He made all the right noises about the need to regulate the industry more than is currently the case. He had a cozy relationship with the major regulators like the SEC, CFTC, and Congressmen on both sides of the aisle.
As a result of all this, his media darling status still pervades like an ill-timed fart that refuses to fade, even though he cannot give any proper account or take any responsibility for the many missing billions of dollars. Meanwhile, the media still wants to project him as a misunderstood genius and that he still has much to offer to a desperate world in dire need. Alas, I fear that SBF staunchly believes that too.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office, and a hedge fund.