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By Sheelah Kolhatkar
The Bahamas Magistrates’ Court in Nassau is located in an imposing pink and white building covered with palm trees. On December 13, 2022, Sam Bankman-Fried, former PDG. de, the now-bankrupt cryptocurrency exchange FTX, arrived there to apply for bail after being charged with 8 counts of felony. Bankman-Fried wears T-shirts and shorts, regardless of the occasion; That day he was wearing, like armor, a blue military suit that did not suit him. He had spent the night before in prison, where he had not received the medication he was taking for his depression. But the most disturbing was the indictment, revealed that morning in the United States, which accused him of fraud, conspiracy to use money laundering and other crimes that can carry more than a hundred years in prison.
The night before, he and a colleague were running around with their laptops in the beachfront penthouse of a hotel where he lived when his visitor called him into a room. A few minutes later, according to the colleague, an organization of Bahamian law enforcement officers, accompanied by members of the resort’s staff, entered the apartment. An agent had an arrest warrant for Bankman-Fried.
When police entered the room, Bankman-Fried asked for water and gave the impression she was preparing for what lay ahead. “I can give him my passport,” he told a broad-shouldered officer, who in turn warned him that he might need to bring a jacket with him. Passing his phone, wallet and course ring to his colleague whom he had asked to check to keep his parents calm, Bankman-Fried raised his wrists to be handcuffed.
When the hearing began, his parents, Joseph Bankman and Barbara Fried, were sitting in the third row, feeling broken. Bankman later told me, “Frankly, I think most parents would die before they accused their children of such terrible things. »
Bankman and Fried have long been popular members of Stanford Law School and known for their involvement in liberal causes. When Sam, their firstborn, was a child, they identified him as intellectually exceptional and emotionally atypical: an isolated kid who played with baseball statistics. and mathematical puzzles. At the age of twenty, Sam gained foreign fame at the helm of FTX, a crypto corporation he co-founded in 2019 that promised to give legitimacy to a nascent industry rarely linked to money laundering and corruption. He shared the level with Bill Clinton and Tony Blair, appeared on the covers of Fortune and Forbes, and convinced several prominent venture capitalists to donate hundreds of millions of dollars to his company. Ten months before his arrest, FTX was valued at thirty-two billion dollars. Sequoia Capital, one of FTX’s biggest backers, claimed in an online profile of the now-defunct Bankman-Fried that he could become the world’s “first billionaire. “
The educational network in which Bankman-Fried grew up is a position where immense wealth is sometimes evoked with suspicion, even when courted in private. But Bankman-Fried has stood out among other young billionaires for her commitment to the effective altruistic movement, which some fans think deserve to try to earn as much as imaginable to maximize what they can give. By the time of his arrest, he had become a major contributor to public health and other causes, and one of the largest private donors to American electoral politics.
His parents come from modest backgrounds and have lived in the same space (a one-story bungalow on the Stanford campus) since the ’90s; They describe themselves as “utilitarian-minded. “As scholars, Bankman and Fried show a common interest in tax law as a tool for social equity. As Sam and his younger brother, Gabriel, grew older, a family of relatives talked about what it means to live a moral life, and the brothers worked together on philanthropic projects funded by Sam. (Gabriel declined to be interviewed for this article. )Like Larry Kramer, former dean of Stanford Law School, Bankman and Fried told me “loved that their young people had such idealistic and tough commitments. “
The rewards of being Sam’s parents were monetary and reputational. In 2022, he gave them a gift of ten million dollars; A lawsuit filed through FTX’s bankruptcy estate against Bankman and Fried in September claims the money was “looted” and came from an account containing guest funds. His lawyers said the lawsuit’s claims were “completely false. “
Bankman and Fried visited Sam in the Bahamas and continuously stayed in a sixteen and a half million and thirty thousand square foot beach space in a gated community. In December 2021, Bankman took a leave of absence from Stanford to work full-time at FTX, offering legal, philanthropic and tax advice for a salary of two hundred thousand dollars per year, plus expenses. These expenses included “hotel stays” of twelve hundred dollars a night, according to the lawsuit.
“I’m interested in cryptocurrencies because I need the biggest global impact to have an impact forever,” Bankman-Fried said in an ad in The New Yorker. Like other crypto-evangelists, he said he believes in the power of the virtual. Currencies and blockchain generation to remove middlemen from the monetary formula and provide the deficient life-changing economic opportunities. He also relied on smart advertising to talk. In one ad, a plumber realizes that he too can bank cryptocurrencies with FTX, and football legend Tom Brady knowingly says, “Are you ready for it?
In March 2022, a month after an extravagant Super Bowl ad featuring Larry David (with Bankman-Fried’s father in the background dressed in a powdered wig) told the audience not to miss out on the FTX cryptocurrency, the Federal Reserve began raising interest rates, in part to fight inflation. As money became more expensive to borrow, the price of many cryptocurrencies plummeted. Regulators and bloodhounds began to reveal that corporations in the sector lent money to each other in a closed circuit at the price of their assets. The allegation that Bankman-Fried created his own closed-circuit to lie to investors and the public is at the center of the government’s case opposing him.
In addition to owning FTX, Bankman-Fried owned most of a crypto hedge fund called Alameda Research, managed by Caroline Ellison, a trader he dated. On Nov. 2, CoinDesk, an industry news site, reported that Alameda owned only about fifteen billion. dollars in cryptocurrency assets, much of which were in FTT, a virtual token issued through FTX. This disclosure raised questions about the true price of Alameda’s holdings and the clash of interests between the two supposedly independent companies. Changpeng Zhao (generally known as C. Z. ) , the CEO of Binance, a crypto competitor, wrote a series of skeptical tweets indicating that he was abandoning his FTT. Alarmed, FTX consumers withdrew six billion dollars in just 3 days. On November 8, FTX was so down that it stopped honoring withdrawal requests.
Some Bankman-Fried workers quit and he huddled with those who stayed, seeking to placate investors and raise cash to save the company. Meanwhile, a former FTX worker told me, “Parents were panicking and asking, ‘What about your legal security?’?’»
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On Nov. 11, under what Bankman-Fried describes as pressure from FTX’s lawyers, she agreed to cede the company to a new CEO, a decision she immediately regretted and tried to oppose unsuccessfully. The new CEO, temporarily installed, was John Jay Ray III, a bankruptcy lawyer who had overseen the dissolution of Enron; filed a Chapter 11 filing and commenced FTX’s official liquidation proceeding.
Shortly after Bankman-Fried’s arrest, the Commodity Futures Trading Commission claimed in a lawsuit that it had caused the loss of more than $8 billion in consumer assets. Among those affected were Tom Brady; his ex-wife, Gisele Bündchen-style; basketball star Steph Curry; billionaire oil investor Robert Belfer; tennis star Naomi Osaka; former Trump spokesman Anthony Scaramucci; a pension fund for teachers; and many investors, adding structural workers, small business owners and students.
In the trial court, Bankman-Fried looked straight ahead as her lawyer called for her release while her extradition was negotiated, emphasizing that she had stayed and tried to “fix things” for clients when perhaps she had simply fled the country. The prosecutor responded that Bankman-Fried posed a flight risk, with the means to charter a personal plane. When the prosecutor called Bankman-Fried a “fugitive,” her mother laughed. He was denied bail and 8 days later was extradited to the United States.
Bankman-Fried’s trial will begin in New York in early October, and until recently she was preparing for it while under space arrest in California, in the house of her formative years surrounded by redwoods and cacti. His parents had started looking after him and running to cheer him up, as they had done as a child, but now they were also struggling to find legal escape routes in the face of cases they claimed not to have anticipated: that their son, now widely regarded as a crypto. Villainous, he would face life in prison and be charged with complicity.
For years, Bankman and Fried have hosted lively Sunday night dinners at their home, debating everything from the global crisis of democracy to college videos and gossip. In December, after a New York ruling set her son’s bail at a quarter of a billion dollars, her house pawned as security for his release. Two friends also endorsed it: Andreas Paepcke, a computer scientist at Stanford, pledged a six-figure amount, as did Larry Kramer and his wife Sarah, who has since died. Because Bankman and Fried had been very supportive when Sarah underwent cancer treatment, Kramer told me, “I said yes before Joe finished asking me.
When I visited the family earlier this year, a security guard they had hired to comply with bail conditions was sitting outside the space in a van, asking visitors to leave their phones and other electronics in their cars. Inside, Bankman-Fried, wearing an ankle bracelet, had taken over his mother’s office. “The most common thing is case preparation,” he told me, pointing to two computer screens. “I mean, there’s not much else I can do. “
At thirty-one, he still looks like a child in many ways: pale and mild, with dark eyes and wild curly hair, who that day was crushed in the back where he had slept. The table where he was sitting was crammed with packets of cinnamon gum, fidget spinners, a mini fan, deodorant, and a bottle of Adderall (he was diagnosed with ADHD, in addition to depression, years ago). As we talked, he shook his knee and shuffled and rearranged a deck of cards.
The government alleges that Bankman-Fried engaged in fraud and embezzlement of visitor deposits beginning in 2019 and spent that budget on travel, real estate, speculative investments, private enrichment, and political crusades. The government further alleges that it “provoked” the creation of flaws in FTX’s computer code that allowed Alameda, its hedge fund, to borrow cash belonging to clients, and that it conspired to bribe at least one Chinese official with $40 million to unlock FTX assets held in that country. The U. S. government dropped the corruption charges and four other charges from the case and added a new one: He allegedly used budget stolen from his clients to pay more than a hundred million dollars in campaign contributions ahead of the 2022 midterm elections. Don’t panic too much,” Sam said.
At the keyboard, he opened and shared with me several memos he had written since his arrest: documents filled with links, screenshots, statements, and complex explanations that he believed would prove his innocence. The gist of his argument is that he made mistakes, but he still made them. without knowingly committing crimes. At worst, he says, he was unaware of things that he, as CEO, was aware of, namely the fact that Alameda had racked up billions of dollars in losses and that FTX consumers’ cash was being was using to cover the hole. .
“Alameda’s position in FTX was particularly higher than we had imagined. That’s one of the biggest,” he told me. “Which meant that, in fact, if Alameda collapsed, FTX would be much more than I had imagined. “He said that this perspective has only become transparent to him some time before the bankruptcy of the company. His defense team is now tasked with convincing the jury that his client, a quantitative scientist, overlooked something of such importance.
Three of Bankman-Fried’s closest associates have already pleaded guilty and agreed to cooperate in his prosecution: Caroline Ellison, Alameda’s former executive director; Gary Wang, co-founder of FTX; and Nishad Singh, former director of engineering at FTX. In Ellison’s guilty plea, he said FTX granted Alameda unlimited borrowing privileges and that when loans from outside lenders were withdrawn in June 2022, FTX’s budget was used to repay them. Extra testified that he conspired with Bankman-Fried to hide the loan from Alameda’s lenders by creating false financial statements.
Ellison appeared less self-confident last November, the day after FTX stopped accepting visitor withdrawals, in a recording that could be used as evidence at trial. When asked by a colleague at a staff assembly if Alameda’s loan was legal, she replied, “Uh. . . Sam, I guess. Bankman-Fried insisted in my conversations with him that prosecutors would not be able to produce any documents showing that he authorizes unlimited loans because, according to him, there are none.
While sitting with him in the office, his mother, who looked tense, passed by on her way to the kitchen. Fried retired from full-time training last year, hoping to have more time to write and do political activism. After Donald Trump won the presidency in 2016, he co-founded Mind the Gap, a political action committee built around Moneyball-style knowledge analysis aimed at moving congressional seats from red to blue. When his son was arrested, Fried resigned from the PAC and focused on exonerating him. “The four of us only care about one thing, and that’s Sam’s innocence,” he later told me.
I asked her if she had ever felt compelled to ask her son if he had done any of the things she accused him of. She said no, she didn’t want to ask. Her son was incapable of committing dishonesty or stealing, she said. “Sam will never do it,” he continued. It’s just not in it. “
Fried is a leading scholar of legal ethics. His best-known book, The Progressive Assault on Laissez Faire, is a study of capitalism and the coercive aspects of the flexible market. “It’s a brilliant review,” said Debra Satz, dean of Stanford’s School of Humanities and Sciences, “and the e-book separates those debates about freedom and equality. ” This year, her intellectual rigor was applied to her son’s media strategy, which she saw as an integral component of his defense, to the point that she and her husband hired a high-profile public relations consultant, Risa Heller, to help them. The couple embarked on a crusade to make their point: the press, unfairly assuming their son was guilty, failed to read into the weaknesses of the government’s case and the role of FTX lawyers in the company’s downfall. The crusade was not supported by the lawsuit filed against them in September, a lawsuit their lawyers say is a cynical attempt by John Ray to influence the final results of his son’s trial. Fried called the trial a waste of creditors’ money and said her real purpose was to “inflame the jury on the eve of Sam’s trial by portraying us all as a gang of thieves. “
Robert Gordon, a colleague at Stanford Law School, described Fried as one of the most “morally demanding” people he knows. “She’s so confident,” she says of her confidence in her son, “and her thinking about moral issues is just too cautious. This is, of course, the wonderful mystery that lies at the heart of it all.
During a hike in the mountains near my relatives’ home, Fried described me as “emotionally reserved, like Sam,” before breaking down in tears. “I don’t care what they say about me, Joe doesn’t care. “”Whatever anyone says about him,” he said. Saving Sam is the main task of our lives. “She had lost ten pounds since the beginning of her legal troubles and a recent eye operation had temporarily affected her vision, but she seemed determined to work on her determination. Wearing a baseball cap and bright red backpack, Fried sped up a hill, his shoes creaking in the earth. In two hours under a scorching sun, he didn’t drink a sip of water.
Before the collapse of FTX, Bankman-Fried led an exhilarating life. “I would go to a convention and end up canceling a meeting with a head of state, because there was a contradictory request from some other head of state that seemed more important to me. ” he told me. ” And, you know, there were celebrities, and I don’t really care about celebrities. But it’s still a bit surreal the first few times it happens. “
The bankruptcy documents imply that he and his corporations spent about two hundred and fifty million dollars to buy thirty-five homes in the Bahamas and allegedly chartered planes to deliver Amazon orders from Miami to employees on the island. During our conversations, Bankman-Fried said this is likely to exceed the top-spending component of an effort to attract talented workers, as many tech executives before him had done. “I’ve tried to make FTX a great position to work in,” he said.
Pounding his cards, he insisted that the only assets he bought for himself cost “about two million,” a negligible amount by the tech CEO’s standards. “I didn’t think it would have been right for me to live an incredibly luxurious lifestyle, and I wouldn’t have enjoyed it either,” he added. In the Bahamas, according to him and others, he himself did a lot of grocery shopping and cooked for some of his employees. (Beyond Burgers and Beyond Sausages were a staple, he said. ) He also paid himself a salary of two hundred thousand dollars and never accepted bonuses, he told me. In court documents, FTX’s bankruptcy estate said it tracked $2. 2 billion in bills and loans to Bankman-Fried, most commonly of Alameda.
As we talked, Fried poked his head out the door. “Dinner at seven?” she said. Bankman-Fried, who spoke lightly to her parents in my presence, nodded. Before we sat down at the table, Bankman made the impression with a bottle of California Cabernet.
Bankman-Fried swallowed water and temporarily cleaned her plate before returning to her research. But Bankman, nervous and cheerful, seemed to be seeking to convey a sense of normalcy. He is best known for his paintings that introduced two primary utilities. Crusades. One of them exposed illegal tax shelters and documented the competitive marketing of those shelters to businesses through legal and accounting firms. He then helped draft a law to identify shelter users, through which about a billion dollars in unpaid taxes were recovered through the government. The crusade of the moment aimed to make filing taxes simple and free. (California passed some of the reforms he fought for. )”You know, taxes sound very boring, and I understand that,” he said, “but it’s about who owns what. “, when the music stops. That is why it is vital for reasons of social justice.
His son, while allegedly supporting the regulation of cryptocurrencies in the United States, once wrote to a journalist, on an exchange he believed to be unofficial: “To hell with regulators. . . They don’t protect consumers at all. ” On the other hand, he has fought in his race to get the government to scrutinize monetary transactions more. As his son’s business grew, Bankman said he became interested in how crypto can make cash transfers less expensive for consumers, especially in the Global South.
In an FTX podcast in August 2022, 3 months before the implosion, he allegedly said, “From the beginning, whenever I was helpful, I lent a hand. “It was helpful. According to the lawsuit filed through the bankruptcy estate, he described Alameda as “a family business” years before his son hired him full-time and used his connections and experience to help Alameda and FTX grow. He joined his son in meetings on Capitol Hill aimed at securing policy adjustments that ultimately make it illegal to extract the maximum from crypto mismatches in the United States. But Bankman’s role in FTX’s charitable giving was what he liked to talk to me about.
“The company seemed to have such unlimited resources that you could think big and do wonderful things,” he said. He has committed budget for a universal source of intellectual income in Chicago and a program to bring intellectual fitness facilities to troubled homes in South Florida. According to the bankruptcy lawsuit, Stanford was another charity of choice. The lawsuit alleges he gave his university five million and part of dollars in “donations from the FTX Group” for his and Fried’s personal benefit. The day after the lawsuit was filed against them, Stanford announced that it would return the money.
At my family’s dinner, Sandor, a docile German shepherd, lay under his feet. Before FTX collapsed, the family rarely locked the front door at night, Bankman said, but now they were receiving threats, some of them anti-Semitic. At first, they were begged to rent full-time guards, but after calculating the annual expense, they supplemented their part-time security with Sandor. He is trained to attack if he receives the right orders, in German. “The coach came in and put on a suit,” Bankman told me. “He said those words and the dog jumped into the air and ripped off his arm. “
Bankman is, in addition to her other job, a part-time therapist. Particularly interested in anxiety, he has written about the intersection of law and psychology and co-hosted, with Stanford students, a podcast on wellness and the legal profession. He deployed his mental experience at home to check that everyone remained calm, but the day after our dinner, as he and I walked around campus, his own anxiety was evident. When I asked him how much his son’s defense would cost, Bankman replied, “Basically everything we have. But, he added, in a melancholy tone, “that’s what cash is for. “
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Shortly after Sam was born, his parents discovered that he was not like other children. He had little interest in toys, other than puzzles, and seemed largely uninterested in amusement parks and birthday parties. One night before bed, Fried recalled, Sam and Gabriel, who were still in elementary school, began asking him and Bankman questions about the divorce. They knew a child whose parents were getting one and wanted to know how it worked and who got what. “We ended up talking about network asset states, opportunities for network asset states and other tactics to divide human capital,” Fried said. The argument lasted more than an hour and after she and Bankman left the room, she turned to him and said, “We’re stupid. ” They are interested in what we are interested in, they are just much younger and ignorant. Fried told me, unable to hide her pride, “And that replaced raising children for us. ” They would give their children fewer amusement parks and more conversations with adults.
However, a few years later, one day, on her way home from work, she discovered Sam, who rarely cried, crying. “I’m so bored that I feel like I’m going to die,” he told her. At this point, Fried said, “we’ve set maximum speed. “He was enrolled in a Saturday program called Math Circle, where teachers taught logic and problem-solving to early students. There were even higher categories of mathematics before school. And in ninth grade, Bankman-Fried was admitted to a selective summer program called Canada/USA Mathcamp, where, for the first time, she made close friends. Gary Wang, who would be one of the discoverers of FTX, was one of them. he was just passionately introduced to this other world of math and science nerds, and they were his people,” Fried said.
Sam and Gabe were also encouraged to participate in debates about human rights and foreign policy at their parents’ Sunday night dinners. Larry Kramer remembers once having a war of words with the kids and saying anything condescending to them, like, “When you’re a little older, get it. “Later, Kramer said, Bankman called him aside: “They wanted their young people to be treated at the same point as adults. “
After some hesitation about their commitment to public school, Fried and Bankman said Sam and Gabe would move on to Crystal Springs Uplands High School, a personal school that has attracted many tech-savvy kids in addition to Steve Jobs’ son. Reserved, recalls a former student: “Everyone identified that he was bright and super smart and that school was not a challenge for him. “
After graduating, Bankman-Fried enrolled at MIT, imagining that she could become a physicist. His plans began to evolve in his second year, when he discovered the effective movement of altruism. Many effective altruists have been inspired by philosopher Peter Singer, who argues that while more than a billion people in emerging countries are deficient and suffering, spending on luxury goods is morally imperfect. The movement has been thinking about how much money it would take to save a single life in danger (about $4,000, according to one estimate), and some of its members have pursued well-paying careers to donate the maximum of their source of income to organizations that serve other vulnerable people. The movement is aimed at people with quantitative orientations.
In 2014, Bankman-Fried accepted a job at Jane Street Capital, a trading firm that used mathematical models to find and mine other securities in other stock markets. The company hired many math programmers and academics and had a geeky, collegial culture; Night chess tournaments were common. Jane Street attracted other effective young altruists, including Caroline Ellison, daughter of M. I. T. Stanford graduate professors.
Bankman-Fried told me that the task favored other people who could simply track the many variables that influence the market and had the ability to synthesize them and make quick trading decisions, while managing computer code designed to execute trades. He described it as “ordering from, right on the border between humans and PCs. “
Bankman-Fried told me he gave part of what he earned to Jane Street, but refused to disclose the amount. Much of the money, he said, went to animal welfare organizations and the Center for Effective Altruism, in the form of grants. and movement building. After about 3 years, he left Jane Street and for a brief period worked for the Centre while thinking about starting his own business.
The cryptocurrency boom was underway and a bunch of virtual currencies were traded on exchanges around the world. Bankman-Fried became interested in the industry after noticing that costs were quoted differently depending on the exchange used. A savvy trader with a master in algorithmic programming was well positioned to exploit differences: for example, buying a bitcoin in the US. Promote it in Japan and benefit from the spread. In 2017, according to court documents, he and his colleague, Tara Mac Aulay, began trading cryptocurrencies with their own cash on various exchanges. Finally, others joined us: Ellison; Wang, Sam’s math camp friend, who had worked at Google; and Singh, a friend of Gabe’s who worked at Facebook. Wang and Singh had also become effective altruists and pledged to donate as much of their income as possible. The friends formalized the fund by calling it Alameda Research.
Under Bankman-Fried, its first CEO, Alameda made competitive bets with borrowed money. As classical banks did not grant loans to crypto companies, the fund had to resort to establishments specialized in the field of cryptocurrencies, with the highest interest rates. His record, according to the Wall Street Journal, was inconsistent. A few months after its launch, it lost around two-thirds of its assets following a giant bet on XRP, a virtual currency issued through a blockchain-based payment network. Mac Aulay resigned, along with some other employees. Last year, he wrote on Twitter that the departures were due in part to “concerns about threat control and business ethics. “
Bankman-Fried rebuilt the fund and transferred it to Hong Kong. However, in 2019, faced with regulatory uncertainty and strict pandemic-like restrictions, he turned to his father, who begged his son to move to a post like the one in the Bahamas. , which sought to generate domestic investment by creating a crypto center. FTX was introduced there later that year as an exchange and trading platform. Alameda secured its legitimacy through intense trade on the new platform, an agreement that also created the situation for Alameda. to obtain a favorable solution (possibly by being able to see what trades others were making on the exchange). The C. F. T. C. alleges that FTX gave the fund an “unfair advantage” by exempting it from regulations it implemented for other users. Bankman-Fried claims Alameda didn’t have preferential access in a really vital way: “He didn’t give them the kind of leniency that would allow them to ruin other accounts. We have been quite cautious about it.
In the penthouse, valued at more than thirty million dollars and overlooking a marina full of yachts, Bankman-Fried lived as an incredibly privileged student, sharing the vast area with Ellison, Wang, Singh and other employees. He had strange schedules, taking a nap in an ottoman in the office. In 2019, he tweeted about “stimulants when you wake up, sleeping pills if you want them. “Two years later, Ellison tweeted, “There’s nothing like normal amphetamine use to make you realize how stupid a normal, drug-free human experience is. (Bankman-Fried claimed she was only taking prescription drugs and that their use was indicated on the label; Ellison did not comment on this story. )
Most of FTX’s profits came from fees paid through investors to the industry on its platform. CNBC reported that the exchange’s profits were one billion dollars in 2021. This fall, Bankman-Fried named Ellison and Sam Trabucco, an MIT colleague, graduates, to co-CEO Alameda, so she can simply focus on FTX. Bankman-Fried said it no longer played any role in Alameda’s investment decisions after that time, but, according to the C. F. T. C. In the case that opposes him, he maintained daily contact with Ellison and Trabucco and remained in detail concerned in the background.
Bankman-Fried also fit any foreign crypto-statesman. Zeke Faux, a Bloomberg journalist and author of an e-book about the industry, “Number Go Up,” told me, “His thing with media was just to be very accessible. If a cryptocurrency newsletter needed a quote on Shiba Inu coin prices, it was there. And by going up, he was effective and was able to create this symbol of the only kind right in the field of cryptocurrencies.
Bankman-Fried told me about that moment: “I was about to achieve what I wanted to achieve. Further confirmation seemed to come when bestseller Michael Lewis began frequenting his workplace and accompanying him to meetings. Bankman-Fried gave Lewis unlimited access to an e-book expected to be published next month.
While audited currency statements for 2021 show a successful business, FTX, thanks to a loophole in the tax code that applies to cryptocurrencies, was able to report $3. 7 billion in losses carried over to its tax returns, particularly cutting its tax bill. CPAs would see red flags in the financial statements, adding to the fact that two other relatively unknown auditors had prepared them. As one expert at CoinDesk speculated: “Looking back, we can see that this would likely suggest that Bankman-Fried doesn’t need a company to see the big picture. “
The following year, a murky FTX transaction directly affected Bankman-Fried’s parents. During the company’s asset buying frenzy, the couple signed a deed of ownership for the $16 million beach space and part of dollars in the Bahamas where they were staying, paying nothing. The bankruptcy proceeding recommends that the agreement has been made at the behest of your child. Bankman-Fried and her parents categorically deny this.
In an explanation that reflects more negligence in signing legal documents than Stanford law professors usually possess, Bankman told The New Yorker that he and his wife signed the deed by mistake; whereas the space was intended for the company’s assets; and that after belatedly understanding the U. S. tax implications similar to proofs of ownership, they complied with their legal obligations by alerting the company’s lawyers to their concerns. A spokesman for the couple said: “An outside lawyer showed Joe and Barbara that FTX have favourable ownership of the house and they agreed to document it in writing.
Bankman-Fried’s philanthropic ambitions grew with FTX. After the COVID-19 pandemic began, he joined several billionaires, including Peter Thiel and Patrick Collison, in donating cash to efforts to find treatments. Edward Mills, a professor at McMaster University, whose lab conducted one of the largest COVID-19 cure trials in the world. Globally, a recipient of FTX. Me said Bankman-Fried was seeking to fund a slew of biotech corporations to expand vaccines and treatments, which he hoped could be temporarily tested through a foreign network of clinical trial sites. “Sam had a vision of a world without disease,” Mills said.
At the same time, Bankman-Fried is also one of Washington’s biggest political donors, personally contributing about $40 million ahead of the 2022 midterm elections, according to OpenSecrets, a nonprofit that tracks money in politics. The CEOs were donors to Joe Biden’s 2020 presidential campaign, donating more than five million dollars (an “anti-Trump” donation, he told me). He also made black cash contributions to Republicans, which he declined to quantify. One of his goals to counter extremist candidates in the Republican primary, he said, and by keeping his bills off the radar, he could avoid the backlash that would ensue if it turned out that the applicants had received cash from a known Democratic donor.
But until the end of 2022, he had no more money to give and, among all the reasons he advocated, the effective altruism movement was shaken during his fall. Shortly before Bankman-Fried’s arrest, one of the movement’s co-founders, William MacAskill, wrote on Twitter: “If you lied and abused your clients’ funds, you betrayed me, just as you betrayed your clients, your employees, your investors and the communities you are a part of. Peter Singer told me that while he thinks that while the motion continues, Bankman-Fried’s arrest has made the public more cynical about Americans looking to make money to give it away. And, in an online forum on effective altruism, network members lamented the fact that the lives of FTX clients had been ruined. While chiding themselves for having done poor due diligence before, as one member put it, “entrust a decent percentage of investment and reputation. “of EA’s entire move towards an offshore crypto company.
For FTX, the end began in the spring of 2022, when, in the face of emerging interest rates, cryptocurrencies began to falter, ending waves of monetary tension across the sector. Bitcoin has fallen twenty-seven percent in 8 days; terraUSD and Luna, two coins that provided liquidity to other crypto companies, lost almost all of their value; Celsius Network, a crypto exchange, collapsed; and Three Arrows Capital, a ten-billion-dollar crypto hedge fund, was forced to liquidate after heavy losses. In June of that year, a psychiatrist who had treated Bankman-Fried in California moved to the Bahamas to see a life coach for his concussion. team.
However, over the summer, Bankman-Fried gave the impression that it had not been affected by the unrest in its industrial exit, and announced plans to rescue some of the crypto companies that had not been as successful as FTX. At the end of October, he went to Saudi Arabia to check how to attract new investors. On Nov. 2, CoinDesk’s article on Alameda’s balance sheet was published.
The following Sunday, when Binance CEO C. Z. Tweeting his doubts and accelerating the flood of visitor recall requests, Bankman-Fried’s parents were in the Bahamas for their Sunday night dinners at Stanford with FTX employees. In the middle of the meal, a lawyer for the company answered a call, agitated and left.
“It was incredibly stressful and overwhelming,” Bankman-Fried told me of the days that followed. He says he believes he can raise billions of dollars from investors to help the company and fulfill recall requests. You may then sell assets to raise more money. while maintaining the operation of the stock exchange. “There were too many things I had to do,” he said. “It’s a little scary. “
The day after C. Z. indicated it was divesting its ITT, FTX claimed it was experiencing a liquidity crisis, and Bankman-Fried began publicly seeking a bailout. At that point, Bahamian police invaded the office on a stopover. The scale was probably due to a security breach, but some workers began to panic about getting in trouble and others became angry. “I think, in one way or another, we all had this superhuman feeling toward him,” one former worker told me. Now his boss is tainted, as is his resume. Soon, the worker continued, several of them began taking turns staying with Singh, a devoted E. A. member. community, fearing that he might be suicidal. (Singh’s lawyer did not respond to requests for comment. ) Three months later, Singh pleaded guilty to bank fraud, conspiracy to commit fraud, conspiracy to commit money laundering and conspiracy to violate crusade financial laws. The recent lawsuit against Bankman-Fried’s parents cited an email from Fried to her son suggesting that he use Singh’s call instead of his own when making a $1 million contribution to Mind the Gap, to avoid creating “the impression that MTG’s funding is a family affair. Fried told the New Yorker that it was “a perfectly legal and not unusual practice,” and said his son donated about a tenth of that figure to his PAC.
As FTX’s downward spiral continued, Bankman began talking to defense attorneys and tried to get his son to sign up for the talks. But, determined or delusional, Bankman-Fried only sought to convince other people to trust him with a bunch of millions of dollars more, to save the company. Sometimes, according to Bloomberg, his father was by his side, making calls on his behalf, to no avail. Many other people quit, packed their bags and left the island, the colleague said. who, a few weeks later, would take Bankman-Fried’s ring and wallet before the police handcuffed him: “At one point, Sam was almost the only one left. “
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It is well known that the government can exert enormous pressure on cooperating witnesses, and Bankman-Fried’s parents acknowledge the devastating role their son’s former colleagues and roommates will most likely play in her trial. In addition to Ellison’s testimony, Wang, who pleaded that, guilty of 4 counts of fraud, is expected to say he helped create the computer code backdoor that allowed Alameda to borrow so much from FTX. Singh is also expected to speak.
It is not unusual for banks to take cash from depositors and use it for other activities. Bankman-Fried’s defense could simply argue that FTX consumers knew their cash could be used through the company for other purposes. Another defense argument is more likely FTX’s outside legal counsel, the Sullivan firm.
Bankman-Fried says that in the days leading up to its decision to sign the updated agreement that allowed the company to file for bankruptcy, attorneys for Miller and Sullivan
The next morning, around four-thirty, an exhausted Bankman-Fried clicked on the DocuSign link Miller had sent her and electronically signed the document. About ten minutes later, he says, he secured an emergency investment of about $400 million. Here from Tron, a blockchain platform. Tron founder Justin Sun told Bloomberg TV that the offer will be “subject to due diligence. “Bankman-Fried said she tried to cancel her signature but was unsuccessful.
“It’s like a singular, constant moment around which everything else revolves,” the former colleague said. “It’s incredibly palpable. I saw a guy tormenting him because he couldn’t understand what had happened. It’s like you’re wasting your keys and you’ve checked the room and couch and don’t know where they went.
At the time, Miller and Sullivan
Although a judgment rejected the receiver’s motion, Jonathan Lipson, a bankruptcy expert at Temple University, later filed a brief with the receiver, noting that in January, Ray had called FTX a “dumpster fire. “writes, it was worth asking why Sullivan
Even if the defense can find out that Sullivan
Ray’s claim, in his first legal filing as FTX’s director, that he has never “seen such a total failure in corporate controls and such a total absence of reliable monetary information, as has happened here,” reinforces the legal risk. Last December, he unfavorably compared the conduct of FTX executives to that of Enron. “The crimes that were committed there were highly orchestrated monetary machinations by other very complicated people to keep transactions off balance sheet,” he said. “It’s just a matter of taking customers’ cash and using it for their own purposes. “
Bankman-Fried’s defense argued that the government was teasing the company to help with the prosecutions. The defense additional complained that Ray and his colleagues control FTX’s servers and files and denied Bankman-Fried access to documents that could exonerate him, adding change logs to the computer codebase showing exactly who allowed Alameda to interact on unlimited FTX loans. Ray declined to comment and prosecutors deny Bankman-Fried’s access was obstructed.
On Dec. 12, a month after Chapter 11 was filed, Bankman-Fried was in the attic writing testimony about the FTX collapse, which she promised to deliver the next day to the U. S. House of Representatives Financial Services Committee. Shortly before the Bahamian government appeared. To arrest him, he had shared a Google document of his testimony with his mom and his colleague, and one of them crossed out his first line: “I would like to start by officially declaring, under oath: Me.
Financial fraud cases of this magnitude result in guilty pleas, so trials like Bankman-Fried are relatively rare. After years of harsh denunciations of the lack of prosecutions similar to those of the 2008 currency crisis and of having done little to address the transformation of cryptocurrencies into a speculative bubble, the Justice Department and securities regulators seem to be using the FTX case as an opportunity to assign a new harsh view on currency crimes.
Bankman-Fried is already facing the consequences of her attempt to seize her public symbol ahead of trial. This summer, the Times published excerpts from a diary kept through Ellison, in which she feared she would be overwhelmed. Bankman-Fried’s legal team admitted in a court filing that it had provided documents to The Times. Lead prosecutor Danielle Sassoon said the leak was an attempt through Bankman-Fried to intimidate a witness, not the first. She filed a petition requesting that he and his parents not be allowed to make public statements about his case and that he be moved from space arrest to prison.
Bankman-Fried lawyer Mark Cohen of Cohen
Last December, at the time of his arrest, his parents wrote him a letter. “You are innocent,” they said, reassuring him. Within a year, there is a significant possibility that the fury of the world will become villainous. “Ten months later, his parents’ very cautious optimism turns out to be pious. A fourth senior executive in Bankman-Fried’s inner circle, Ryan Salame, reached a plea deal. in September.
In an email to The New Yorker, Fried called the moves of the prosecution and the bankruptcy mass “McCarthyist” and “a relentless pursuit of general destruction,” imaginable through “a gullible public that will believe everything I say. ” He continued, “It takes a lifetime to build a reputation as an honorable person. It takes five minutes to destroy it, and they did. “
As their son’s October trial date approaches, Fried and Bankman began discussing how, if he lost, they could handle his appeal. They take turns flying in from California to stop at their Brooklyn prison every Tuesday. But at Stanford, they persistently continue their famous Sunday night dinners, staying “in the game,” said their colleague Robert Gordon, “even as their lives fall apart around them. “
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