Several weeks have passed since a spoiled Silicon Valley millennial has been exposed as potentially one of the most prolific conmen of the 21st Century. Sam Bankman-Fried (aka SBF) has allegedly perpetrated one of the costliest frauds in the history of the financial markets, duping investors and customers out of tens of billions of dollars. The ex-CEO was scheduled to testify remotely as a “witness” before the U.S. House of Representatives Committee on Financial Services on Tuesday, Dec. 12 but was arrested the day before in the Bahamas — the timing of which seems slightly suspect. Regardless, the committee began its investigation of the events that led up to the implosion of the crypto exchange FTX and its filing for bankruptcy last month.
To recap: A man in his mid 20’s chased untold wealth with a cryptocurrency hedge fund called Alameda Research in 2017. He made money hand over fist – so much so that he became a highly influential figure in the crypto world. He then founded a crypto trading exchange called FTX in 2019, backed by some of the biggest names in Venture Capital. His close association with Alameda and the reported discovery of transfers of large sums of money to Alameda, which were allegedly lost in high risk trades, caused FTX to be caught short when investors sought redemptions earlier this year. Inexplicably, SBF confessed to making rookie mistakes in interviews while pleading his ignorance. Sadly, this man exemplifies all the bad traits assigned to his generation: narcissism, laziness, and indecisiveness.
Ultimately, a failed acquisition to purchase FTX’s non-U.S. businesses by early investor and eventual competitor Binance would prove SBF’s final undoing. Binance backed out of the “Hail Mary” deal on Nov. 9 after a brief period of corporate due diligence and examination of FTX financials. This led to FTX’s bankruptcy declaration on Nov. 11, SBF’s resignation as CEO, and the appointment of a caretaker CEO who is charged with recovering as much cash as possible for investors and clients. While SBF initially left the U.S. for the Bahamas in Sep. 2021, allegedly because of its more favorable regulatory environment, one wonders if his move was also a tactic to avoid potential prosecution. This didn’t work. His net worth plummeted to $100,000, and the FTX valuation fell to zero. Gone are the goals of Benevolent Altruism he so proudly espoused in the early days of FTX.
There is no denying SBF’s intelligence. He could conduct potential investor calls while playing League of Legends. I’m sure his MIT degree in Physics prepared him appropriately for the many vectors associated with market ups, downs and tangents. However, in my view, the scruffy hair, wrinkled tee shirts and ever-present cargo shorts were a facade to project him as “too cool for school” to care about his personal appearance, which likely distracted from his incompetencies in business.
SBF’s Alameda success allowed him to become a notable and significant donor in the 2020 Presidential elections, contributing $5.2M to the campaign of Joe Biden alone. According to SBF, he gave liberally to both parties during the most recent midterm elections, so much so that at nearly $40M he was the second largest contributor to the Democratic party – second only to George Soros. He contends that his contributions to Republican causes are not as well publicized because they would not be well-received by his Democrat friends or his parents. His mother is the founder and former chairwoman of a California-based left wing PAC called Mind the Gap, which has given millions of dollars from donors to Democratic campaigns and pledged to spend as much as $140M toward Democrat causes in 2020.
The House is now holding hearings on FTX’s collapse and the loss of over $10B in client and investor funds. SBF, who initially agreed to testify remotely, is no longer a cooperating witness. If subpoenaed, it’s likely the committee will only hear more of SBF’s obfuscated, confused, technobabble stories blaming poor data labeling and miscommunication between himself and the CEO of Alameda (his former girlfriend, Caroline Ellison). I don’t believe that a hearing will clarify the true nature of the FTX collapse, nor will it help cryptocurrency regulation. If you want to see SBF’s true character, read his leaked congressional testimony obtained by Forbes. SBF places blame with the current FTX CEO, his own legal counsel, a law firm he appointed to manage the FTX bankruptcy, and Binance’s CEO, without admitting any wrong on his part.
We can look at SBF as a character who is a product of our time. Given all of the advantages of wealth and privilege – great education, access to money and people to start and grow businesses, parental support, a brain wired in such a way that these complicated issues like cryptocurrencies, etc. were simply novel challenges to him and an engaging and charming personality that left investors and client fawning both to invest in him and do his bidding for him – the perfect formula for a potential high-ticket fraudster.
The FTX collapse is what happens when entitled children who take no responsibility for their own actions are allowed too much power with little to no oversight by the supposed adults in the room. As this unseemly “drama” continues to play out in the weeks and months ahead, I expect a plethora of Federal indictments coming down the pike. Only time will tell whether financial regulators will act justly to ensure that people never again lose their life savings at the hands of these hype men and schemers.
William Clifford is vice chairman of the advanced technology development firm Spencer Trask & Co. He previously served as the Chairman and CEO of Gartner Group, Inc., the world’s leading IT strategy and market research firm.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.