Adult-Child Genius Sam Bankman-Fried Opts for “I’m Hopelessly Stupid and Confused” Defense

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.)

And recall:

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:

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.

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  1. diptherio

    Proofreading note:

    “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.”

  2. Michael Fiorillo

    Unrelated to the Times broadcast, but fascinating and revealing all the same, was SBF’s admission to YouTube interviewer Tiffany Fong that he only publicized his donations to the Democrats, choosing to make dark money contributions to the Repugs.

    He said he did this because he knew the #McResistance media he was cultivating/playing would alter its fawning coverage of him if it knew he was swinging both ways. He has elsewhere spoken of the superficial and PR-inspired motivations behind his purported philanthropy. The cynicism of his actions, in combination with his faux-innocent manner, is impressive in a sickening kind of way.

    Every action these people have taken suggests forethought and planning, on a very detailed level. The idea of it being solely based on incompetence seems preposterous.

    1. lyman alpha blob

      Or maybe his Democrat fundraiser of a mother would have disowned him if he’d made it public, stopped funding that bank account with the $100k in it, and then how would he have been able to purchase the good amphetamines?

      I’m not buying the incompetence or ignorance defense either. And last I checked, those guilty of murder aren’t let free if they claim they didn’t know killing people was wrong. Ignorance is not some universal absolvent.

      The fact that the cryptomuppet is still walking around free is just another admission that the PMC live by a different set of rules than the rest of us.

      Note to the Democrat party: this is the type of thing that makes people vote for Trump in case you clowns haven’t figured that out yet,

      1. some guy

        Or maybe his Democrat fundraiser of a mother would have disowned him if he’d made it public, stopped funding that bank account with the $100k in it, and then how would he have been able to purchase the good amphetamines?

        here’s a bet: his mother knew, and acknowledges that this is a valid way to play the game.

        like, why assume Democrat fundraisers adhere to principle?

  3. InquiringMind

    Funny take from Ken White (@Popehat):

    “SBF has settled on a strategy of self-incrimination filibuster: if he never stops confessing they’ll never get around to charging him”.

    1. Yves Smith Post author

      Except this isn’t a confession. He’s repeatedly maintaining his innocence from a legal perspective by asserting he had no intention of doing anything bad, it was all merely epic stupidity.

      1. Rob

        Sort of like Elizabeth Holmes’s great regret that she “failed” the people who had trusted her. In her mind, fraud and failure amount to the same thing.

        1. Angie Neer

          Agreed. The “move fast and break things” ethos has a corollary that failure is good because it means you were striving for greatness. I remember an acquaintance who fully bought into this and cheerfully proclaimed “I LOVE to fail, because it means I’m trying!” Fortunately, she was not handling other people’s money with that attitude, but I think Holmes, SBF, and their ilk have bought into it. Either that or they’re simply sociopaths, but honestly I think if they were sociopaths they would be better at covering their tracks.

  4. DJG, Reality Czar

    “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.”

    {Is that you, Jake “War Criminal” Sullivan? Is that you Hunter “Budding Painter” Biden?]

    The laws are for the little people. Don’t let anyone sleep under the bridge.

    The reason the media workers are not trying to turn him into carrion is that he (and they) belong to the class for which there are no consequences. They want him to get away with this.

    1. NoFreeWill

      “If he can’t get away with this I might not get away with this!” is a great read on what much of PMC/elite crime defenses/slaps on the wrist/no prosecution really consists of. The whole class knows its guilty of fraud, theft from the people, and criminal negligence/incompetence, so if anyone really gets taken down it sets a very bad precedent. Because it’s whitest collar people setting the penalties, prosecuting, and defending their buddies, knowing they themselves might be up on the stand in a couple years.

        1. Lysias

          I’m currently reading Whitney Webb’s book. I was just reading in it about Clinton’s pardon of Marc Rich.

  5. David in Santa Cruz

    It’s pretty clear that SBF has convinced himself that he can cleverly rely on the ridiculously self-serving “Terms” that FTX users “agreed” to when they bought-into his trading platform, and the too-cute notion that he only “borrowed” customers’ assets and that he “intends” to pay them back — if only the grown-ups would stop being so mean and unleash him to deploy his Adderall-addled genius to find the next mis-priced trade to arbitrage.

    This is just a different twist on Elizabeth Holmes or Brock Turner. What’s in the water in Palo Alto that the kids there are so delusional about the consequences of spending other people’s money or humping other people’s bodies in order to play-out their entitled fantasies?

  6. Dr. John Carpenter

    “I didn’t ever try to commit fraud on anyone” Ah, so you have a natural gift for fraud then!

    Give me a break. I’ve heard children try to duck responsibility more convincingly.

    1. Mel

      Yeah, that’s how I parsed it. Didn’t have to try to commit fraud, it was so easy.

      Then again, ISTR USAian courts, in business and political cases, leaning hard on mens rea arguments for acquittal. Could work this time, too?

  7. Paul Jurczak

    Putin’s characterization of the collective west as an Empire of Lies rings so true in this case…

  8. Tom Stone

    SBF is acting as though he has top cover and thus nothing to worry about.
    The Bank purchase may indicate that he had friends in the right places he is still counting on, which is unwise.
    Epstein also had top cover and a “Life insurance” policy consisting of lots of recordings which silently disappeared before he was suicided.
    I expect SBF has more health problems than he is aware of…

    1. Arakawa

      If he has a sudden ‘medical episode’ or Tiffany Dover style ‘faint on camera and then disappear completely off the face of the Internet’, God forbid, then the Epstein fake-death conspiracy people *and* the ‘vaccines cause massive amounts of died suddenly’ people are both going to go wild simultaneously. Perhaps justifiably, but I fear for the Internet in such a scenario.

  9. Arizona Slim

    Hard to believe, but my snark tank is dry. I can’t add anything to the snark that is already posted here.

  10. Revenant

    There is one other fact circulating which, while inexcusable in itself, would support the “we did not know how big the hole was” argument. It would still leave a large hole rather than a gigantic one, though.

    This is the fact that FTX could not obtain banking facilities (!) and so instructed customers to wire funds to Alameda. SBF talks about the fiat accounts being inaccurate : a defence on this point would be that he did not transfer billions from FTX to Alameda because Alameda never transferred them to FTX, the beneficial owner. So Alameda incinerated the FTX funds in its custody and, on this coming to light, FTX had a hole and Alameda had a liability.

    I do not believe this absolves SBF for a minute. Simply taking the cash via Alameda would probably be a regulatory breach by FTX and Alameda and ignorance is no defence of careless / wilful accounting and constructive trust thereafter.

    However, it might be a classic cutthroat defence between defendants, a giant “She did it!” because he can try to claim no intent merely incompetence whereas Caroline is guilty of fiduciary breaches….

    I would hope the other facts are enough to find a crime if this is his argument…. They got All Capone for tax offences in the end.

  11. Strontium-90

    How many more times must we read that this deeply disturbed ne’er-do-well was “once worth $26 billion,” as though incanting 11-figure koans cover the naked capitalist?

    It destroys the credibility of the institutions reporting those figures.

  12. IM Doc

    What I could not fathom was the rather boisterous applause at the end of his interview yesterday. I do not remember that happening with Madoff, Lay, Fastow, or Skilling.

    As the camera panned on the audience in rapturous applause you could tell there were some serious fan girls and fan boys.

    I just simply could not believe it.

    1. Joe Well

      You mean fans of Sorkin were applauding him? Sorry, I cannot physically bring myself to watch this.

      1. Watt4Bob

        Good one!

        Maybe if we held him up, suspended by his ankles, he’d belch up a few billion in BTC?

  13. britzklieg

    I put this comment in links by mistake and apologize for the double post.

    While it is curious, to say the least, that the NYT would give Bankman-Fried the opportunity to address his fraud, it seems few are buying his obvious dissembling and so the justified outrage continues. Whether he ultimately escapes judgement and justice is yet to be determined – by the powers involved and how much damage control they’ll need to exercise.

    That there is no outrage about Zelensky speaking at the same event, given the far more massive fraud being perpetrated through war profiteering in Ukraine, screams cognitive dissonance. It’s ironic that blockchain tech allows the public to see all 9 billion worth of FTX/Alameda’s nefarious activity (though not being able to stop it) while the “where” and “to whom” about the 100 billion sent to Ukraine will never be known. Now watch while the Democrats do everything possible to not know the “where” and “to whom” (as they send more) while the Republicans do everything possible to pretend they want answers (as they too send more) when actually they don’t.

    It’s all about the Benjamins…

      1. britzklieg

        agreed about the distinction. And as the mighty wurlitzer continues to dominate the american mind it’s naive to ask why either one were ever heroes, but then again, looking at the speakers one can spot several dodgy characters with hero status. They may be grifters but they are our grifters! Endorsed by the NYT!

        which prompts me to wonder if Eric Adams could be a Dem POTUS darkhorse in ’24…

  14. John D.

    My understanding is that our beloved elites were willing to actually punish Bernie Madoff because he victimized the wrong sorts, i.e. the rich. Was SB-F doing the same? Or did he prey mostly on average people?

    1. Michael Fiorillo

      If you watch the Tom Brady ad for FTX, it’s impossible to conclude they weren’t targeting average people: the whole conceit of it was that Brady is a Regular Guy – he calls his mechanic and other working class acquaintances to get them to participate – and that Crypto is something for Regular People to get into. Including an image of a short-order cook quitting his job to speculate on cryptocurrency was particularly disgusting.

  15. tawal

    I’m waiting for the addled brain defense, probably sooner than later.
    That he can say that he had zero control, knowledge about/over Altadema (sp) is pure bunk.
    With all the side corporations, of which he controlled over 50% of the whole magilla, he is ultimately criminally at fault.
    I’m sure that NSA has all their texts and emails. Should be fairly easy to unravel the criminal acts…if they wanna

    1. Basil Pesto

      Agreed. It’s playing out rather delightfully too (except for those who were diddled obviously), assuming there’s a more-or-less happy ending.

  16. Michael Hudson

    To me, the closest analogy is the Icelandic banking crisis: Banks lending to buy up their own stock, justifying more credit extension — given Gordon Brown’s “light touch” regulation and links with the Russian criminals.
    I had to fight to get Iceland not to pay attention to Krugman, who was hired to be a shill urging that Iceland take responsibility for its London affiliates. I wasn’t paid, but had a nice trip to Iceland, but I understand that Krugman was paid. That’s how STX is trying to protect itself — with defenders in high or at least legitimate places — hence all the campaign money he gave to the regulators,
    Re Yves’ forecast, it seems indeed that the crook thinks he has made or bought friends in high places.

    1. Michael Fiorillo

      Yes, and he’s salting his prospective legal defense with all sorts of incompetence-not-fraud rasuggestions; whether that works for him will likely depend more on politics than legal acumen.

  17. Jason S

    It’s ridiculous to think his attorney parents were not advising his actions for years. It is naive to think he accidentally set up shop in the Bahamas and Hong Kong.

    Fraud and theft. Lies and sociopathy.

    The media, government, and corporations gaslight everyone into believing the little guy is responsible for all of the bad stuff going on in the world – while growing their tyranny and ruining everyone’s quality of life more.

    Babylon is begging to be squashed once more.

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