Sam Bankman-Fried’s Bahamian arrest was the result of his unchecked arrogance

Sam Bankman-Fried, the disgraced founder of now-defunct crypto exchange FTX, might have spent less time on media interviews while playing video games over the last few weeks and instead spent more time googling extradition treaties. At the very least, he could have spent less time doing media interviews where he said he didn’t think he would be arrested.

On Twitter Spaces during the day on Monday, Bankman-Fried said, “I don’t think I’m going to get arrested,” referring to the scandal that has engulfed his business dealings since November, leaving FTX bankrupt and its clients unable to withdraw funds. Hours later, authorities in the Bahamas, where Bankman-Fried lives and FTX is based, arrested him following criminal charges brought by the U.S. Attorney’s Office for the Southern District of New York. The SEC and CFTC are prosecuting Bankman-Fried, also often referred to as SBF.

In the numerous interviews and Twitter chats Bankman-Fried has done with the media in recent weeks, he has been evasive but remiss in discussing his duties in the situation. “What happens, happens. It’s not up to me,” he told Puck’s Teddy Schleifer in an interview in early December when asked if he thought anyone should go to jail over the FTX debacle. When Andrew Ross Sorkin of the New York Times asked him days earlier if he was concerned about a potential criminal charge, he replied, after some bewilderment, “It sounds strange to say it, but I think the real answer is that it’s not what focus on.”

The arrogance is impossible to ignore.

The 30-year-old MIT graduate has squandered the funds of hundreds of thousands of his clients, most of whom are unlikely to see much of their money back. He keeps saying he’s sorry and that he “screwed up,” but he doesn’t apologize or explain the billions of dollars missing, the misappropriated funds, or the serious fraud allegations against him. His apologies also conflict with many of his actions, before and after the FTX collapse, as he continues to place the blame elsewhere for what happened.

FTX appears to have been the exact opposite of the safe, honest crypto institution that Bankman-Fried said it was. His refusal to take full responsibility, even now, speaks to the size of his ego.

Bankman-Fried’s words do not reflect his actions throughout Alameda and FTX

Bankman-Fried spent huge sums of money and personal capital to build its profile and brand. He plastered the FTX name on everything he could, including the Miami Heat’s arena, and put his face in commercials. He portrayed himself as a super philanthropist, making money in cryptocurrency to funnel to the charitable endeavors he and others in his inner circle favored. (Disclosure: This August, the Bankman-Fried philanthropic family foundation, Building a Stronger Future, awarded Vox’s Future Perfect a grant for a 2023 reporting project. That project is now on hiatus.)

Throughout, he is alleged to have committed serious crimes, including electronic media fraud, securities fraud and money laundering, as well as commingling funds from his cryptocurrency exchange, FTX, with those of the trading firm he founded , Alameda Research. According to the SEC’s complaint against Bankman-Fried, “From FTX’s inception, Bankman-Fried diverted FTX client funds to Alameda and continued to do so until FTX’s collapse in November 2022.”

In other words, Bankman-Fried’s claims that he was unaware of what was going on with the commingling of FTX and Alameda funds and that the exchange failed because he fell asleep at the wheel, if the allegations against him are to be believed, are false. “As he spent lavishly on office space and condominiums in the Bahamas and sunk billions of dollars of client funds into speculative venture investments, Bankman-Fried’s house of cards began to crumble,” the complaint said.

After positioning himself as the serious and safe face of crypto on Capitol Hill and among regulators, Bankman-Fried has also been accused of campaign finance violations and allegations that he made donations in excess of the allowed amount, including by using other people’s names . This is the image of a man who was well acquainted with the rules and railings around him—he was quite fluent in talking about regulations—and seemed to believe that they did not, or should not, apply to him.

In an interview with Vox’s Kelsey Piper in November, conducted via direct message on Twitter, he stated, “Screw the regulators. They make everything worse.” Those are words he may regret, as regulators now come after him. Then again, given his cavalier attitude, who knows?

The blame game continues

In testimony he was scheduled to give to a House Financial Services Committee hearing before his arrest, published by Forbes, Bankman-Fried claimed responsibility for FTX’s collapse but repeatedly shifted the blame elsewhere. It begins with the line that has become Bankman-Fried’s trademark—”I screwed up”—and then proceeds down a meandering path that oscillates between acceptance of guilt and abdication of responsibility.

Bankman-Fried reiterated his regret that FTX had filed for Chapter 11 bankruptcy and complained that the company, now run by John J. Ray III, who helped steer Enron after its 2001 collapse. , has rejected his offers to help fix the disaster he created. He claims he could “easily collect some pieces of data” that FTX was unable to find. In Trumpian fashion, he sometimes reflects a “I can fix it myself” attitude — although at other times in this saga, when convenient, he’s been very careful to point out that certain elements he’s overlooked.

Bankman-Fried says he still knows of “billion-dollar serious financing offers” to make customers “essentially whole,” but that would require the company to be relaunched as an exchange. It is not clear who these offers are supposed to be from. And then, his testimony again blames elsewhere that these magical, mysterious new remedies do not appear. “I admit I’m not optimistic about some parts of the process,” he says. “Personally, I have not witnessed any progress by Mr. Ray’s team towards raising significant funds or restarting the exchange.”

Ray was brief and blunt in his analysis of what happened to FTX as he learned more details. In testimony before the House Financial Services Committee on Tuesday, Dec. 13 (a hearing Bankman-Fried was also scheduled to appear at), Ray said FTX moved to “spending $5 billion” at the end of 2021 to 2022 and that the loans and other payments in excess of $1 billion were made to insiders. He said FTX’s collapse stemmed from “the absolute concentration of control in the hands of a very small group of extremely inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company other money or assets entrusted to the people.” Ray also told the House hearing that FTX uses QuickBooks for accounting. There was, he says, “no sophistication” and “lack of any management” in FTX.

Many of Bankman-Fried’s words and actions in recent weeks have been petty, to say the least, and often borderline delusional. It hit Binance, the competitor that partly fueled the FTX crash, accusing its CEO of lying and claiming that the company, which briefly entertained buying FTX, never intended to go ahead with the deal. (Bankman-Fried aside, Binance is facing problems of its own.)

In his prepared testimony, he says FTX’s new leadership is “disruptive.” He appeared to label Ray and others as racists, declaring that their move to seize FTX assets from the Bahamas and the United States equated to “malicious intent and incompetence on the part of other races, cultures and governments” that would be “considered deeply offensive if directed at American minorities.

Maybe he thought he could get away with it, because that’s how things often go

In retrospect, it’s hard not to look at Bankman-Fried now and wonder how he managed to do it all. The answer is simply that he was allowed to.

It managed to raise $2 billion from investors, including big names like Sequoia, Tiger Global and SoftBank, who didn’t seem to look too closely under the hood. He was the subject of numerous largely flattering profiles that admired his low-key good looks and his apparent dedication to an effective philosophy of altruism and philanthropic causes. The media continues to point out that his parents are Stanford law professors and that he grew up in smart, wealthy, liberal circles, as if that upbringing has any significance.

With all of this in mind, it makes sense why Bankman-Fried has certainly shown such audacity in his business decisions and personal actions before, and even now. If you tell everyone that you’re awesome and you totally get it, and everyone around you constantly affirms that you’re awesome and you totally get it, you might be very inclined to go along with it. If the rules never applied to you, why would they start now? You achieve prodigy status and notice that no one around you really cares how you got there, so you roll with it – even if it maybe involves committing some supposedly major crimes.

It’s unclear what’s next for Bankman-Fried. He seems to be in a lot of trouble and will have a team of probably very good lawyers defending him in court (although how well he will take their advice is an open question). At the very least, he’ll probably have to take it easy for a while with media interviews and tweeting. Although given his love of talking to the press — and the press’s love of talking to him — this likely won’t be the last we hear from him.

Perhaps the bigger question to ask beyond Bankman-Fried himself is how he managed to achieve such status in the first place, to display such arrogance without ever worrying that it would come before a fall. Perhaps the scarier thing is that guys like this get away with this kind of thing all the time. There may be an SBF 2.0 lurking around the corner, but it’s more likely that there are several hiding in plain sight right now.