Sam Bankman-Fried (SBF) received $2.2 billion in payments from FTX, nearly 70% of the total funds improperly disbursed before the digital asset exchange’s bankruptcy filing last November.
On Wednesday, FTX’s new management filed a series of declarations detailing its ongoing efforts to make sense of SBF’s tangled financial web. Among the more jaw-dropping figures in these documents is the staggering sum of $3.2 billion in payments and ‘loans’ made by FTX and its numerous affiliates—including the SBF-owned market-maker Alameda Research—to company insiders.
Roughly $2.2 billion of these payments/loans were made to SBF, while FTX/Alameda’s former head of engineering Nishad Singh ranked a distant second with $587 million in similar transfers (and the bulk of this was later diverted to SBF for various venture capital investments).
Former FTX CTO Zixiao ‘Gary’ Wang placed third with $246 million, followed by FTX Digital Markets’ former CEO Ryan Salame ($87 million). Former Alameda co-CEOs Sam Trabucco and Caroline Ellison filled out our swindling six with transfers of $25 million and $6 million, respectively. (Based on Ellison’s paltry share of this bounty, we guess James Brown had a point.)
Notably, the $3.2 billion figure doesn’t include $240 million in other questionable spending, including purchases of luxury properties in the Bahamas (FTX/Alameda’s former base of operations), as well as FTX’s voluminous political and ‘charitable’ donations. (More on the latter below.)
FTX’s current management can’t say how much of this $3.2 billion might be recoverable, having previously noted a “massive shortfall” between total liabilities and the assets held by FTX and its U.S.-facing offshoot FTX.US.
SBF has pleaded not guilty to a raft of criminal and civil charges relating to his fraudulent conduct. Singh recently pleaded guilty to six criminal charges, while both Ellison and Wang are reportedly cooperating with federal prosecutors after being hit with their own charges last December.
Salame and Trabucco have yet to be charged, at least, not publicly, but Salame is known to have tipped off Bahamian authorities regarding FTX’s illegal commingling of customer assets with Alameda’s trading desk. FTX’s former compliance chief Daniel Friedberg is also said to be cooperating with the feds in a bid for leniency regarding his role in SBF’s fraudulent circus.
It’s anyone’s guess how much of FTX’s assets will be left to distribute to its former customers once the dust finally settles. In January alone, FTX’s bankruptcy team billed the court for $38 million, of which $16.8 million went to the controversial legal firm of Sullivan & Cromwell. SBF unsuccessfully objected to S&C being hired to help make sense of his Byzantine financial dealings, based on SBF’s view that S&C pressured him into filing for bankruptcy last November.
He was only following his own orders
Meanwhile, SBF shows no sign of stopping his efforts to try and offload his expenses onto FTX’s creditors. On Wednesday, SBF’s legal team filed a motion requesting permission for him to tap into FTX’s directors and officers (D&O) insurance coverage. Such coverage generally allows senior management types to avoid personal financial losses—including legal fees—stemming from lawsuits based on decisions made in the course of running a company.
However, there are notable exceptions to this rule in cases involving fraud and criminal offenses, so SBF really is (again) pushing the limits of propriety here. There’s also the inconvenient truth that SBF was effectively in sole command and control of the FTX/Alameda crime ring, so he can hardly plead that he was doing the bidding of anyone other than himself.
SBF has previously sought access to certain FTX assets that he claimed were needed to pay his legal bills. These included the 56.3 million shares in the Robinhood digital trading platform that SBF purchased through a shell company called Emergent Fidelity Technologies with yet another ‘loan’ unknowingly provided by FTX’s customers.
Assuming there are those who will object to SBF’s latest motion, the U.S. Bankruptcy Court in Delaware handling FTX’s demise will consider his request at a hearing on April 12.
Effective ignoring of warning signs
SBF’s ties to the Effective Altruism (EA) movement are the stuff of legend, in part due to his November confession to a Vox reporter that there’s “this dumb game we woke westerners play where we say all the right shiboleths and so everyone likes us.”
This week, Time published a lengthy article on how prominent EA leaders privately knew as far back as 2018 that SBF was dangerous, yet these same leaders publicly expressed surprise and outrage when SBF’s fiscal house of cards caved in on itself.
Specifically, Time’s sources say Centre for Effective Altruism (CEA) co-founder Will MacAskill and the head of SBF’s philanthropic arm Nick Beckstead “were repeatedly told that Bankman-Fried was untrustworthy, had inappropriate sexual relationships with subordinates, refused to implement standard business practices, and had been caught lying during his first months running Alameda, a crypto firm that was seeded by EA investors, staffed by EAs, and dedicating to making money that could be donated to EA causes.”
SBF appeared less committed to altruism from the start by registering himself as sole owner of Alameda, allegedly reneging on a previously agreed upon equity arrangement that would have capped his stake at 40%.
One of the individuals who flagged concerns about SBF to EA leaders noted that SBF was taking “dangerous and egregious shortcuts” in his approach to corporate controls and “in many cases had concealed the fact that he had done that.”
Naia Bouscal, an early Alameda software engineer, added that the company “didn’t know how much money we actually had.” Despite the lack of clear accounting records, SBF pressed his underlings to do “a huge number of trades, a huge number of transfers.” SBF also “didn’t have a distinction between firm capital and trading capital. It was all one pool.”
In April 2018, four Alameda execs staged something of an intervention at their offices in Berkeley, California. The quartet laid out a laundry list of behavior that could result in criminal charges, adding that they “didn’t trust Sam to be in investor meetings alone” based on his proclivity to “lie and distort the truth for his own gain.”
At the end of this presentation, SBF was offered a buyout in exchange for his resignation as Alameda CEO. SBF reportedly said nothing, then walked out. The next day, he informed the team that he wasn’t going anywhere. Instead, around half of Alameda’s then-staff—including the four accusers—submitted their own resignations.
Tara Mac Aulay, who co-founded Alameda with SBF, was among those who quit. Bouscal told Time that Mac Aulay later expressed her concerns over SBF to CEA’s MacAskill, who “basically threatened Tara … Will was taking a pretty hostile stance here and that he was just believing Sam’s side of the story, which made no sense to me.”
An unidentified former Alameda staffer told Time that SBF’s clout with the EA movement was such that few were willing to challenge him or take another’s side against him. This staffer claimed SBF’s attitude could be summed up as: “I could destroy you … no one is going to believe you.”
The CEA reportedly conducted an internal investigation in 2019 following the allegations against SBF, which may have contributed to SBF deciding to give up his spot as a CEA director that same year. Regardless, SBF continued to make it rain for EA causes.
In just the first nine months of 2022, the FTX Future Fund contributed $160 million to EA initiatives, including over $33 million to MacAskill-linked organizations. In August 2022, SBF hosted a dinner at a ridiculously pricey vegan restaurant in New York to celebrate the publication of MacAskill’s book We Owe The Future. (You definitely owe somebody.)
More FTX promoters sued
In Florida, a class action suit was filed Wednesday against “YouTube and social media financial influencers and promoters who shared financial advice and actively promoted FTX and its yield-bearing accounts (YBAs) to their millions of followers.”
The suit accuses these influencers—Kevin Paffrath, Graham Stephan, Andrei Jikh, Jaspreet Singh, Brian Jung, Jeremy Lefebvre, Tom Nash, Ben ‘BitBoy’ Armstrong, Erika Kullberg and Tokyo-based talent management firm Creators Agency—of being paid “handsomely to push [FTX’s] brand and encourage their followers to invest” in its YBAs.
The suit is led by Edwin Garrison, who’s also lead plaintiff in the class action against FTX’s celebrity promoters. This latest suit claims FTX “could not have arisen to such great heights without the massive impact of these Influencers.” The plaintiffs are seeking at least $1 billion dollars in damages, as well as legal fees and court costs.
Sadly, the only satisfaction that Garrison et al are likely to receive is a warm and cozy feeling when SBF’s cell door slams noisily shut. With the trial not scheduled to get underway until October—assuming SBF doesn’t cut a deal before then—there will be precious little left on FTX/Alameda’s bones to satisfy anyone.
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