Jeff John Roberts on the role of Sam Bankman-Fried's parents in the FTX scandal

A question that has come up repeatedly in the FTX scandal has been the role of Sam Bankman-Fried's parents. Namely, how could such respectable people—Stanford law professors famous for their sense of ethics—have raised a sociopath who stole billions of dollars under the guise of altruism? As it turns out, they were Bankman-Fried's primary accomplices. 

As a scorching cover story in BusinessWeek reveals, Barbara Fried and Joseph Bankman didn't just raise a criminal, but actively took part in running FTX and enjoying the spoils of the fraud. They regularly turned up in the company's offices and were included on important emails, and, most critically, flexed their prestige to open doors in Silicon Valley and Democratic power circles for their son. Meanwhile, these two advocates for the poor helped themselves to a $16 million luxury villa in the Bahamas and $10 million in cash—paid for by FTX customers.

~ Jeff John Roberts, "How Sam Bankman-Fried's parents enabled his criminal empire," Yahoo Finance, September 15, 2023

September 14, 2023

Kevin Duffy on the role of the fraudster

Does the scam artist serve a social function?  Sam Bankman-Fried unwittingly shed light on the corruption of many institutions: venture capital, elite universities, charities, professional sports, Hollywood, mainstream media, ESG rating services, regulatory bodies and the Democratic Party.  Remarkably, he was able to infiltrate their highest levels in the blink of an eye.  Just last May, SBF was rubbing shoulders with the global elites at the World Economic Forum in Davos.

~ Kevin Duffy, "FTX Collapse: Lessons for investors," The Coffee Can Portfolio, p. 8, January 24, 2023

Sam Bankman-Fried on impacting the lives of trillions of people not born yet

Ultimately, this scale of impact that you can have on the world is just really, really large.  I think the fact is you can impact way more people through your philanthropy, through how you give back, than you do in your everyday life.  That's what really sets it apart.  You can think about the thousands of people who you can help who are dying of diseases that no one should be dying of today.  There are millions of them, but a single person can potentially save thousands of their lives over the course of your career.  And that's a lot of lives to save.  And I think when you start thinking about the trillions of people who haven't been born yet, who are going to inherit this earth from us, the things that we do that sort of impact what it is exactly that we're passing down to them are just incredibly important and magnified way beyond the scope of almost anything else that we do.

~ Sam Bankman-Fried, "Effective Altruism: Education, Empowerment & Environment with Gisele & SBF," Crypto Bahamas, 3:20 mark

WSJ on the virtue signaling of Sam Bankman-Fried

Mr. Bankman-Fried virtue-signaled by committing to make FTX “carbon neutral” and donating generously to fashionable progressive causes such as a foundation working to provide solar energy in the Amazon River basin.  “We’re giving millions each year to launch sustainability related initiatives,” he said in an April Forbes magazine interview with—you can’t make this up—Brazilian super-model Gisele Bündchen.

~ WSJ Editorial Board, "Sam Bankman-Fried Becomes an ESG Truth-Teller," The Wall Street Journal, November 17, 2022

Jonathan Turley on Sam-Bankman's arrest right before testifying before Congress

The question is why the Justice Department moved to stop Bankman-Fried as he worked so hard to make the criminal case against himself.  He comes across badly in these past interviews like a trophy-laden millennial who believes that he just needs to play to win.  It is not quite that easy in a criminal case. 

If he testified, Bankman-Fried could not only have made any criminal defense more difficult but he could have potentially tripped the wire for allegedly false or misleading statements under oath.  It was a target-rich environment for Congress — and a potential bonanza for prosecutors. 

Bankman-Fried was in a dangerous free fall.  Despite his legal team, Bankman-Fried seemed to be praying for someone to “stop me before I speak again.”  Someone just did.

~ Jonathan Turley, "The Justice Department Faces Questions After Effectively Preventing Bankman-Fried From Testifying in Congress," JonathanTurley.org, December 13, 2022

Sequoia Capital on Sam Bankman-Fried's upbringing

SBF is from the Bay Area—the eldest son of two Stanford law professors, Joe Bankman and Barbara Fried.  His parents raised him and his siblings utilitarian—in the same way one might be brought up Unitarian—amid dinner-table debates about the greatest good for the greatest number.  One of SBF’s formative moments came at age 12, when he was weighing arguments, pro and con, around the abortion debate.  A rights-based theorist might argue that there aren’t really any discontinuous differences as a fetus becomes a child (and thus fetus murder is essentially child murder).  The utilitarian argument compares the consequences of each.  The loss of an actual child’s life—a life in which a great deal of parental and societal resources have been invested—is much more consequential than the loss of a potential life, in utero.  And thus, to a utilitarian, abortion looks more like birth control than like murder.  SBF’s application of utilitarianism helped him resolve some nagging doubts he had about the ethics of abortion.  It made him comfortable being pro-choice—as his friends, family, and peers were.  He saw the essential rightness of his philosophical faith.

~ Sequoia Capital, "Sam Bankman-Fried Has a Savior Complex - And Maybe You Should Too," September 22, 2022

Luc Olinga on effective altruism's omnipresence in Silicon Valley and prestigious universities

Bankman-Fried had adopted a posture, nourished by the current philosophy of Effective Altruism, omnipresent within Silicon Valley and the prestigious universities.  The EA ideology boils down to "the most good can be done by choosing to make the most money possible in order to give it all away."  Earn-to-give is the community’s leitmotif. 

The FTX debacle shows that those who sign the checks are inspired by those who look like them, who have been to the same schools as them, who come from the same socioeconomic backgrounds as them, who share their realities.  If you're different, you're almost out of luck.

~ Luc Olinga, "Crypto Is Full of FTX's Bankman-Fried," TheStreet.com, November 24, 2022

Sequoia Capital on its initial investment in FTX

Alameda was not immune to the exchange-level shenanigans that gave crypto as a whole its sleazy reputation.  But FTX had an ambition to change that.  It was built to be the exchange traders could count on. SBF needed to get the word out.  He wanted FTX to be known as the respectable face of crypto.  This required ad campaigns, sponsorship deals, a charitable wing—and a war chest to pay for it all. 

FTX did need money, after all.  And it needed that money from credible sources so it could continue to distinguish itself from the bottom-feeders who came to crypto to fleece the suckers.  So, in the summer of 2021, when FTX started to raise its Series B from a who’s who of Silicon Valley VCs, [Sequoia partners Michelle] Bailhe and [Alfred] Lin hit the “Don’t Panic” button.  “Embarrassingly, we had never tried to reach out to Sam, because we figured he didn’t need us,” Bailhe admits.  “I thought they were just minting money and had absolutely no need for investors.”  Learning otherwise, they quickly contacted SBF and organized a last-minute Zoom call between him and the partners at Sequoia—at four California time on a hot July Friday afternoon.  Bailhe was adamant, putting her reputation with the other partners on the line: “I’m like, ‘No, it’s worth it. Cancel your afternoon.’”

~ Sequoia Capital, "Sam Bankman-Fried Has a Savior Complex - And Maybe You Should Too," September 22, 2022

(The account is based on an article by journalist Adam Fisher, commissioned by Sequoia.  The article, published last September, was posted on the firm's website under "We help the daring build legendary companies.”  It has since been removed.)

Sequoia Capital on how William MacAskill and Sam Bankman-Fried met

MacAskill was visiting MIT in search of volunteers willing to sign on to his earn-to-give program.  At a café table in Cambridge, Massachusetts, MacAskill laid out his idea as if it were a business plan: a strategic investment with a return measured in human lives.  The opportunity was big, MacAskill argued, because, in the developing world, life was still unconscionably cheap.  Just do the math: At $2,000 per life, a million dollars could save 500 people, a billion could save half a million, and, by extension, a trillion could theoretically save half a billion humans from a miserable death. 

MacAskill couldn’t have hoped for a better recruit.  Not only was SBF raised in the Bay Area as a utilitarian, but he’d already been inspired by Peter Singer to take moral action.  During his freshman year, SBF went vegan and organized a campaign against factory farming.  As a junior, he was wondering what to do with his life. And MacAskill—Singer’s philosophical heir—had the answer: The best way for him to maximize good in the world would be to maximize his wealth. 

SBF listened, nodding, as MacAskill made his pitch.  The earn-to-give logic was airtight.  It was, SBF realized, applied utilitarianism.  Knowing what he had to do, SBF simply said, “Yep. That makes sense.”  But, right there, between a bright yellow sunshade and the crumb-strewn red-brick floor, SBF’s purpose in life was set: He was going to get filthy rich, for charity’s sake.  All the rest was merely execution risk.

~ "Sam Bankman-Fried Has a Savior Complex - And Maybe You Should Too," Sequoia Capital, September 22, 2022

(The account is based on an article by journalist Adam Fisher, commissioned by Sequoia.  The article, published last September, was posted on the firm's website under "We help the daring build legendary companies.”  It has since been removed.)

Sam Bankman-Fried: "I wasn't spending any time or effort trying to manage risk"

George Stephanopoulos: How do you explain the failure?  Was it inattention, arrogance?

Sam Bankman-Fried: It's a good question.

Stephanopoulos: Was it unethical?

SBF: Some part of it was just literal distraction.  I really should have spent some time each day taking a step back and saying, "what are the most important things here?"  Right?  And how do I have oversight of those and make sure that I'm not losing track of those.  And frankly, I did a pretty incomplete job at that.  I spent a lot less time looking at assets and looking at balances and positions because that's not where revenue came from.  And so I wasn't seeing as a core business driver obviously was a core risk, and that was a huge mistake of mine to not think more about that.

Stephanopoulos: And you said one of your great talents in a podcast was to manage risk!

SBF: That's right.

Stephanopoulos: That's obviously wrong.

SBF: Well, I think that there is something maybe even deeper wrong there which was I wasn't even trying.  I wasn't spending any time or effort trying to manage risk on FTX.

Stephanopoulos: That's a stunning admission.

SBF: I don't know what to say.  What happened, happened.  If I had been spending an hour a day thinking about risk management on FTX, I don't think that would've happened.  I think I stopped working as hard for a bit.  Honestly, if I look back on myself, I think I got a little cocky... I mean more than a little bit.  And I think part of me felt like we'd made it.

~ Sam Bankman-Fried, interview with George Stephanopoulos, Good Morning America, 8:10 mark, December 1, 2022

Jeff John Roberts on being duped by Sam Bankman-Fried

It’s not a good feeling.  In July, I sat down with Sam Bankman-Fried for over an hour at a hotel overlooking Central Park, a meeting that would be the basis for a Fortune cover story.  I was charmed by his nerdy affect as SBF, unkempt in a T-shirt and bushy hair, as he twirled a fidget spinner and rattled off tidbits about everything from M&A strategy to the macroeconomy to the importance of trust in business deals.  It was all bullshit, of course, and I didn’t see through it.

[...]

[L]ike any good con man, SBF told us a story we wanted to hear and were eager to believe.  He styled himself as a trading genius who outgrew the elite quant firm Jane Street Capital, and who appeared to run circles around everyone else in the industry.  His pedigree was immaculate with a degree from MIT, parents who both teach at Stanford Law School, and personal connections to top power brokers in Washington, D.C.  SBF also discussed philosophy and poetry and took thoughtful positions on current issues like climate change and animal welfare—offering a more likable, human alternative to other crypto CEOs, whose libertarian views can come across as stark and unsettling.

~ Jeff John Roberts, "How SBF fooled everyone - including me," Fortune, November 14, 2022

(Roberts wrote the Fortune cover story, "The Next Warren Buffett?".)

Michael Saylor on how Sam Bankman-Fried lost $10 billion of customer money

Here's the diabolical twist: I [SBF] didn't just generate $10 billion of an unregistered security to dump it on the unsuspecting retail.  That would take me 500 trading days, dumping $20 million a day, right?  He didn't do that.  What he did is he generated $10 billion in unregistered security and then just borrowed $10 billion dollars secretly from his depositors and then went and gambled it, traded it, spent it, lost it.  And that is particularly impressive.

[...]

This is also diabolical: FTX said, "we're built by traders for traders" and Sam bragged that they only charged 3 basis points trading fee and he was 30 times cheaper than CoinBase or much cheaper than Binance.  So he's stealing customers off of the other crypto exchanges by, in essence, offering near-free trading.  He's not trying to make money off the trading.  He's trying to get the assets on his platform because once he had the assets on his platform, he basically used FTX as his personal piggybank.

[...]

So Sam basically scraped billions from unsuspecting investors in Silicon Valley.  They should've know better.  He took billions from crypto hedge funds and crypto banks like BlockFi and Voyager.  They should've known better.  And then he took probably $10 billion or more from depositors on his exchange.  They have the best argument.  It's like they were staring at terms and conditions that said he's not going to rehypothecate or use their assets.  He lured them with the promise of cheap trading, high leverage.

~ Michael Saylor, interview with Valuetainment, 5:30, 11:20 mark, December 5, 2022

Sam Bankman-Fried on campaign donations: "I want to support great public servants"

I want to support great public servants.  If you imagine an election where everyone running on both sides of the aisle for every race was an amazing public servant, I'd say "great, I'm not needed here."  I think that if you have the opposite, where everyone was horrific - which obviously won't happen - I think then what I would start to get to is, there needs to be an informational campaign to alert people to how poorly people are being nominated here.

~ Sam Bankman-Fried, interview with Meet The Press Reports, NBC News, 10:50 mark, September 22, 2022

Michael Novogratz on the criminal behavior of Sam Bankman-Fried

Sam is delusional about what happened and his culpability in it.  We could all be dime store psychiatrists.  There's a lot of narcissism there.  There's a lot of grandiosity, but being psychiatrists isn't going to really help.  He needs to be prosecuted.  He will spend time in jail.  They perpetuated a large fraud and it wasn't just Sam.  You don't pull this off with one person...  I'm not saying he even planned this all like a criminal mastermind.  What they did was criminal and they need to be prosecuted for it...  Stanford [SBF's alma mater] is one of the best universities in America and he worked at Jane Street and those guys are fiercely good.  Traders don't forget how they lose money.  It's kind of the DNA of anybody who spends time in this field.  So it's just kind of a pile of malarkey to say, "oh, I didn't understand how much risk we had.  These were huge bets, and they were huge bets made with my money and other depositors' money...  It's "I stole your money and I should've risk managed the money better."  It was the theater of the absurd to some degree...  Some people start off going down the path, they get in trouble and start breaking the law thinking they can get it back.  It's a tale as old as time, right?  And so you might not have started the plan of, "oh, I'm going to go rob everybody," but the moment there was one mistake you start cheating.  And then you start cheating more and then you start cheating more and next thing you know, you've got a $10 billion cheat going on.

~ Michael Novogratz, CNBC interview, December 1, 2022

Derek Van Shaik on the psychological drivers of Sam Bankman-Fried

Many automatically assume crooked rich people want to get rich to be flashy, driving Lamborghinis and be covered in diamonds.  However, there's psychologically more to wealth than merely just the physical objects, such as the associated power of having wealth.  Since the crooked rich usually feel insecure, they are attracted to the power money brings to make themselves feel less insecure.

[...]

For Sam to think he would never get caught and he can outrade everyone stems from hubris and arrogance, which is his elevated sense of self worth.  However, if you look at his body language and behavior, he's quite insecure, constantly looking down in conversation, nervous jitters that test the structural rigidity of chairs, self-comforting hand holds and what appears to be constant nervous stuping smirks...  If you're thinking, "How could Sam be both insecure and arrogant?," it's the opposite side of the same coin.  Extremely arrogant people are extremely insecure.  Their arrogance is a coping mechanism to feel less insecure.  The most secure people are those who can admit when they're wrong, willing to learn and don't feel that they're unbeatable.

[...]

Is Sam a narcissist sociopath?  Possibly, to have that much arrogance, insecurity and apparent disregard for other people.  Sam talks a lot about giving his money away to charity, however constantly speaking of charity is common of a naricissistic sociopath because they are using charity to gain fame, publicity, the appearance of altruism and to hide the truth of who they really are, all the while getting tax breaks.

~ Derek Van Shaik, "How Sam Bankman-Fried LIED Non-Stop to Steal Billions,"  YouTube, 2:30, 5:25, 8:00 mark, 

Terry Duffy on the baggy shorts image of Sam Bankman-Fried

When you have the greatest quarterback of all time and a supermodel wife doing a commercial, picking up the phones saying, "are you in?, are you in, are you in?".  To me it looks like a pump-and-dump scheme if you watch that commercial, and I watched it again today.  People get very influenced by people like Tom [Brady] and his wife and others - or his ex-wife.  So, no, I'm not surprised.  And I'm not surprised by the baggy shorts and the big t-shirt because it's a gimmick.  And most people that wear a gimmick are also selling a gimmick.

~ Terry Duffy, CEO of CME, CNBC interview with Melissa Lee, 5:00 mark, November 22, 2022

Jesse Powell on how Sam Bankman-Fried was in conflict with the crypto industry

Most people want good things.  They got into the space to change the world and really help people and to push crypto forward.  They're not here, first and foremost, to make money.  I think Sam saw crypto as a means to an end, and most people in this space see crypto as the end goal...  That's what we need to deliver to humanity.  So his ideas certainly were in conflict with the rest of the industry.

~ Jesse Powell, "FTX Meltdown and the Future of Crypto," Reason.com, 22:20 mark, November 16, 2022

Jeffrey Tucker on Sam Bankman-Fried marketing FTX with social justice causes

He was a physics major who got a lot of social justice in his head and began to realize that he was looking for a new angle on how to market cryptocurrency.  And the anti-government philosophy of the usual crypto crowd of "buy bitcoin to get away from the government and secede from the Fed and have your own private money and change the world toward freedom," he went the opposite direction and realized that he could market his little business with some version of ESG and DEI and all the fashionable social justice causes.  So he came up with this idea of effective altruism.  And so he wasn't in it to make money for himself.  He was in it to support good causes and to give all of his money away.  And he drives an inexpensive car and he dresses in a shabby way, and it was all virtue signaling within the crypto space.  And this was new, actually, for the crypto world which had usually been about kind of a cowboy anarchism: "let's get away from the government to do our own thing."  He went the opposite way.  So he developed very tight relations with the left basically.

~ Jeffrey Tucker, "FTX cryptocurrency scandal is just the beginning," Will Cain Podcast, 0:15 mark, November 15, 2022

Jeffrey Tucker on Sam Bankman-Fried and effective altruism

Will Cain: It reminds me of a company that was founded well over a decade ago and people might remember: Vice.  And Vice had a very charismatic leader who had a flashy lifestyle and said he understood Gen Z, or Gen X, or millennials, or whatever it may have been.  And because of that, he attracted investment from legacy media organizations, hundreds of millions of dollars in increasing rounds of capital raise that continued to push up the valuation of Vice.  And I hear what you're describing now with SBF is he did something similar, although instead of Lamborghinis the way that he got - I think he got - Silicon Valley to give him a ton of money to investing in FTX, or to buy FTT [FTX's token] was through the flashy mechanism of virtue signaling.  That I'm going to give it all away, that I'm altruistic.  And so that sucked in the sophisticated investor?

Jeffrey Tucker: Yeah, that was his value-added to the ongoing cons in this space, and there are many.  But his particular sort of spin on it was to be the innovator of effective altruism, which he describes as a religious conversion.  He realized it was wrong just to make a lot of money, but rather you should make a lot of money and then give it all away.  So just a nice bit of flim flam perfectly constructed for 2019 and 2020.

~ Jeffrey Tucker, "FTX cryptocurrency scandal is just the beginning," Will Cain Podcast, 12:40 mark, November 15, 2022