On Sam Bankman-Fried & the Collapse of FTX
Last week, Sam Bankman-Fried (founder of FTX Group) and others shared views on the +$30 billion crypto-exchange mess. The following are a selection of their comments.
Bankman-Fried, during a NY Tmes event: “Clearly I made a lot of mistakes. There are things I would give anything to be able to do over again. I did not ever try to commit fraud on anyone.
“I've had a bad month. This has not been a fun month for me. But that’s not what matters here … What matters here is all the stakeholders in FTX who got hurt and trying to do everything to help them out.
“I don’t know of times when I lied. Look, there are times when I, certainly times when I was acting as a representative, as a marketer for FTX and when I was looking for how can I — in a way which is truthful — paint FTX in as a compelling way as possible. And as an exciting and optimistic way as possible. I wasn’t thinking about, and I wasn’t talking about what are the risks involved with FTX. I obviously wish that I had spent more time dwelling on the downsides and less time thinking about the upsides."
A U.S. Justice Department court filing: “An examiner could—and should—investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement by the Debtors." (i.e. FTX Group and others)
Harvard Business Review: “The collapse of the FTX cryptocurrency exchange is a case study in what goes wrong when a startup grows quickly without any checks or balances … When founders are allowed to act like monarchs, their startups are more likely to fail — often with dire consequences for customers, employees, investors, and society."
Galaxy Digital Chief Executive Officer Mike Novogratz: “He’s in a reality that is not real … the reality is that Sam and his cohorts perpetuated a fraud. He stole money from people, people should go to jail.”
Mark Cuban: “I talked to the guy [Sam] and thought he was smart … I had no idea he was going to take other people’s money and put it to his personal use ... I don't know all the details, but if I were him, I'd be afraid of going to jail for a long time."
OUR TAKE
As FTX legal processes move forward, investors, journalists, regulators and others will assess their own missteps in the mess. Comparisons of Sam to Bernie Madoff, Enron’s Ken Lay and Theranos’ Elizabeth Holmes seem relevant - with the roles other FTX colleagues needing clarity.
“In Math We Trust” was a mantra within the crypto-markets, but Bankman-Fried and others have shown that assuring trust requires many factors including the integrity of market participants and their adherence to the law.
The FTX mess will trigger more legal actions, regulations and government oversight of digital assets (cryptocurrencies, NFTs, etc. Blockchain and digital asset innovation, in many forms, will continue - and similar to other markets, adding value in an "early-to-understand" context is important.