About SBF, FTX, and White-Collar Criminals
I’ve been following the Sam Bankman-Fried (SBF) criminal trial for the last few weeks. After the spectacular collapse of the second largest cryptocurrency exchange FTX last year, he was indicted with several crimes including wire fraud, securities fraud, commodities fraud, and money laundering. His coconspirators Caroline Ellison, Gary Wang, and Nishad Singh plead guilty, cooperated with the prosecution, and testified against Sam. Against his lawyers' advice, Sam took the stand himself and didn’t look good in the cross-examination. On November 2nd, 2023, the jury spoke Sam Bankman-Fried guilty on all charges.
I never had any money on FTX, but I lost some money on BlockFi, which also went bankrupt in the FTX fallout. The story of SBF and FTX, however, is very interesting and I became invested in it after following the news and SBF’s media tour after the collapse. Sam as a character is fascinating and even after the trial, I’m not sure how I feel about him.
Let’s start with the obvious: He is guilty. His defense strategy of claiming that he didn’t know that customer funds were being used and that he doesn’t recall pretty much anything is completely unbelievable. He knew and almost certainly was the driving force behind it. Using customer funds and lying about it to customers and investors is a crime and the jury found him guilty of it — as he deserved.
His intentions, however, I’m not so sure about. I don’t think he stole the money just to enrich himself. Yes, he bought and lived in the infamous 35 million-dollar penthouse in the Bahamas and flew on private planes, but given that he was a billionaire (even without the customer funds) I don’t think this is that outrageous. Most of the customer money was used to pay back lenders, investments, celebrity marketing, and political donations.
SBF was way too comfortable with taking extreme amounts of risk. An anecdote from the trial was that he would take a coinflip where one side meant that the world would be destroyed as long as the other side meant that the world would end up twice as good. This is obviously crazy. Judging everything purely on its expected value doesn’t work.