For me the Sam Bankman-Fried/FTX case will never be complete until I see members of Congress who took his bribes being dragged off to prison— there’s over 100 of them. So… put another way, the Sam Bankman-Fried/FTX case will never be complete for me. You think someone is ever going to indict McCarthy, Pelosi, McConnell, Schumer… and so on down the food chain all the way to Maxwell Alejandro Frost whose campaign benefitted by nearly a million dollars in stolen FTX funds while Frost kept telling people in Central Florida that he was just a poor Uber driver?
We got a tiny bit closer last week when Ryan Salame, SBF’s partner who took on the task of bribing Republicans plead guilty, disgorged a billion and a half stolen dollars but— as far as we know— hasn’t agreed to cooperate with the feds. Lora Kelly told the story for The Atlantic. “SBF,” she wrote, “made himself known as a political heavyweight— he was a known donor on the political left— and as an avatar of the effective-altruism philanthropic movement, to which he also donated millions. Central to FTX’s growth, and Bankman-Fried’s popularity, was his public face, and the ideals he said he stood for. But last week’s guilty plea from Ryan Salame, a lesser-known FTX executive, is a reminder of one of the many truths that have since come out about Bankman-Fried: His donations were likely not based solely on the best interests of humanity but also on the best interests of crypto. In addition to his publicized donations to Democrats, he also marshaled millions of dollars to boost Republican candidates who seemed sympathetic to crypto-related causes. He has admitted, since the collapse of FTX, that most of his Republican donations were not linked to him, for cynical reputational reasons: ‘Reporters freak the fuck out if you donate to Republicans,’ he told the crypto content creator Tiffany Fong in November. Bankman-Fried’s fingerprints weren’t always apparent on Republican donations, but his lieutenant Salame’s often were. Salame, whose name is pronounced ‘Salem,’ last week became the fourth top FTX executive to plead guilty, including to a charge of violating campaign-finance law. Prosecutors alleged that he made millions of dollars of political donations— many of which were to Republicans— under the direction of Bankman-Fried. Salame was public about his Republican affiliations. While Bankman-Fried hobnobbed on the left, Salame leaned into his identity as a “budding Republican mega-donor,” as the Washington Examiner called him last September. He donated millions of dollars under his own name, and even helped his girlfriend run as a Republican for a congressional seat on Long Island (she lost in the primary).
It’s not totally clear whether Salame is truly passionate about Republican political causes or if he was simply emerging as a Republican donor out of loyalty to his boss (and his girlfriend). He has reportedly said that he was not especially interested in politics, and that he was getting more involved at the encouragement of others at FTX. In a charging document, prosecutors surfaced messages that Salame wrote, saying that the purpose of donations was to “weed out anti crypto dems for pro crypto dems and anti crypto repubs for pro crypto repubs” In other words, it seems that he and his involved colleagues hoped to use donations to elevate politicians sympathetic to the crypto business, regardless of party. (Jason Linder, a lawyer for Salame, did not immediately respond to my request for comment, though he said in a statement last week that “Ryan looks forward to putting this chapter behind him and moving forward with his life.”)
In contrast to his compatriots, who claimed to be getting rich in order to give back and who were involved with effective altruism, Salame reportedly spoke about working in crypto simply to get rich. Salame clearly enjoyed the trappings that the wealth he gained in his 20s (he is now 30) afforded him. He has a reputation for enjoying fancy cars and private planes. His taste is apparent in his accessories: I noticed that in a widely circulated portrait, he is wearing what looks like a Cartier Juste un Clou nail bracelet in white gold. These status-symbol bracelets start around $8,500. Last week, Salame arrived in court to plead guilty wearing orange-and-blue socks emblazoned with bitcoin logos. Those may not have been pricey, but they certainly showed confidence.
In what feels like a poignant— or maybe self-aggrandizing— touch, Salame invested some of his wealth in the restaurants of his home region, the Berkshires. (He grew up in Western Massachusetts and attended the University of Massachusetts at Amherst.) Salame swooped in with millions during the early days of the pandemic, and by the time he was 28, he owned nearly half of the full-service restaurants in the small town of Lenox, according to The Berkshire Eagle. He was a local boy done good— until FTX cratered. Now Salame must forfeit his interest in one of his key restaurant holdings (along with assets including millions of dollars and a 2021 Porsche) as part of a plea deal. Whether Salame’s heart is truly in Republican politics or in restaurants or just in socks and personal advancement, he cuts a contrasting figure to those of his fellow former FTX executives, and he may continue on that path. The others who have pleaded guilty— Caroline Ellison, Nishad Singh, and Gary Wang— have all also agreed to cooperate with the government and to testify against their former boss. Salame has not. (Bankman-Fried has pleaded not guilty to all of the charges brought against him so far.) This time last year, those executives— Bankman-Fried most of all— were widely seen as responsible adults in a cowboy industry. That the walls have closed in this fast, and that their noble public personas have fully crumbled, remains stunning. Maybe Salame was frankest about his motives all along.
Theodore Schleifer has been on this FTX beat, for Puck, before the mainstream media caught on. His latest, Inside the Fall of S.B.F.’s Big Cool Buddy tells what really happened between Salame and SBF’s FTX-world. Salame had been looking for an escape hatch for a year— and finally pulled the plug 11 months ago. Schleifer wrote that “Salame always stood out as the linen-and-loafered bro among the Math Camp crowd that surrounded S.B.F. He wasn’t exactly an effective altruist, the prevailing ideology among the core FTX set, but he was drawn to power and had a taste for nice things. Salame, as I’ve reported over the years, was personally a Romney Republican, and someone who wouldn’t be caught dead at some lame GOP fundraising event. But his infatuation with Sam was undeniable. And so when S.B.F. and the rest of the E.A.s, including Sam’s brother Gabe, and the top Bankman-Fried aide Michael Sadowsky, saw an opportunity for the movement to influence conservative thought leadership— namely, by electing Republicans who would counter Trump, stave off nuclear war, and yeah, who were crypto-friendly, too— Salame played ball.” Now he faces as much as 10 years in prison. US Attorney Damian Williams: “Salame agreed to advance the interests of FTX, Alameda Research, and his co-conspirators through an unlawful political influence campaign and through an unlicensed money transmitting business, which helped FTX grow faster and larger by operating outside of the law.” He’ll be sentenced March 6.
He even enjoyed being the FTX Republican, spreading around the big bucks in DC. He started by funding his own red SuperPAC with $15 million during the 2022 GOP primaries. His intention was to help elect more mainstream conservative Republicans— not fascists but pro-crypto... like now Alabama Senator Katie Britt, one of FTX’s biggest investments. [T]oward the middle of the year, he started dreaming bigger. He hired a strategist, Tyler Deaton, to serve as his donor-advisor, and to help acquaint him with the big fish like Mitch McConnell. People at Jeff Roe’s firm talked openly about him as the next big thing.”
One month from now, SBF himself, currently in jail, goes on trial (October 2). Yesterday, David Yaffe-Bellany, who got to read a 250 page document of self-justification Bankman Fried wrote about his predicament, reported that SBF thinks he’s “one of the most hated people in the world.” He got the document from Tiffany Fong a crypto social-media influencer who SBF sent it to. The document provides “a window into Bankman-Fried’s mind-set during the eight months he spent in home detention before a judge revoked his bail in August… Prosecutors have charged Bankman-Fried with orchestrating a scheme to funnel FTX customer funds to a hedge fund he founded, Alameda Research, so that his companies could make venture capital investments, buy real estate and donate to politicians. He has pleaded not guilty and faces decades in prison if convicted.”
One thing I was certain about from the very beginning is that both of his parents have been complicit and should also be facing prison. His father may be headed in that direction already. Yesterday, Pete Syme reported that Joe Bankman— the criminal mother is Fried— was a top, and well-paid, FTX advisor. Now he’s spending $10 million for his son’s legal fees. You don’t make that kind of money as a Stanford law professor, nor to buy a $16 million pad in the Bahamas. He drafted legal documents and marketing campaigns for the Ponzi scheme “currency,” FTT.
On Wednesday, Max Chafkin and Hannah Miller, reporting for Bloomberg, wrote that at the time that SBF decided to spend $20 on a 2022 Super Bowl ad, “Critics were warning that FTX was alluring naive investors with extremely risky financial instruments that were mostly banned in the US. Those investors would see their money vanish when the funds were diverted without their knowledge to a hedge fund that Bankman Freed also owned. FTX collapsed and filed for bankruptcy in November 2022. Leading the bankruptcy processes John Ray III, who did the same for Enron and has described this case as worse has accused Bankman Freed of using customer funds to enrich himself, family members, and other insiders, and is seeking to reclaim some of that money. More ominous for the Bankman Frieds is the criminal case set to begin in New York City on October 6th. Prosecutors haven't accused the parents of wrongdoing, but charges against their son, whose net worth at its height was estimated at $26 billion, include fraud, money laundering, and bribery. The case could send Bankman Fried to prison for the rest of his life. He pleaded not guilty and has characterized the losses as the result of inept but not criminal management. Bankman and Fried have steered clear of much of the scrutiny that's enveloped FTX. That's at least in part because they've yet to deliver a full accounting of their roles in helping their son build a sprawling business and political influence operation.”
Last year, Bankman Fried told the New York Times that his parents weren't involved in any of the relevant parts of his company. Former employees and business partners say this wasn't the impression they had at the time, and legal filings suggest Bankman and Fried were crucial to their son's transfiguration from schlubby startup NERD to hyperconnected crypto mogul. The couple profited tremendously from FTX, netting $26 million in cash and real estate in 2022 alone. They were regular fixtures at the company's offices, offered words of encouragement to employees, and were included in internal company communications. Their reputations and connections were essential to FTX’s success.
…[Silicon] Valley's knee jerk elitism is so blindingly obvious that it seems almost beside the point to bring it up. Investors overwhelmingly favor companies run by white men, often hailing from a tiny group of elite colleges, while shunning anyone who deviates from their superficial sense of what a successful founder should look, talk, and act like. Some openly discriminate against founders over the age of thirty, against founders with an accent, and against anyone who comports themselves as if they're not already rich. God help you if you show up to a pitch meeting wearing a suit. The most privileged place within this world of extreme privilege is Stanford, the birthplace of companies such as Hewlett Packard, Sun Microsystems, Cisco, Yahoo, Google, and PayPal. Fried, a product of Harvard Harvard Law School, the US Court of Appeals for the Second Circuit, and the law firm Paul Weiss, arrived in 1987 as a tenure track professor and rented a house on campus. A year later, she met Bankman, a graduate of the University of California at Berkeley and Yale Law School who'd come to Stanford on a trial teaching gig after practicing as a tax lawyer in Los Angeles. Barb and Joe, as their known on campus, went public with their relationship after Bankman secured a ten year track job. The following year, they moved in together, and when Fried's rental came up for sale in 1991, they bought it. The home where Sam Bankman Freed grew up and where he spent the first half of 2023 under house arrest sits at the end of Cooksey Lane. It's valued at $3.6, though that's more the result of Palo Alto's decades long real estate boom than a comment on its luxuriousness.
…Running a crypto business was always legally complicated. Bankman Fried started a hedge fund, Alameda Research, in 2017 to exploit price differences between cryptocurrencies traded in Asia and those in the US. Soon the fund was moving huge sums of money between continents in ways that looked, as he boasted on a podcast, exactly like money laundering. Alameda struggled to open bank accounts. Bankman Freed needed lawyers. Fortunately, a very very good one was available. His dad wasn't an expert in crypto, but at the time Alameda started, no one was. “From the start, whenever I was useful, I'd lend a hand, Bankman said on an FTX podcast in August 2022, noting the company didn't have lawyers at the time. He added, “I think my utility there was pretty obvious.”
Former Alameda staffers say Bankman helped draft early legal documents. Invoices from Fenwick and West Alameda's law firm list him as an attendee in meetings, showing he was involved not only on tax issues, but also in the development of marketing materials for FTX and FTT, the made up currency Bankman Fried issued when he launched his crypto exchange…
FTX was based in Hong Kong until the government there began cracking down on crypto in 2021. A person familiar with FT’Xs operations says Bankman played a key role in the decision to relocate to the Bahamas, where there were few restrictions on digital currencies. The specifics were arranged by someone Bankman personally recruited, David Friedberg, a former Fenwick and West lawyer who became FTX’s general counsel. To his employees, Bankman Fried gave the impression he consulted his dad constantly. When someone would offer a legal suggestion, he'd often say it sounded good, but he wanted to call Joe first, according to a former staffer, who added that almost all the lawyers who worked for Alameda seemed to be friendly with Bankman. Other ex-employees say that, especially compared with Bankman Fried, who sometimes struggled to make eye contact and could be blunt, bordering on cruel when dealing with employees, the father had a way with people. Training as a psychotherapist had made him an excellent listener, and he was an energetic conversationalist.
…[Bankman] was seen, another employee recalls, as a cute old man, a capable but non threatening figure who was there to keep his son from losing control. But the most important role Bankman and Fried played was to give their son credibility with people who might not otherwise be inclined to do business with a sketchy upstart. In 2021, when Bankman Fried approached Sequoia Capital about making a big investment, the firm was interested in backing a global crypto exchange, but had concerns about potential legal and regulatory risks. According to two people familiar with the deal, FTX was based offshore and operating on the edges of the law.
…Bankman Fried was adamant that his long term goal was to secure the approval of US regulators. Plus he had something [Binance and BitMax] didn't, an endorsement from a former commissioner of the US Securities and Exchange Commission. Sequoia was convinced to invest said people close to the deal after a phone call from a prominent ex-SEC official who'd consulted with the firm informally on previous deals and now teaches at Stanford. This former official spoke in support of FTX’s legal strategy, which involved operating overseas while it worked to win approval from US regulators, and said Bankman Fried also happened to be the son of his friends… part of a pattern.
Both parents really opened doors for Sam, says a person who was involved in Bankman Fried's effort to get American politicians to embrace his firm. By that time, Fried had started a left wing [conservative corporate Democratic, NOT left wing by any stretch of the imagination] superPAC, Mind the Gap, which styled itself as the Silicon Valley wing of the hashtag resistance movement. The group advised high profile tech donors, including former Google CEO Eric Schmidt and LinkedIn co founder Reid Hoffmann, on where to direct campaign contributions. The circle of elite donors got a new member in 2020, Fried's son, who gave more than $5.5 million to Democrats and Democratic Party aligned groups that year, instantly making him a DC player.
In 2022, he gave about $40 million. Bankman Fried gave directly to candidates recommended by Mind the Gap. Nishad Singh, a former FTX executive who pleaded guilty to funneling from FTX customers to political causes supported by Bankman Fried, donated $1 million to Mind the Gap in 2021, making him the pack's largest donor for the most recent election cycle. Mind the Gap hasn't been accused of wrongdoing. [It should be; it’s as crooked as they come.]
Bankman meanwhile often accompanied his son to meetings with regulators and elected officials… In magazine profiles and TV interviews, Bankman Fried professed austerity. He wore beat up sneakers, lived with roommates, and drove a Toyota Corolla with all of the savings going to charitable causes. He said, you pretty quickly run out of really effective ways to make yourself happier by spending money. He told a Bloomberg reporter in early 2022; I don't want a yacht.
In reality, Bankman Freed and his inner circle spent with such abandon that the office could feel, as the person who worked on the Super Bowl ad describes it, like the Emerald City in The Wizard of Oz. The company bought hundreds of millions of dollars of luxury real estate, including a thirty million dollars penthouse apartment in the fanciest resort in the Bahamas, where Bankman Fried and his cohorts lived. They chartered private jets for themselves and because Amazon.com doesn't consistently service the island for their online packages, and as bankruptcy filings would make clear, they even bought a fifty two foot yacht. It was purchased by Alameda for Sam Trabucco, the company's co-CEO at the time, who named it Soak My Deck. Bankman Freed's parents seemed to share in the spoils. They flew first class, sometimes private. After landing in the Bahamas, they regularly stayed in a sixteen million dollars beach side apartment. FTX bought that dwelling, along with three dozen others on the island at a cost of roughly $250 million. Through their spokeswoman, Bankman and Freed have said they saw the home as company property, not theirs. Bankman Freed expressed a similar sentiment in an interview at a New York Times conference. “I know it was not intended to be their long term property,” he said.” I don't know how that was papered in.”
So here's how it was papered in. A bill of sale obtained through a public records request in the Bahamas shows that on April 7th, 2022, Bankman and Fried signed as co owners of the apartment, with a Bahamian notary as witness. The document makes no mention of FTX and refers to the property as a vacation home. The house was used as temporary housing while Joe worked in the Bahamas, the spokesperson for the couple said in a statement, outside counsel confirmed to Joe and Barbara that FTX would have all beneficial ownership of the house and agreed to document that in writing. Around the same time, Bankman received a $10 million gift from his son.
A lawsuit filed by Ray the FTX bankruptcy chief claims Bankman Fried got the money by borrowing it from an account that contained customer funds. According to the complaint, he did so after consulting the person who by this point had become a top adviser on legal matters, personal and professional, his dad. The lawsuit alleges that the loan was never formalized. There's no loan agreement, promissory note, or other indication that the funds were not simply taken from Alameda by Bankman Fried to enrich his family. His father moved almost $7 million to personal bank accounts. The rest he kept in crypto on FTX.
Given the rising prices of digital currencies at the time, keeping some of his nest egg on FTX might have seemed like a logical decision for Bankman not to mention an opportunity to live his newly adopted values. But within months, a market wide sell off caused him to lose $1 million and ultimately endangered FTX itself as the company lurched toward insolvency. Bankman Fried publicly claimed all was well, while turning to his father to help minimize the damage. FTX has enough to cover all client holdings, he wrote and later deleted on Twitter… we don't invest client assets. Behind the scenes, his father was offering a very different and ultimately more honest message. FTX was in trouble and needed cash. On November 7th, when Bankman Fried was posting falsehoods, and the next day he and his dad were holed up with other executives trying to deal with what they characterized as a bank run, says a person with knowledge of the operation. Bankman communicated the same two investors, including the short lived Trump White House Press secretary and financier Anthony Scaramucci, who says he first heard about FT’Xs troubles on November 7th.
Scaramoucci, says Bankman, in a phone call that morning, described a liquidity mismatch of roughly $1 billion, but in a second call later that day, Bankman said the figure was actually f$4.5 billion. Finally, Scaramucci heard from another FTX employee who said the real amount was $7 billion. “I think Joe wanted to help his son, and he got hot in the quandary of what was happening,” Scaramucci says. “You want to think the absolute best of your kids.”
In the days that followed, Bankman was included on emails to the Bahamian Attorney General and the country's top securities regulator, who'd been tipped off about the possible misappropriation of funds and were sending increasingly frenzied messages asking, in short, what the hell was going on. Bankman Fried cc-ing his dad, attempted to put them off. He mentioned a liquidity gap and promised the company was doing its best to find investors. In a subsequent email, which his father was also copied on, he offered to pay back Bahamian investors before anyone else, an offer that federal prosecutors have suggested was an attempt to essentially buy influence in the country.
Just before the bankruptcy filing, Bankman urged regulators and creditors to avoid rushing to judgment. His initial position, says the person familiar with the discussions, was that FTX as managers were just kids who'd made a mistake. They'd give the money back, he explained, and then everyone would be able to move on with their lives. Bankman and Fried didn't, however, try to return the cash gift. They haven't explained why, but Ray's lawsuit filed on behalf of FTX’s creditors, suggests a reason they need the money to fund their son's criminal defense. Bankman Fried was arrested in mid-December, extradited to the US, and released on bail. The bail package, $250 million, was secured by bonds from two of his parents' colleagues at Stanford, as well as the deed to the family home where Bankman Fried was ordered to live while he awaited trial.
The sudden turnabout was jarring to friends and Stanford faculty members who'd only just gotten used to the idea that the kid they'd seen at Joe and Barb’s was a crypto billionaire. Now they were attempting to wrap their heads around the accusation from prosecutors that he'd actually been the mastermind of one of the largest frauds in US history. Security barriers went up blocking the road leading to the house. Students and members of the media stopped by to gawlk at Bankman. Fried bought a German shepherd, they told friends, because they were worried about their safety.
There was all this morbid intrigue, says Tim Rosenberger, who graduated from the law school earlier this year. Were they going to hire a new professor who was going to teach tax law? In group chats populated by former FTX employees, a debate has raged over whether Bankman and Fried knew about the alleged crimes. Friends of the couple, meanwhile, have struggled to fathom how two people who were famous for being ethical could have been so close to such a massive ethical lapse.
In August, prosecutors accused Bankman Fried of leaking damaging information about a former employee as part of an attempt to intimidate witnesses. His lawyers denied the charge, but he was sent to Brooklyn Metropolitan Detention Center. As her son was taken into custody, Fried, who'd been watching tearfully from the spectator's gallery, tried to approach him. “That's my son,” she said, when a US Marshall stopped her. She watched as Bankman Fried, following standard protocol, removed his jacket, took off his tie, and bent over to remove the laces from his dress shoes. Bankman held his arm around Fried's shoulders while she sobbed. Friends say they're worried about the couple.
Since Bankman Freed's arrest, neither parent has taught a class. Bankman canceled his courses, and Fried, who retired from the school two months before FTXs collapse, resigned from her political nonprofit. “To have something like this happened to a family of intelligence and public spiritedness,” says John Donahue III, a fellow Stanford professor and longtime family friend, “that's devastating. It's hard to wrap one's head around.”
“How could they not know,” says an other friend who requested anonymity. “The most sense I can make of it is that it was blind faith. They didn't have the full picture.” That's certainly plausible if the narrative laid out by prosecutors is accurate. Bankman Fried was sociopathic in his deception, conning not just investors, but also business partners and even his own employees. It's not a stretch to think he might have used his own parents, along with their towering academic careers, to pump an exploitative enterprise.
Bankman Freed claimed to be a billionaire many times over. Why shouldn't he buy his mom and dad a nice home? And why shouldn't his dad get to hang out with Larry David on a Super Bowl shoot? But even if they didn't know about the alleged misappropriation of funds, critics say the parents deserve part of the blame. Fried's ethical compass could explain how her son might have been able to overlook obvious moral failings in service of what he perceived as the greater good. To follow this train of thinking, what's a little misappropriation of funds if the result is billions of dollars for world-saving charities?
Meanwhile, Bankman was involved in providing legal advice that now looks at the very least less than sound. He participated in a number of decisions, including the launch of FTX, the creation of FTT, the company's courtship of politicians, and the dealings with regulators and the Bahamas that have been criticized by regulators and prosecutors as potentially illegal. Bankman also was involved in the hiring of Friedburg, FTX’s general counsel, who's been accused of enabling the fraud and working to cover up efforts to expose it, including by paying off potential whistleblowers. The allegations made in a lawsuit on behalf of FTX creditors included a quote from Bankman to his son urging him to rely on Friedburg, so we have one person on top of everything.
Friedburg has denied wrongdoing and hasn't been charged with a crime, but critics say there was enough in his background, including a stint at a Canadian online poker website that was accused of cheating players while he was there, to give pause to someone with a clearer set of eyes,
…Defenders of the university, including Donahue, point out that Stanford wasn't the cause of Bankman Fried's alleged crimes, was at most a backdrop for them, but backdrops matter. Coming from a place such as Stanford and having parents of high achievement changes how the world sees your shortcomings. What might be perceived as a sign of unseriousness playing video games during a meeting, say, becomes unmistakable evidence of brilliance. Over the past ten months, Bankman Fried has tried to shift the blame to former employees, lawyers, and corporate rivals, and insisted his mistakes were ones of sloppiness rather than malevolence.