OPINION:
Sam Bankman-Fried (“SBF”), the Bahamas beach-living, disheveled 30-something-year-old whose $16B+ net worth evaporated in the past month, faces an uncertain future.
The question of whether he will face serious legal consequences for the apparent fraud his cryptocurrency exchange FTX engaged in is now up to prosecutors.
More than one million customers lost everything (or almost everything) they invested with FTX.
How did $16 billion vanish?
It appears that SBF used a Ponzi-scheme to take creditors’ deposits, and rather than save them on his crypto exchange, he invested them (without their knowledge) through his hedge fund Alameda Research, which made spectacularly bad investment choices.
While SBF is engaged in a legally dubious worldwide public relations tour (he appeared on ABC’s “Good Morning America” and even traveled to New York to be interviewed at the DealBook conference), it is time to analyze how Congress was asleep at the switch and how the media has covered the spectacular crash of the world’s leading proponent of “effective altruism.”
Let’s begin with Congress.
Outgoing House Finance Service chairwoman Maxine Waters (D-CA) is hustling to hold a congressional hearing before the Democrats lose the majority, demanding SBF to appear as a witness at a hearing next week. He has shamelessly said he will appear when he is ready. We will see if Congress uses its subpoena power.
Astoundingly, Chairwoman Waters praised via Twitter the disgraced financier’s “candid” interviews with the press ahead of his hearing before a House committee.
“We appreciate that you’ve been candid in your discussions about what happened at FTX,” wrote Chairwoman Waters. “Your willingness to talk to the public will help the company’s customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th.”
Keep in mind that in 2021 and 2022, Bankman-Fried donated nearly $38 million to various candidates and PACs, mainly giving to Democratic candidates and left-wing groups, according to Federal Election Commission filings (FEC).
Apparently, Democratic mega-donors have a perk that other citizens do not have: They can decide on their own if they will appear at a congressional hearing.
SBF took to Twitter to say, “Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain. I’m not sure that will happen by the 13th. But when it does, I will testify.”
In a late-breaking report on December 7, CNBC reported that Chairman Waters does not plan to subpoena SBF to force him to testify on Dec. 13. In fact, on Friday, SBF finally relented and agreed to testify.
Bankman Fried’s initial unwillingness to testify before the Congress slated for Dec. 13, despite a barrage of media appearances, didn’t go down well with the crypto community.
Alex Berenson, an author by profession, took a quip at Bankman-Fried’s refusal to testify despite his media frenzy and said that the former CEO is “happy to talk to anyone and everyone… just as long as he’s not under oath.”
Another user pointed toward the hefty donations made by the former CEO to the Democratic party, implying that his donations have given him leverage to get away with stealing people’s money while setting his own terms for testifying in Congress.
Another Twitter user wrote: “He shouldn’t have the option of “at his leisure” - they need to subpoena him to show up and get the handcuffs ready. Learning what happened is a complete lie.”
Where was Congress during this economic disaster? Why is crypto unregulated? Why was FTX able to operate without a Chief Financial Officer (CFO) or even a Board of Directors?
Congressional Democrats were asleep at the switch. Now they are shamelessly and urgently trying to appear tough on crypto.
The mainstream media, however, continues to treat SBF with kid gloves. Most notably, the New York Times’s recent puff piece on Bankman-Fried has painted the former crypto CEO as a merely confused and mistaken young entrepreneur, implying that he may even deserve a second chance. NYT offered him over an hour of airtime during its Dealbook Summit to defend himself and shift blame to other factors, including “management failures.”
Unsurprisingly, the crypto community on Twitter was not happy with NYT’s treatment of SBF. Crypto economist Alex Krüger tweeted that the puff piece was a “disgraceful reporting by the @nytimes on FTX. It portrays SBF as a charitable entrepreneur who went under and does not mention the words fraud, criminal, substance abuse.”
Crypto entrepreneur Zooko Wilcox pointed to the “disgusting complicity on the part of the New York Times. He has ruined countless people’s lives by theft and fraud, and NYT is now helping him to delay or evade justice by whitewashing him in their prestigious, influential newspaper. I doubt this is just a mistake on their part.”
The fact is, the downfall of FTX and SBF has cost hundreds of millions of dollars for everyone, caused by dishonest use of customer funds, non-existent internal corporate controls, and poor business decisions – all of which Congress failed to scrutinize until now. Bankman-Fried’s incompetence and fraudulence are what have led to this crisis, and he deserves the consequences in the courts of law and public opinion.
This travesty is also unfair to the crypto industry. If this emerging sector was to learn and improve moving forward, we must make sure that lawmakers and the media do not coddle criminals for their “mistakes” and use them as examples of why the industry needs better regulatory clarity.
• Matt Mackowiak is the president of Potomac Strategy Group, a Republican consultant, a Bush administration and Bush-Cheney re-election campaign veteran and former press secretary to two U.S. senators.
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