In the weeks since his crypto empire has collapsed, Sam Bankman-Fried has ignored the most fundamental legal advice that any lawyer — or even a casual viewer of TV crime procedurals — would give: Shut your mouth.
Rather, Bankman-Fried, commonly known as SBF, has been on an apology tour, variously tweeting, DM-ing, and giving recorded interviews with reporters about the very things that could land him in prison if he is ultimately charged with a crime. (He hasn’t been, though he is under investigation by numerous agencies and has already been named in at least two civil suits brought by investors.)
SBF has repeatedly admitted that he “f—ked up.” He has apologized on Twitter and in a letter to staff. He hasn’t shied away from press interviews. And on Wednesday, he is expected to take the stage (virtually, anyway) at the New York Times’ DealBook Summit in New York for a one-on-one chat with host Andrew Ross Sorkin.
“What SBF is doing is a form of litigation suicide,” Howard Fischer, a former Securities and Exchange Commission lawyer tells me. “Everything he says that turns out to be contradicted by admissible evidence will be taken as evidence of deceit … I don’t know if this is a sign of unrepentant arrogance, youthful overconfidence, or simply sheer stupidity.”
A lawyer for SBF didn’t respond to a request for comment. Neither did his former lawyer, a well-known white-collar criminal defense attorney from the firm Paul Weiss, who dropped SBF as a client just days after taking him on, citing unspecified “conflicts” that had arisen, according to Reuters.
SBF resigned as CEO when his crypto exchange, FTX, declared bankruptcy on November 11. A new CEO, John J. Ray III, is shepherding FTX and more than 130 affiliated companies through bankruptcy.
Ray, for his part, has made it clear he’s not a fan of SBF’s “erratic and misleading” public statements, according to a bankruptcy court filing. Ray sought to make clear that SBF does not speak for FTX or its affiliates.
To be sure, the whole picture of what happened inside FTX and Alameda hasn’t fully come to light. Is there evidence of colossal mismanagement? You bet. Ray, a lawyer who made his name overseeing the liquidation of Enron, called FTX’s management failures the worst he’s seen in his career.
Being bad at business isn’t (necessarily) a crime. But Ray’s filings appear to bolster news reporting by Reuters that indicates SBF may have implemented a “backdoor” in his company’s software such that the movement of funds would not have triggered internal red flags. (SBF has denied implementing a “backdoor.”)
That’s the kind of allegation that federal prosecutors from the Justice Department would be sniffing around for, several lawyers have told me.
And not just any federal prosecutors. The collapse of FTX is under investigation by the Southern District of New York, widely known as an elite organization packed with some of the nation’s top lawyers. Its nickname is the “Sovereign District of New York.”
“People who work in the Southern District went to the best law schools, were elected to law reviews, and clerked for federal judges,” Nicholas Lemann wrote in the New Yorker in 2013. “They prosecute the biggest, baddest, scariest criminals: evil billionaires, the Mafia, drug gangs, terrorists.”
One such lawyer who previously worked in in SDNY’s Securities and Commodities Fraud Task Force, told me that “if it turns out that the allegations against Bankman-Fried have merit, he is potentially in the most serious trouble you could possibly be in.”
“The Southern District of New York is investigating him. And when they get involved, if there is criminality, odds are that they will make the case aggressively, prosecute it and secure a conviction,” said Samson Enzer, who joined Cahill Gordon & Reindel in 2021. “They rarely fail.”