Cardano and Ethereum co-founder Charles Hoskinson is the latest commentator to compare Sam Bankman-Fried (SBF) to the infamous fraudster Bernie Madoff.
But besides the extraordinary sums involved in the collapse of FTX and the Madoff investment scandal, what else do the two cases have in common?
In a recent tweet, Hoskinson was highly critical of Michael Lewis’ Sam Bankman-Fried biography Going Infinite: The Rise and Fall of a New Tycoon.
Calling it a “dumpster fire of a book,” Hoskinson took issue with what he perceived as Lewis’ light treatment of Bankman-Fried, who Going Infinite depicts as a likable if misguided young billionaire.
Dismissing the book as an “apology tour,” Hoskinson remarked, “it’s extraordinary to me that the Bernie Madoff of my generation is getting a free pass by the media.”
Of course, Hoskinson isn’t the first person to draw a comparison between Bankman-Fried and Maddoff.
Alongside the “Wolf of Wall Street” Jordan Belfort, Maddoff is one of the most well-known white-collar criminals of all time. And unlike Belfort, Maddof never got the chance to rebuild his public image outside of prison and ultimately died 12 years into a 150-year sentence.
In the wake of the FTX collapse in 2022, one of the first people to draw the comparison between Bankman-Fried and Maddof was Diana Henriques, the author of The Wizard of Lies. Her book details the rise and fall of Madoff’s $64B Ponzi scheme.
“The similarities between what we know of Madoff and what we know of Bankman-Fried are striking,” she said at the time. “They are vastly different characters, but what is similar is this deliberate, eye-crossing complexity that would cause the average investor to just glaze over.”
Continuing, Henriques said that both FTX and Maddof’s fraud empire required that investors trust that their respective business processes would work, without fully understanding the mechanics behind them.
“The most essential gift of a con man is that they can inspire trust that never wavers, even in the face of red flags and worrisome details. You can’t look at FTX as anything but a massive leap of faith by a lot of people who should have known better,” she remarked.
Another notable similarity between the two cases is that both men fell victim not to probes or investigations, but rather to market movements and economic circumstances.
In Madoff’s case, despite multiple warnings over the years, it wasn’t until the financial crash of 2008 that things started to go south.
With the economy in turmoil, the rate at which investors wanted to withdraw their funds accelerated.
Unable to attract fresh deposits or fast enough to fill the void, Madoff’s Ponzi scheme soon unraveled. By the time banks stopped lending his firm money, the game was truly up.
While the demise of Madoff’s investment business was catalyzed by the 2008 financial crash, for FTX and Alameda, the prolonged crypto winter of 2022 triggered the firms’ collapse.
Like Madoff, SBF spent his final days as a business mogul desperately trying to secure fresh funding to keep his companies afloat. Unfortunately for both men, no amount of last-minute fundraising was enough to protect their firms from insolvency as investors moved to protect their assets en masse.
One crucial difference between Bernie Maddof and Sam Bankman-Fried is that while the former pleaded guilty to 11 felony charges, SBF has maintained his innocence all along.
With SBF’s fraud trial currently underway, lawyers for the former FTX CEO appear to be building a defense argument centered on his supposed ignorance of the illegal movement of funds between FTX and Alameda Research.
As the trial progresses, Bankman-Fried’s attorneys will need to convince jurors that other actors, such as his one-time girlfriend and Alameda CEO Caroline Ellison, were responsible for the whole debacle.
In his opening statement, Mark Cohen, the lead lawyer for SBF, asserted that the government’s case against SBF hinges on the testimony of Ellison and other witnesses, contending that they had strong incentives to cooperate with the prosecution.
Ultimately, SBF’s defense seems to rely on attacking the testimony of his former friends and colleagues. In contrast, when Maddof admitted to operating the largest Ponzi scheme in history, he adhered to a strict code of silence that would make even the most devout mafioso proud.
However, with the disgraced crypto tycoon facing a potential life sentence at the age of just 31, it’s hardly a surprise that he’ll do anything to stay out of prison.