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Sam Bankman-Fried’s Fall From Grace: SBF Prison Interview Shows Life After FTX Collapse

Last Updated 9 seconds ago
Teuta Franjkovic
Last Updated 9 seconds ago
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • In an interview, Bankman-Fried recounts FTX’s fall, blaming the bankruptcy filing for triggering a DOJ investigation.
  • Bankman-Fried expresses regret over leadership decisions, suggesting he should have maintained control.
  • While awaiting appeal, Bankman-Fried criticizes the proposed FTX reorganization plan.

In December 2021, Puck’s reporter William Cohan first met Sam Bankman-Fried through an introduction by Anthony Scaramucci.

At the time, Bankman-Fried was at the height of his power as the founder of FTX, then valued at $32 billion. This made him the richest person under 30  in the world.

Cohan’s second meeting  with Bankman-Fried occurred under much grimmer circumstances. It happened inside the Metropolitan Detention Center (MDC), Brooklyn, New York City, where Bankman-Fried has been since his arrest and jailing.

Author Chronicles: From Casual Encounter to Prison Visit

Bankman-Fried’s mother, Barbara Fried, suggested the interview, which was arranged through a prison email system, stark.

Upon arriving at MDC, Cohan experienced a thorough and somewhat invasive entry procedure. He eventually met Bankman-Fried. Now significantly thinner, he wore a prison jumpsuit, a far cry from the casual attire he wore during their first meeting. Despite his circumstances, Bankman-Fried seemed to be coping as well as could be expected, Cohan said. He maintained a semblance of normality by participating in the small economies of prison life, such as trading food items.

Their conversation covered a range of topics, from Bankman-Fried’s daily life in prison to his thoughts on the legal battles ahead. Bankman-Fried shared his living conditions, which include sharing a dormitory-style space with other inmates, highlighting the stark contrast to his previous life of luxury. He also expressed a resigned acceptance of his current situation, finding small comforts in movies and games.

Doubts About Ellison’s Risk Appetite as Alameda CEO

Bankman-Fried reflected on the downfall of FTX. He said he felt betrayed by the legal system and advisors whom, he believed, led him to ultimately harm the company. The former FTX chief compared his situation to past financial crises. He also wondered why his actions were met with criminal charges when similar financial industry cases typically resulted in civil, not criminal, repercussions.

The disgraced former billionaire discussed his former girlfriend, Caroline Ellison. Bankman-Fried appointed her to lead Alameda Research after being advised against managing both FTX and the hedge fund. He chose to lead FTX. He mentioned that he had approached others for the Alameda position, but they declined. Bankman-Fried described Ellison as a competent manager and administrator who was hesitant about making large investments and taking big risks.

SBF: ‘Maybe I Should Have Ignored Lawyers, Run Both Companies Like Elon Musk’

Bankman-Fried also expressed regret over not putting more effort into finding another suitable executive for Alameda. He also indicated that he should have disregarded his legal counsel’s warnings about the conflicts of interest.

This sentiment echoed throughout their meeting, revealing a recurrent theme of his current reflections—that perhaps he should have maintained control over both entities, similar to how Elon Musk manages his various business ventures . This, Bankman-Fried said, might have allowed him to steer both organizations without the complications that ultimately arose.

‘Every Man for Himself,’ Blames Lawyers for DOJ Targeting

Bankman-Fried talked about the chaotic events leading up to FTX’s downfall in the fall of 2022 . He described a dire situation where it felt like “every man for himself” as FTX approached a severe liquidity crunch. Initially, he sought to stabilize the company through a deal with Binance which, ultimately, disintegrated. Indeed, the deal may have been tenuous from the start.

Amidst these troubles, his legal team advised him to hand over control of FTX to John J. Ray III. Following this, Ray swiftly moved to file for bankruptcy. He also appointed Sullivan & Cromwell, the company’s outside legal counsel, to represent the bankrupt estate.

The move to bankruptcy escalated matters, putting Bankman-Fried directly in the crosshairs of federal prosecutors. He explained that shortly, after Sullivan & Cromwell briefed federal authorities on November 9, 2022—just before the bankruptcy filing—they presented a narrative suggesting Bankman-Fried might have orchestrated fraudulent activities involving $8 billion of customer funds between FTX and Alameda Research.

According to Bankman-Fried, this briefing was based on information from FTX’s US general counsel, Ryne Miller. The lawyer, Bankman-Fried said, discussed issues related to “reconciling digital assets with entitlements” on FTX’s US exchange. Notably, Andrew Dietderich from Sullivan & Cromwell clarified in a sworn declaration the discussion with the Department of Justice (DOJ) was just about reconciliation and did not directly accuse Bankman-Fried of wrongdoings.

Criticizing FTX2.0. Plan, Alleges Legal Counsel Self-Exoneration

Bankman-Fried will appeal his 25-year sentence. He maintains his innocence, focusing on what he views as prosecutorial overreach. He claimed that he had been made a scapegoat for broader issues within the cryptocurrency industry.

According to Sam Bankman-Fried, his incarceration isn’t a result of mingling FTX and Alameda’s assets. Instead, he says, it is a consequence of a perceived inability to negotiate with federal prosecutors. He says the situation was like a bank run and questions why he was prosecuted. Bankman-Fried was presented with an indictment that offered him a stark choice. He could either plead guilty and face sentencing or go to trial and fight the charges.

Without a plea deal available, he opted for trial, where he ultimately faced defeat. Unlike many of his fellow inmates, Bankman-Fried has the opportunity to frequently communicate with his new attorney. However, while he is getting ready for an appeal in the autumn, the 32-year-old acknowledges the chances of overturning the verdict are slim.

During Cohan’s visit, it was discovered that Sullivan & Cromwell, acting as counsel for the debtor-in-possession in FTX’s bankruptcy case, had filed an initial draft of a reorganization plan.

This plan proposes to return all invested capital to customers and creditors, adding an additional $3 billion as a result of the investments Bankman-Fried directed through Alameda. However, the plan is still pending confirmation. It includes a clause that would exonerate Sullivan & Cromwell and other FTX advisors from future lawsuits.

This kind of legal protection is typical in reorganization plans but stands out given the high-profile nature of the FTX collapse.

SBF Seeks Transfer Amidst Legal Battles

Cohan and Bankman-Fried discussed the potential of him moving  to a different prison, closer to his family in California. This move, while potentially providing some emotional relief, carries its own set of challenges and uncertainties, including a long and potentially arduous transfer process.

Cohan’s visit to Bankman-Fried provided a rare glimpse into the personal and professional impact of the FTX saga on its founder.

As Bankman-Fried prepares for his appeal, the crypto world watches closely, recognizing that the outcomes could significantly influence the regulatory and legal landscape for digital currencies.

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