FTX’s second act

“Mismanagement of a charitable entrepreneur” were the words that the New York Times used to endorse the psychological theme that Sam Bankman-Fried constructed during what herein is being labeled as “FTX’s Second Act.”

“FTX’s First Act,” discussed in my article “Post-Election Questions” (News-Press, Dec. 3), was the creation and operation of the cryptocurrency firm FTX and related companies. This piece will discuss some of the events and people involved in acquiring the conglomeration of skills and contacts that enabled “FTX’s First Act” to occur as well as “FTX’s Second Act.”

Joseph Bankman, a Democrat with expertise in psychology and taxes, and Barbara Fried, a Democrat with expertise in distributive justice —  both professors in Stanford Law school — are the parents of Sam Bankman-Fried and his younger brother Gabriel Bankman-Fried.  

Starting in January 2019, Gabriel Bankman-Fried worked for U.S. Rep. Sean Casten, D-Ill., on the subcommittees for Financial Services and Consumer and Investor Protection and on the task force on artificial intelligence.

Months later, in May 2019, Sam Bankman-Fried moved FTX and Alameda from Hong Kong to the Bahamas, where he spent an estimated $300 million on real estate ,including FTX buying a $16 million “vacation” house for his parents.

While Gabriel Bankman-Fried worked for the congressman, he ran a 501-c nonprofit called Guarding Against Pandemics, funded by by his brother Sam, out of a $3 million townhouse in D.C., where his parties became the hottest invitations in the political capital of D.C. and he contributed to Blue Dog Democrats. He remained employed by the congressman until February 2021.

During this time, Barbara Fried ran Mind the Gap, another nonprofit whose top donor in 2020 was former FTX employee Nishad Singh. The organization has been described as “funneling millions to leftist” to send partially filled out ballots to harvest votes for the 2020 and 2022 elections.

On Dec. 8, 2021, U.S. Rep. Maxine Waters, D-Los Angeles, chair of the House Financial Services committee, invited Sam Bankman-Fried to participate in a panel discussion questioning whether market regulators have the authority needed to ensure market integrity.

In March 2022, Gabriel Bankman-Fried began to lobby the White House by visiting with Democratic lobbyist Jenna Narayanan, who worked for the self-described “liberal activist” Tom Stayer, a Democrat. Sam Bankman-Fried “donated” $66,500 to the Democratic Congressional Committee.

On May 13, Sam “donated “$685,000 to the DNC and visited the White House with Mark Wetjen, an FTX employee and former member of the the Commodities Future Trade Commission under the Obama-Biden administration, and Eliora Katz, director of government relations and policies for FTX and former member of the U.S. Senate Banking Committee.

Sam Bankman-Fried was pushing for cryptocurrency to be regulated by the CFTC instead of the SEC, which has stronger enforcement powers and a larger budget.

In June, Sam “donated” $250,000 to the DCC and pledged another billion dollars to the Democrats.

SEC head Gary Gensler, a former colleague of Joseph Bankman, talked on CNBC about the need to regulate cryptocurrency but took no action except to call Sam in October. Similarly, the CFTC and the committees of Reps. Castens and Waters did nothing.

FTX’s first act ended three days after the midterm elections. Sam Bankman-Fried resigned, $473 million was “removed” from FTX by an “unauthorized: transaction, and FTX, Alameda and 100 affiliates filed for bankruptcy.

FTX’s second act opened with the bankruptcy court-appointed lawyer John Ray III criticizing the lack of financial controls, leaving an alleged million creditors. For comparison, FTX has a million creditors, and Bernie Madoff, who is in prison, had 40,000

Sam Bankman-Fried stopped his biweekly trips to D.C. and gathered his closest friends, who are the only ones knowledgeable enough to be witnesses, around him in his $30 million, seven-bedroom penthouse in the exclusive gated community of Albany in the Bahamas.

Joseph Bankman canceled his classes and traveled to The Bahamas where together with his wife announced they would “return” the $16 million vacation house in the Bahamas purchased by FTX. 

It was leaked that Barbara Fried and Gabriel Bankman-Fried donated “dark money,” which are funds raised to influence elections by nonprofits that are not required to report the identities of their donors, to the Democrats to influence the elections of 2020 and 2022. Ms. Fried resigned from the Mind the Gap nonprofit, and Gabriel stepped down from his nonprofit, Guarding Against Pandemics.

After it became known that Sam Bankman-Fried onated $10 million to Joseph Biden in 2020 and another $40 million to the Democrats for the midterms, Sam sprang into action by saying he, and his relatives running Mind the Gap, had also secretly donated dark money to Republicans for which, of course, conveniently there are no records. Sam appeared to summarize the circles he moves in when he said he hid those because people who donate to Republicans are treated differently.

The inaction of the White House, SEC, CFTC and IRS (for regulating the nonprofits) gave Sam  the opportunity to use podcasts and friendly “interviews” without those bothersome “oaths,” to wage his psychological campaign, which was supported by the Times article using words such as “mismanagement,” charitable” (distributive justice?) and “entrepreneur,” while avoiding any mention of “fraud,” “crimes,” or “stolen.” 

The Times writer and co-host of CNBC’s “Squawk on The Street,” Andrew Ross Sorkin, listed Sam Bankman-Fried as a “29-year-old American investor, entrepreneur and philanthropist,” and George Stephanopoulos used the same term on ABC’s “Good Morning America.”

On Dec. 12, the day before SBF was scheduled to testify under oath before Rep. Waters’ committee, the Bahamas police arrested  Sam Bankman-Fried, based on criminal charges filed in the U.S. where it appears that extradition can happen only if the Bahamas determines that he violated their laws as well as those of the U.S.

The “word-on-the-street” was that the timing was designed to prevent his being questioned, under oath, by Republicans. Subsequently the SEC and CFTC filed charges.

Thus ended FTX’s second act although expect FTX’s third act, much like flashbacks in movies, to provide more details on the first two acts.  

 Brent E. Zepke is an attorney, arbitrator and author who lives in Santa Barbara. His website is OneheartTwoLivescom.wordpress.com. Formerly, he taught law and business at six universities and numerous professional conferences. He is the author of six books: “One Heart-Two Lives,” “Legal Guide to Human Resources,” “Business Statistics,” “Labor Law,” “Products and the Consumer” and “Law for Non-Lawyers.”