Editor’s Note: A version of this story appeared in CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.
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.”
NUMBER OF THE DAY: 80%
Big Tech is increasingly having to tighten its belt, laying off workers (Twitter, Facebook, Amazon) and reining in the perks that have long been associated with Silicon Valley and startup culture.
The latest: Snapchat, which earlier this year said it would lay off 20% of its staff, is now asking workers to return to the office 80% of the time, or the equivalent of four days a week, beginning next year.
Bloomberg cited an internal memo from CEO Evan Spiegel telling employees they may have to sacrifice some amount of “individual convenience” but it will benefit “our collective success.”
President Joe Biden is in an awkward position.
On one hand, Joe’s a union guy, through and through, as he so often reminds us (a Scranton native!) On the other hand, he’s the leader of the world’s biggest economy, and the businesses within that economy are practically begging for Washington to help them stop a strike by tens of thousands of railway union members.
Here’s the deal: Biden on Monday called on Congress to pass legislation “immediately” to avert a rail shutdown that could start at the end of next week.
Rail managers and business interests say that a strike would do serious damage to the US economy. Union members who oppose a tentative deal struck in September say, um, yeah guys, that’s kinda the point of a strike…
To be clear, union leaders have repeatedly said they don’t want to strike, but they believe the threat is the only way to get railroad management to negotiate on their biggest as-yet-unmet demand: sick days. (And no, I don’t mean extra sick days — I mean any sick days, which workers currently have to take unpaid).
They say the railroads, which reported record profits last year, can afford to have a conversation about paid sick leave.
“The railroads have the ability to fix this problem,” said Michael Baldwin, president of the Brotherhood of Railroad Signalmen. “If they would come to the table and do that, we could move forward without Congressional action.”
Biden said he is sympathetic to the union’s demand, but that a rail strike would cause too much economic damage and must be avoided.
A strike would be a blow to supply chains that are already stretched thin. Costs of gasoline, food, cars and other goods could spike. One research group estimates that a week-long strike could cost the economy $1 billion.
Bottom line: For now, it seems like a strike will be averted (though, of course, we said that back in September and here we are again). Biden said today that he was “confident” Congress could get the job done, and House Speaker Nancy Pelosi said the chamber could vote on legislation as soon as Wednesday.
But any one lawmaker can gunk up the works on this kind of thing, and it’s not clear that everyone’s on the same page.
Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)