Sam Bankman-Fried's farcical fundraising effort
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Illustration: Brendan Lynch/Axios
Sam Bankman-Fried yesterday created headlines and lawyer ulcers by instigating a direct message interview with Vox reporter Kelsey Piper, in which he insulted regulators and his own accounting acumen.
What to know: It's impossible to take Bankman-Fried at his word right now, because so many of them are nonsensical. They read like the desperate pleadings of a man trapped beneath his house of concrete cards.
Case in point: Bankman-Fried told Piper that he's still seeking to raise $8 billion from outside investors, in order to make customers whole, adding that "a month ago I was one of the world’s greatest fundraisers."
- This is not going to happen.
- For starters, no one is sure how big the hole really is. Remember that when Bankman-Fried first reached out to investors about a bailout, he first told them he needed $2 or $3 billion. By that evening it was $4 to $5 billion. Now it's $8 billion, with many suspecting it's even larger because FTX's illiquid tokens and other investments keep hemorrhaging value due to crypto contagion.
- Plus, FTX has zero brand equity left.
- Finally, Bankman-Fried isn't even still CEO or a company officer, having resigned in conjunction with the Chapter 11 filing. Maybe he hopes to be a white knight arriving in Nassau with bags of cash, but it's delusional.
Look ahead: What comes next will play out both in Delaware bankruptcy court and on Capitol Hill.
- Current FTX CEO and chief restructuring officer John Ray, who worked on the Enron case, has been scathing toward his predecessor. Per a new bankruptcy court filing:
- "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented ... Mr. Bankman-Fried is not employed by the Debtors and does not speak for them."
- Again, this is a company that raised $2 billion from some of the world's most sophisticated venture capital and private equity firms.
Both the House and Senate announced that they'll hold hearings on the FTX case, basically in response to public outcry.
- Expect both browbeatings to occur next month, although no dates have been set. The House Financial Services Committee says it plans to call Bankman-Fried, while the Senate Banking Committee hasn't yet developed a proposed witness list.
The bottom line: I messaged one investor about Bankman-Fried's fundraising comments, to ask if there was something I missed. He replied with a video of heads exploding. Felt about right.
