Re FTX, SBF Should STFU

Sheelah Kolhatkar’s comprehensive and thoughtful examination of Sam Bankman-Fried and his parents in this week’s New Yorker deserves consideration even by those who, like myself, have read every single word about this case.

Kolhatkar was one of the journalists who had enjoyed consistent, welcoming access to Bankman-Fried while he was on bail at his parents’ house in Palo Alto. That access ended with Bankman-Fried’s decision to share private writings by his former girlfriend and now cooperating witness Caroline Ellison with the New York Times.

I have already shared that I cannot stand the way even a punk-ass bitch like Bankman-Fried has been pre-judged by an angry society. But his decision to speak to the media at such length, to everyone from Effective Altruism bloggers, to totally cringe non-apologies before he was arrested, to detailed interviews with probing journalists after being arrested, is difficult to comprehend. No criminal defense lawyer would advise any contact with the media while charges are pending.

Those with experience in both journalism and criminal law have watched in amazement as his extremely able lawyers — and I know a couple of them personally, and they are able — have allowed this very undisciplined and blurty defendant to continue to sit with journalists, who do not necessarily have his best interests at heart. One of the things we learned from the New Yorker piece is that his mother Barbara Fried is one of the primary proponents of this unusual strategy.

According to the piece, Ms. Fried, a much-decorated legal scholar who is no stranger to the press herself, is a primary driver of SBF’s media strategy. “The couple embarked on a campaign to spread their perspective.” Their pushback is based on the idea that “the press, unfairly assuming that their son is guilty, has failed to examine weaknesses in the government’s case and the role of FTX’s lawyers in the company’s downfall.”

To that end, and with money for Sam’s defense reported to be dwindling, the family has also hired a media professional. Risa Heller is a top strategist and worth every penny of the fortune she’s surely charging the family.

I know Risa well and worked effectively with her when she did PR for Jared Kushner at the time he owned the New York Observer and I was its editor. Jared and I started an annual ranking of the most important PR firms in town, which has grown to be a prestigious and career-boosting list. One year, I somehow neglected to put Risa on. She certainly deserves to be high up on the list, and probably in the top 10 – but I forgot simply because I spoke to her so often that I really didn’t see her as a PR person. It hurt her feelings, and I apologized for the oversight.

But this notion that the media interviews would help Bankman-Fried is so ill-advised that I can’t understand how any of these PR people and lawyers could have allowed it. Already, we see the devastating effects. Bankman-Fried’s cooperation with the New York Times has caused his bail to be revoked, so he’s sitting in jail in Brooklyn, instead of preparing his defense inside his parents’ beautiful Stanford-subsidized home in Palo Alto.

It’s not simply a gap in his quality of lodging. It might have permanent and devastating effects. Bankman-Fried is far less able to aid his own defense from jail in Brooklyn, where he allegedly has limited access to the Internet, let alone the massive amounts of files and data on the servers he could access in assisting his own defense while on house arrest with nothing else to do.

Seldom do you get such clear proof that a strategy has failed. The media availability strategy literally landed this guy in jail and impeded his defense to the point where it might help result in a long prison sentence. So we’ve seen the obvious downside.

But I’m perplexed as to what his smart and talented advisers could have possibly seen as an upside.

The New Yorker article seems to suggest that his reputation is almost as valuable to Sam Bankman-Fried as his freedom. That SBF partisans could be so naïve about the mood of the American public to think any sort of reputational salvage is possible is mind-boggling. Sam Bankman-Fried is a billionaire who is accused of stealing from and bankrupting thousands of ordinary investors. Beyond the accusation, however, he is a baby-faced (former) billionaire born to almost inconceivable privilege. His parents seem to think that their Stanford provided home in the most expensive ZIP Code in America is modest—a “one-story bungalow” as the article pukily describes it. They just don’t get how they’re perceived by ordinary Americans, not to mention the twelve who’re gonna eventually be empaneled on a jury. And yeah, it doesn’t help that he has not one but two Jewish surnames, plus a hyphen that screams “hate me” to ordinary Americans. The article mentions that some of the threats directed their way after FTX collapsed was antisemitic. That surprises me zero and should not surprise the family and their advisers.

The notion that American public opinion would benefit from seeing more of this kid is preposterous. Both legally, and from a PR point of view, Bankman-Fried would have been way better off saying nothing from the moment FTX experienced its first ripples of trouble.

That’s an excruciating proposition. When you’re accused of something heinous, the instinct to share your version of events is almost irresistible. Especially when you believe you’re innocent, but even if you know you’re somewhat culpable, but not in quite the horrible ways you’ve been portrayed by the prosecution, the temptation to “get the real story out there” can be overwhelming. But it’s always a bad idea. The prosecution, with its dramatic charging documents and unlimited access to the media, has an unovercomeable advantage. A defendant cannot alter the public perception. He cannot do any real good. But he can do tons of harm. Not just revoking bail, a rare, but horrible outcome in this case. But the massive amounts of evidence SBF is adding to the case post-arrest can only do him harm.

This New Yorker article provides another good example.

Modern Consensus has already covered the weird way the mainstream media has tried to pretend that SBF was a bipartisan donor. He wasn’t. As we’ve reported, Democrats were the lucky recipients of about 99.5% of the boy wonder’s largesse. Kolhatkar writes that SBF “also made dark-money contributions to Republicans, which he wouldn’t quantify. One of his goals was to counter extremist candidates in Republican primaries, he said, and by keeping his payments under the radar he could avoid the backlash that would ensue if candidates were found to have taken money from a known Democratic donor.”

It seems fairly clear both from how she’s phrased this and from the guilty plea of FTX CEO Ryan Salame, whose secondary job at the company was to provide a credible Republican face for GOP donations, that they’re talking about straw donors. That’s illegal. People go to jail for that. When you use names other than your own to give money to a candidate, you have usually committed a crime. Laws differ based on whether the candidates are federal, local or state, but in general, you must give donations in your own name.

That has two purposes. One is transparency – the public deserves to know which candidates are being supported by which donors at what dollar levels. The second has to do with campaign finance. The FEC limits individual donations to federal candidates—in the ’23-’24 cycle, that amount is $3,300. If you want to give Congressional Candidate Smith $33,000, you cannot simply give him $3,300 yourself and then recruit nine friends to do the same while secretly reimbursing them for those donations. Although the chronically understaffed Federal election authorities seldom enforce it, sometimes they do, and so do others. This summer, the Manhattan DA charged six people over straw donations made to benefit Mayor Eric Adams.

So cooperating with the New Yorker, which is almost unerringly sympathetic to Bankman-Fried here, in contrast to the BusinessWeek cover story about his parents last week, has almost no shot of doing Bankman-Fried any good and stands a real chance of hurting his defense.

Sam Bankman-Fried and his parents, and his very able PR and legal advisers seem to have a view that telling their side of the story will help balance the scales. In fact, they do land some punches in terms of placing some blame elsewhere. The law firm Sullivan & Cromwell, and its alum, FTX general counsel Ryne Miller, are depicted as having pressured SBF to file for Chapter 11 rather than taking the steps SBF asserts might have saved the company. Worse, Sullivan’s motive for applying that pressure is portrayed as lust for legal fees. Indeed, they’ve collected over $100 million in post-bankruptcy billings, with “hundreds of millions more likely to come.” A trustee who polices conflicts of interest on behalf of the Justice Dept has objected to the firm’s appointment.

Jonathan Lipson, a bankruptcy expert at Temple University, has questioned why Sullivan & Cromwell didn’t observe or mention the exchange’s troubles before it collapsed and opined that perhaps a law firm that missed prominent red flags isn’t well-suited to the task of leading the bankruptcy.

(Modern Consensus has reached out to Prof. Lipson and will update this story with his response.)

These are solid punches, and they’ve landed. But so what? The jurors aren’t gonna read the New Yorker profile. And at this point, nobody else’s opinion of this kid matters.

Again, as someone with plenty of experience in media and criminal justice, this strategy strikes me as much more aimed at making the family feel like they’re “doing something” about SBF’s epic predicament. My advice, which I offer for free, is STFU. No amount of access to friendly journalists at elite publications is going to alter the fact that Bankman-Fried is viewed as a super villain. Working the refs cannot help. But as we’ve seen, it can do a lot of harm.