One by one, Sam Bankman-Fried is losing the few influential business figures, who gave him the benefit of the doubt earlier.
He has just completely lost the sympathy of Bill Ackman, the founder and CEO of hedge fund Pershing Square.
The famous investor initially refused to condemn Bankman-Fried, known by the initials SBF, when the latter filed for Chapter 11 bankruptcy for his crypto empire, made up of FTX and Alameda Research, a hedge fund that also acted as a trading platform for institutional investors interested in cryptocurrencies.
Ackman went so far as to find SBF persuasive, when the latter claimed on November 30, in his first media interview, that he did not intend of defrauding clients and investors of FTX and Alameda.
U-Turn
"Call me crazy, but I think @sbf is telling the truth," the financier wrote on Twitter on November 30.
However, he had to explain his remarks a few days later, after sharp criticism on social media, deeming SBF's actions "egregious."
"I was in attendance at the @andrewrsorkin interview of @SBF_FTX and tweeted that I found SBF believable," Ackman, who is known for his investment bets, declared on December 3. "Many have interpreted my tweet to mean that I am defending SBF or somehow supporting him. Nothing could be further from the truth."
"The @FTX_Official fiasco is, at a minimum, the most egregious, large-scale case of business gross negligence that I have observed in my career, and that conclusion is reinforced by SBF’s recent public statements," he continued.
Despite his harsh words, Ackman held back from condemning Bankman-Fried. It is now done. It was Bankman-Fried's December 22 posting of a $250 million bail to be released that was the final straw for Ackman.
'Criminal Indictment'
"I instinctually want to believe the best in people," Ackman reacted. "When coupled with my strong belief that one is innocent until proven guilty, I can be at risk of trusting a crook. @SBF_FTX posting $250m of bail is itself a criminal indictment and refutation of everything he has said to date."
A few hours later, he added: "I just read the terms of the bail agreement. The best one can say is that he has some very wealthy friends and family that believe in him, but with the guilty pleas and cooperation from his two colleagues, things are not looking good for @SBF_FTX."
Bankman-Fried was released after his parents, both law professors at Stanford, signed a $250 million recognizance bond pledging their California home as collateral, according to multiple media reports. Two other friends with significant assets also signed, according to reports.
Such a bond doesn't require full payment up front, but comes into play if a defendant misses a court hearing, or skips town.
Bankman-Fried will live at his parents' house and will be required to wear an ankle bracelet to monitor his whereabouts during the pre-trial period, which could be lengthy, given the size and scope of the FTX collapse.
Justice Department lawyers moved to extradite Bankman-Fried, after two of his close associates pleaded guilty to multiple federal fraud charges and agreed to cooperate with prosecutors.
Bankman-Fried v. Bernie Madoff
Zixiao (Gary) Wang, 29, FTX co-founder and former Chief Technology Officer, and Caroline Ellison, 28, the former CEO of Alameda Research, the hedge fund founded by Bankman-Fried, pled guilty December19, according to the U.S. Attorneys Office for the Southern District of New York.
“As I said last week, this investigation is very much ongoing,” U.S. Attorney Damian Williams said in a prerecorded message.
Federal prosecutors are putting pressure on other employees of FTX and Alameda Research to turn against their former boss.
"Let me reiterate a call I made last week," Williams said in the message. "If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving quickly and our patience is not eternal."
Ackman proceeded to draw a comparison between Bankman-Fried and Bernie Madoff, the former chairman of Nasdaq considered one of the biggest financial con artists in history.
"It appears that @FTX_Official was a legitimate profitable exchange started by an MIT grad with backing from top VCs at a massive valuation. Why would @SBF_FTX commit fraud at Alameda and blow up FTX and risk a lifetime in jail? This reminds me of Madoff, who had a profitable trading operation that generated more than he could ever spend on his lifestyle," the investor said.
He then asked: "Why would he get involved in a ponzi scheme? A theory: Both lost money and were embarrassed. Rather than acknowledge the losses, they assumed that they could ‘borrow’ customer funds, invest them and earn back the loss, and then repay the borrowed funds. All to avoid embarrassment and admission of failure."
But then the market crashed and the losses were too large to recover from, the financier continued. "At that point, they were stuck."
"Neither SBF or Madoff have the typical profile of a crook," Ackman said. "Rather it appears, they were unwilling to accept the consequences of failure and bet they could ‘fix’ things with temporarily ‘borrowed’ funds until they dug too deep a hole and were outed. Again, just a theory."
