Nearly three weeks have passed since FTX founder Sam “SBF” Bankman-Fried announced that his exchange was facing a deep liquidity crisis, was unable to find a last-minute bailout and was forced to file for Chapter 11 bankruptcy. The bankruptcy affected millions of investors, leaving many portfolios completely wiped out.
Bankman-Fried has openly admitted that FTX lent client deposits to Alameda Research, FTX’s sister hedge fund, although he has characterized this as an error that was caused by “confusing internal labeling.” FTX’s terms of service explicitly state that customer funds will never be loaned to other financial institutions or used by FTX for proprietary trades. Sam publicly stated in a now-deleted tweet, “We do not invest client funds (even in Treasuries).”
The broader crypto markets have bled red in response, and other industry players now face insolvency risks with the contagion spreading to Genesis, Grayscale and many other firms that held assets on FTX or were owed money by Alameda Research.
Related: The fall of FTX and Sam Bankman-Fried could be good for crypto
FTX’s new chief operating officer John Ray III stated in court documents, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as occurred here.” In the same court documents, FTX admitted it may have more than 1 million creditors, most of whom were users who lost money when SBF took it and lent it to Alameda Research for its proprietary trading business.
In the wake of Bankman-Fried’s actions, it is deeply appalling that mainstream media such as The Wall Street Journal, The New York Times, The Washington Post, Forbes and many others have covered the FTX scandal and subsequent meltdown with kid gloves, refusing to shout out Bankman-Fried and his inner circle for the use and misuse of customer funds.
Cancel Culture has wiped out many people yet @WSJ and @nytimes still trying to rehabilitate and protect the imagination of Sam Bankman-Fried. So many young people who want to find their way in life have been wiped out.
The “elites” protect their own selves under a microscope. pic.twitter.com/ZaUjLi7TTz
— Charles V Payne (@cvpayne) 24 November 2022
Instead, these publications have largely framed the FTX disaster as a series of honest mistakes by overly ambitious and quirky entrepreneurs adhering to the effective altruism movement. Bankman-Fried and insiders like Caroline Ellison, former CEO of Alameda Research, were simply trying to do good for the world and will no longer be able to see through their benevolent ambitions.
For example, the Wall Street Journal published an article that focused primarily on Bankman-Fried’s charitable ambitions—while easily glossing over the fact that he misappropriated client funds:
Bankman-Fried has said that his law professor parents instilled in him an interest in utilitarianism, the philosophy of trying to do the greatest good for the greatest number of people. He said he began to put those ideals into practice while majoring in physics at MIT. Concerned about the suffering of animals on factory farms, he said, he stopped eating meat.
The WSJ also delved into the FTX Foundation and its Future Fund (a non-profit arm of FTX), discussing how many good causes are no longer able to collect on promised grants:
Related: Will SBF face consequences for mishandling FTX? Don’t count on it
The collapse of Mr. Bankman-Fried’s empire has reverberated far beyond the Bahamas base, through academia and cutting-edge laboratories around the world. More grant recipients […] was still owed funds when FTX failed, according to people familiar with the matter.”
Not once did the WSJ condemn Bankman-Fried for his actions. While discussing multi-million dollar losses suffered by charities, it failed to mention the many billions stolen from FTX customers who were promised their deposits were safe.
Similarly, The Washington Post reported that Sam Bankman-Fried and his brother Gabe wanted to make a difference after the global pandemic rocked the world in 2020:
A Washington Post review of lobbying disclosures, federal records and other sources found that the brothers and their network have spent at least $70 million since October 2021 on research projects, campaign donations and other initiatives intended to improve biosecurity and prevent the next pandemic.
The publication omitted the fact that charitable donations were actually funded by money SBF raised from customers. The article further lamented that the brothers will no longer be able to fund their pandemic-related philanthropic efforts:
But the sudden collapse of FTX, which filed for bankruptcy last Friday after reports that customer funds were used to prop up a sister trading firm, has triggered a financial contagion that is expected to doom the brothers’ pandemic prevention agenda.
Unfortunately, the impact of FTX collapsing goes far beyond negatively impacting pandemic prevention funding. Millions of people lost their money by trusting FTX to keep their crypto safe. Companies that use FTX to keep their corporate taxes are now going under. Hedge funds, venture capital and centralized financial platforms have all been severely crippled, with some investors who have otherwise outperformed the market now facing 50% losses due to embezzlement of their funds.
I can’t believe the mainstream media is still running stories about Sam Bankman-Fried without a single mention of his crime.
This is a scammer who pulled off a historic scam. He stole billions of dollars from unsuspecting victims. How is that not the main role in every story??
— Jake Chervinsky (@jchervinsky) 27 November 2022
Perhaps the most dire reports have come from The New York Times. In a much-criticized puff piece, the author painted a picture of an ambitious but overzealous entrepreneur who made mistakes but did so legally. With a little more oversight or perhaps a larger team, they said, these costly mistakes could have been avoided. They even described SBF as a philanthropist who let charitable ambitions get too big:
Even as he continued to hire, Mr. Bankman-Fried built an ambitious philanthropic business, investing in dozens of other crypto companies, buying shares in the trading firm Robinhood, donating to political campaigns, giving media interviews and offering Elon Musk billions of dollars to help finance the mogul’s Twitter takeover. Mr. Bankman-Fried said he wished “we had bitten off a lot less.”
The downright offensive reporting painted the embattled ex-CEO as simply too busy and overworked to monitor what was going on at his companies.
FTX and Alameda Research are described as closely related. However, they are not described as related parties who should have clear limitations when doing business with each other. In no way was it appropriate to mix funds between the two parties when FTX’s assets were primarily customer funds. Instead, the article explained Bankman-Fried’s defense of the murky relationship by pointing out that Alameda is a crucial market maker and liquidity provider to FTX.
Related: My story of telling the SEC ‘I told you so’ on FTX
In a follow-up post, the NYT explored SBF’s political and charitable contributions in depth, describing the now-disgraced entrepreneur as the Democratic Party’s second-largest donor behind George Soros, and outlining his broad influence on policy and regulation:
A network of political action committees, non-profits and consulting firms funded by FTX or its executives worked to vindicate politicians, regulators and others in the political circle, with the goal of making Mr. Bankman-Fried the authoritative voice of crypto while at the same time crafted the regulation for the industry and other causes, according to interviews, email exchanges and an encrypted group chat seen by The New York Times.
Amid the discussion of his many donations, the article did not even indicate where Bankman-Fried’s generous funding came from. It is not mentioned that FTX and Alameda are now bankrupt, and that many lives have been destroyed. Funds stolen from users to prop up FTX’s equity value or FTT’s price which are then used for political and charitable donations should be returned. Simply put, the money was not Bankman-Fried’s to give.
Forbes wrote a similar puff piece about the other antagonist in the FTX downfall and former CEO of Alameda Research, Caroline Ellison. It led to overflowing compliments to the now fired manager:
Alameda Research CEO Caroline Ellison is a math whiz who loves Harry Potter, foreign political philosophy and taking big risks. She is also one of the supporting players in Sam Bankman-Fried’s FTX disaster.
The article went on to profile her rise from star student at Stanford to Alameda Research, where she eventually took the reins of the proprietary trading firm. It discussed her love of math, polyamory and, of course, effective altruism. It also suggested that she may be the scapegoat for Alameda’s downfall:
Many of the people who have flocked to Ellison’s defense gather on Urbit, a peer-to-peer platform […], one of her online supporters told Forbes. They believe Ellison was set up to be the fall guy, and claim former co-CEO Sam Trabucco, whom they mockingly call ‘Sam Tabasco’, is behind Alameda’s implosion.
Forbes suggested that Ellison might flee from Hong Kong to Dubai, but did little to assign accountability to the former CEO. It obviously left out the fact that she spearheaded disastrous trading and risk management at Alameda, including her involvement in transferring FTX client funds to Alameda to stop her trading losses.
The mainstream media should be held to higher standards of journalism than we have seen in this coverage. Too many outlets have compromised the truth in their reporting, perhaps because their reporters share Bankman-Fried’s leftist politics.
Clearly, Bankman-Fried’s influence reaches far beyond the crypto industry and extends into the mainstream media. We need stronger citizen journalism to get the whole truth out, and we need to collectively make sure that the former billionaire is held accountable for his actions.
Matthew Liu is the co-founder of Origin Protocol, a blockchain platform that brings NFTs and DeFi to the masses through its two flagship products, Origin Story (story.xyz) and Origin Dollar (ousd.com). A serial entrepreneur, he previously co-founded PriceSlash (acquired by BillShark) and Unicycle Labs. He was one of the earliest PMs at YouTube before it was acquired by Google, and also served as VP of Product at Qwiki (acquired by Yahoo!) and Bonobos (acquired by Walmart). He bought his first BTC in 2012 and participated in the Ethereum crowdsale in 2014.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.