A strategy of being always online and courting the media helped Sam Bankman-Fried build FTX into a crypto juggernaut, but is not helping him as he faces a plethora of legal entanglements surrounding its multi-billion dollar collapse, experts said.
Most company founders and executives in a similar situation would stay silent, but not Bankman-Fried, who has continued being highly-engaged — regularly posting on Twitter, giving unvarnished comments to reporters and even agreeing to appear virtually at the New York Times Dealbook conference on Wednesday.
It’s a curious approach and one that legal experts say could cause him and his lawyers multiple headaches in any upcoming litigation. Criminal lawyers are especially prone to making sure their clients stay publicly quiet.
“Any attorney worth his salt should be telling him to keep his mouth shut,” said Mark Broughton, a California criminal defense attorney who has written extensively on effective media management for lawyers. “There is a logic in getting out in front of the narrative and trying to define it, but this is something that should be left to one’s attorney because anything you say can be used to impeach you.”
Since FTX filed for Chapter 11 bankruptcy protection earlier this month, federal prosecutors and regulators in the U.S. have been investigating allegations Bankman-Fried misused customer deposits and that billions of dollars have gone missing. He also faces endless civil litigation from the millions of customers whose accounts have been frozen.
“Prosecutors and civil attorneys are salivating over his Twitter feed,” said Wayne Pollock, an attorney and founder of Copo Strategies, which advises lawyers on how to utilize public relations to help their clients. “This is info that would usually take years and millions in litigation to uncover and he is just giving it to them for free.”
FTX’s new chief executive, John Ray, who was appointed to take over the bankrupt company by a federal bankruptcy judge in Delaware, has criticized Bankman-Fried’s “incessant and disruptive Tweeting,” saying it was hindering efforts to unwind the mess he left behind.
Bankman-Fried, who remains huddled in the Bahamas where FTX was based, has since said publicly he regretted agreeing to the bankruptcy filing, arguing that he could have saved the company by raising outside funding to plug the gaping holes in its balance sheet. Lawyers for the company at the time told him he was being delusional and that bankruptcy was the only option, the New York Times reported.
In a wild interview he gave to Vox nearly a week after the Chapter 11 filing, Bankman-Fried said he was pushing for a separate bankruptcy effort filed by Bahamian officials to succeed, seizing control away of the process from the U.S. appointed administrators.
In the same interview, he revealed that years-long efforts he had engaged in with U.S. officials to help create a regulatory framework for the crypto space, had been done solely for PR reasons. He added that his high-profile philanthropic campaign built around the effective altruism movement was far from sincere.
All of this raises the question of how much Bankman-Fried has been listening to legal advice. He was briefly represented by the major league New York law firm Paul, Weiss, Rifkind, Wharton & Garrison, but was dropped as a client due to unspecified conflicts of interest. Bankman-Fried is now reportedly represented by Gregory Joseph, the founder of a boutique law firm, and is also being advised by David Mills, a colleague of Bankman-Fried’s parents at Stanford Law School.
Bankman-Fried, Joseph and Mills didn’t immediately respond to messages seeking comment.
Pollock said it was likely hard for Bankman-Fried to go silent, given that he had built his company up largely through aggressive courting of reporters and public engagement online.
“Here is an example of a tech startup entrepreneur who is so used to doing everything in public,” Pollock said. “So much of his rise was achieved through social media and podcasts. He was the public face for FTX and really much of the crypto world. It has to be second nature for him and that is hard to turn off.”