What a Securities Lawyer Would Ask FTX’s Bankman-Fried

New York Times columnist Aaron Ross Sorkin will interview Sam Bankman-Fried at the DealBook Summit. Here are 10 questions a practiced fraud lawyer would ask the former chief executive.

AccessTimeIconNov 30, 2022 at 6:07 p.m. UTC
Updated Nov 30, 2022 at 6:30 p.m. UTC
AccessTimeIconNov 30, 2022 at 6:07 p.m. UTCUpdated Nov 30, 2022 at 6:30 p.m. UTCLayer 2
AccessTimeIconNov 30, 2022 at 6:07 p.m. UTCUpdated Nov 30, 2022 at 6:30 p.m. UTCLayer 2

As a securities litigator for over 30 years, I have cross-examined a host of conmen and fraudsters. Most of my cases have been concentrated in the financial services field where I represented Wall Street, securities brokerage firms, commercial banks and national stock and derivatives exchanges – in other words, traditional finance.

Starting in 2017, I pivoted my firm toward representing foreign and domestic crypto exchanges, as well as a host of startup enterprises using blockchain technology to disrupt traditional financial products and services.

James A. Murphy was the founder and chairman of law firm Murphy & McGonigle.

When I heard that Andrew Ross Sorkin was planning to interview FTX founder Sam Bankman-Fried (as part of the New York Times’ DealBook Summit, scheduled before the Bahamian-based crypto exchange once worth $32 billion imploded), I reflexively went to my computer and typed up the first 10 questions that I would ask SBF, if given the chance.

Obviously, if we were going to court, I would have an outline with hundreds of questions and follow up points. Soon enough, Bankman-Fried will likely face a judge rather than a Times’ columnist. But so long as he continues to ignore his lawyers’ suggestions about not speaking publicly, it’s worth asking him tough questions.

The ‘Original Sin’

Sam, the FTX Terms of Service state very clearly that the assets customers deposit at FTX belong to the customers – not to FTX.

You do realize it was illegal for you to misappropriate assets from your customers’ accounts, right?

Potentially guilty confederates

Who at FTX or Alameda knew you were transferring those customer funds to Alameda Research [a hedge fund Bankman-Fried co-founded prior to FTX]?

The new FTX CEO, John J. Ray, III, has stated that you used “special software to conceal the misuse of customer funds.”

Who helped you do that?

Show me the money

The New York Times has reported that $515 million was “suspiciously transferred” from FTX wallets after the bankruptcy filing.

Do you know where that money might be?

Are there any FTX assets hidden anywhere around the world, or in cold storage wallets, that the current management of FTX might be unaware of?

Something fishy in the Bahamas

The Bahamian authorities have admitted they ordered the transfer of certain FTX assets to wallets under their control after the U.S. bankruptcy was filed.

Did you help the Bahamian authorities transfer FTX assets?

Major clawbacks

You personally borrowed $1 billion from Alameda. And one of your companies, Paper Bird, Inc., borrowed $2.3 billion from an Alameda affiliate.

That makes a total of $3.3 billion you borrowed.

Where is all that money right now?

Will you return those assets to the bankruptcy administrator immediately?

Can money buy you love? – From the media

Which news organizations have you given money to through “grants,” “donations,” “investments” or any other means?

FTX US – not dead yet?

On Nov. 15 (four days after the bankruptcy filing), you tweeted that FTX US had sufficient assets to repay all its customers.

Was that statement true?

If so, why was FTX US placed into bankruptcy?

The other investment: political capital

You have been an enormous contributor to Democratic candidates in the U.S., and you even spoke of possibly spending $1 billion to elect a Democrat as president in 2024.

How many visits have you had with officials at the White House, members of Congress and Securities and Exchange Commissioner Gary Gensler? And what did you discuss with them?

Keeping secrets

The FTX bankruptcy lawyers are fighting very hard to keep the names of FTX customers secret.

Were any FTX accounts used by foreign or domestic political figures, “rich and famous” people, oligarchs, drug cartels, terrorist groups or repressive regimes to hide their assets or engage in money laundering?

Homeward bound?

I’m sure you understand that an enormous number of FTX customers have been badly hurt by your conduct.

Will you return to the U.S. voluntarily to cooperate with the criminal investigations of your role in the collapse of FTX?

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James Murphy

James A. Murphy, a securities lawyer and legal writer, was the founder and chairman of law firm Murphy & McGonigle.