Just take the fifth

Sam Bankman-Fried cannot shut up

The FTX co-founder, facing 12 federal charges for defrauding customers, refuses to stop talking
Sam Bankman-Fried cannot shut up
Photo: David Dee Delgado (Getty Images)
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I’m not a lawyer, but over time I’ve picked up on one truism spouted by attorneys of all shapes and sizes, in big cities and small towns all across the country: “Shut up.” Often, I’m sure, lawyers will say more on that topic to their clients, something like, “For the love of God, please stop talking. I am begging you—whatever you do—to shut your mouth and not say a word.”

The right to silence is no laughing matter, of course. It was developed under the English common law system (pdf) in the 18th century, and has since become a tenet of American jurisprudence. The Fifth Amendment to the US Constitution affirms, “No person shall be…compelled in any criminal case to be a witness against himself.” Additionally, since the Supreme Court’s 1966 Miranda ruling, police officers have had to, among other things, inform detainees that they have the right to remain silent.

It seems likely that Sam Bankman-Fried’s lawyers are constantly reminding him the same thing. “There is no question that his lawyers have told him to shut up,” University of Michigan law professor Adam Pritchard told Quartz. “But he seems to think that the right against self-incrimination is only needed by guilty people—and he seems to have some difficulty including himself in that group.”

Bankman-Fried, the co-founder and former CEO of the cryptocurrency exchange FTX, is facing 12 civil and criminal charges—including securities fraud, wire fraud, and conspiracy to commit money laundering—brought by the US Justice Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. In short, Bankman-Fried is accused of mismanaging customer deposits and using them to make risky bets through a hedge fund he controlled called Alameda Research.

But in the months since FTX fell apart, Bankman-Fried has refused to stop talking. He’s participated in interviews with journalists, public events, and conversations on Twitter Spaces. He’s tweeted incessantly about the company, its finances, and why he believes he is innocent and the company could have survived if it didn’t declare bankruptcy in the aftermath of a bank run. (“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” John Ray III, the corporate litigator who oversaw Enron’s bankruptcy and was tapped to guide FTX through its liquidation, wrote in a recent bankruptcy court filing.)

Bankman-Fried may go down as one of the great fraudsters in modern business. And whether or not his public statements will lead to his downfall, one thing is certain: He’ll have his say.

Sam Bankman-Fried has the right to remain silent

The Fifth Amendment doesn’t protect Bankman-Fried from his own statements to the media, his own posts on Twitter, or his writing on a new Substack newsletter he debuted last week. Instead, it protects him from government coercion.

Still, it’s generally good advice for a lawyer to tell a client to stop talking.

Mark Cohen, a former federal prosecutor and partner at the New York firm Cohen & Gresser, leads Bankman-Fried’s legal team. Cohen did not respond to an email about his client’s public antics, but Bankman-Fried told The New York Times in a live interview before his arrest that his lawyers instructed him to “recede into a hole.” His lawyers, he admitted, were not thrilled about his appearance at the event.

“That’s not who I am, and that’s not who I want to be,” he said. “I have a duty to talk and explain what happened.”

David Lurie, a securities litigation and enforcement lawyer in New York, told Quartz that Bankman-Fried’s attorneys are correct in advising him to shut up. “A defendant cannot be compelled to speak to the government, including while in custody or at trial,” Lurie said. In addition, while juries are instructed not to assume the worst from a defendant’s silence in court, the government is free to introduce public statements that the defendant freely gave. These statements, called admissions of a party opponent, are generally admissible in courtwhich could spell trouble for Bankman-Fried. “It is hard to imagine anything more relevant than Bankman-Fried’s many prolix commentaries on the transactions and other business activities that are at the heart of the charges now pending against him,” Lurie added.

Christopher LaVigne, a New York-based litigation partner and co-chair of the cryptocurrency practice at law firm Withers, told Quartz that criminal defense lawyers will often advise clients to stop talking—about anything, let alone their alleged crimes. “Any public statements provide ripe fodder for prosecutors to use against Bankman-Fried at trial and, if he is ultimately convicted, to establish his lack of acceptance or remorse during sentencing,” LaVigne wrote in an email.

But Bankman-Fried isn’t a typical defendant. He was “born into life online, where arguments are publicly waged on social media, subreddits, and blogs,” LaVigne added. “And he waged a very high profile campaign on behalf of FTX. It is not necessarily surprising that he may have eschewed traditional criminal defense advice and instead taken again to the online medium he knows best in order to sell his innocence.”

Bankman-Fried’s Substack debut

“I didn’t steal funds, and I certainly didn’t stash billions away,” Bankman-Fried wrote in his first post on Substack on Jan.12.

In this newsletter, like in many of his public appearances and statements since FTX collapsed in November, Bankman-Fried has maintained his innocence as well as his incredulity that his businesses collapsed. He has played the role of a dumbfounded, head-scratching pseudo-victim, one of the befuddled and scammed—certainly not the scammer.

On Jan. 17, the law firm Sullivan and Cromwell, which represents the post-Bankman-Fried management of FTX in its bankruptcy proceedings, released an update on the firm’s liquidation efforts. Bankman-Fried wrote a follow-up post asserting that the firm’s findings are faulty. “[Sullivan and Cromwell] claims that FTX US has a shortfall. That claim is false,” Bankman-Fried wrote. “Based on S&C’s own data provided in the same court presentation, FTX US had roughly $609m of assets ($428m USD in bank accounts, plus $181m of tokens) backing roughly $199m of customer balances. FTX US was solvent when it was turned over to S&C, and almost certainly remains solvent today.”

Bankman-Fried’s two newsletter posts, like the majority of his tweets, have been almost investigatory in nature. He has one set of data, FTX has another, and maybe the government has a third. In his statements, he offers up his version of events like one detective comparing notes to another. There’s a perverse drama to it all, watching the villain paint himself as a victim, pointing fingers at his rivals and former colleagues in an effort to solve a whodunit that almost certainly leads back to him.

Bankman-Fried is headed for trial, and his lawyers will have to pick a narrative. Whether that matches the one that Bankman-Fried has advanced is yet to be determined, but his statements are immortalized in bits scattered across the internet.

Sam Bankman-Fried has the right to remain silent. He simply doesn’t care to exercise it.