News : Why Sam Bankman-Fried is ignoring his lawyers

Thursday, December 1, 2022

Why Sam Bankman-Fried is ignoring his lawyers

Dec 01, 2022

By Kate Davidson , Sam Sutton and Declan Harty

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It was the interview everybody was waiting for. Embattled former FTX CEO Sam Bankman-Fried made his first public appearance since his company collapsed in spectacular fashion just weeks ago, at the New York Times' DealBook Summit on Wednesday.

Defense lawyers everywhere cringed.

From our Sam Sutton: "In an hour-plus conversation, the 30-year-old former billionaire claimed that he's now down to his last $100,000 and one working credit card. He said he no longer has access to company accounts or records and that he's still unclear on key facts around what caused the sudden implosion of his investment empire, which included scores of exchanges, holding companies and a major crypto hedge fund."

He also said there was little he could do to help customers burned by the collapse and admitted he screwed up.

NYT reporter Andrew Ross Sorkin sits in front of a giant screen with an image of FTX founder Sam Bankman-Fried.

FTX founder Sam Bankman-Fried said his lawyers have advised him not to speak publicly. | Michael M. Santiago/Getty Images

And NYT's Andrew Ross Sorkin asked the question on all of our minds: Are your lawyers on board with this whole public speaking thing?

"They're very much not," Bankman-Fried said to laughter from the audience.

"The classic advice, right, is don't say anything, recede into a hole," he added. "I have a duty to try to do what's right to help customers out here."

Bankman-Fried also signaled he'd be willing to testify if called by Congress. The House Financial Services Committee has scheduled a hearing on FTX for Dec. 13, and Chair Maxine Waters (D-Calif.) has said she'd like to hear from Bankman-Fried.

"I would not be surprised if I'm up there talking about what happened to our representatives," he said.

Meanwhile — Lawmakers will get a chance today to publicly grill one of the top U.S. market regulators over the collapse of FTX. Don't expect many fireworks.

The Senate Agriculture Committee will hold the first FTX-dedicated hearing Thursday, with Commodity Futures Trading Commission Chair Rostin Behnam appearing as the sole witness.

In the wake of FTX's downfall, the CFTC has been shot into the spotlight with questions arising over how Washington regulators have handled overseeing the currently besieged cryptocurrency market to date. But lawmakers are not expected to grill Behnam, a former staffer to Chair Debbie Stabenow (D-Mich.), over what the agency should or could have done. Instead, the hearing is mainly expected to revolve around what Behnam believes should happen next — with the focus on the future of the Digital Commodities Consumer Protection Act, which would give the CFTC oversight of crypto trading, instead of the much larger SEC.

Championed by Stabenow and Senate Ag Ranking Member John Boozman (R-Ark.), the bill has been thrown into flux since the downfall of FTX, whose former leader, Bankman-Fried, was one of the legislation's most ardent supporters in the crypto industry. Since FTX imploded, the likes of Sen. Sherrod Brown (D-Ohio), who is a member of Senate Ag as well as chair of the Senate Banking Committee, and SEC Chair Gary Gensler have criticized the bill. Brown told POLITICO on Wednesday that he's planning his own crypto legislation for 2023.

Now the question is whether the so-called DCCPA would have done anything to enable the CFTC to prevent FTX from happening at the scale it did or whether changes are needed to make it so.

IT'S THURSDAY — Now we know, Fed Chair Jerome Powell rises early and starts his day off reading several newspapers and drinking his coffee in peace. (h/t David Wessel of the Hutchins Center at Brookings)

But Mr. Chairman, are you reading Morning Money?? Let us know! We'll keep you anonymous: kdavidson@politico.com and ssutton@politico.com .

JOIN NEXT WEDNESDAY FOR A POLITICO DISCUSSION ON THE NEW TRAVEL EXPERIENCE : Americans are now traveling in record numbers — but the travel experience has changed drastically in recent years, not always for the better. What lessons can we learn from the pandemic and different responses around the globe? And in the face of a possible recession, what will help the travel industry remain vibrant and deliver jobs? Join POLITICO on Dec. 7 for "The Travel Experience Redefined" to discuss these questions and more. Breakfast and coffee will be provided. REGISTER HERE .

Driving the Day

PCE inflation and consumer spending data released at 8:30 a.m. … Fed Governor Michelle Bowman speaks at the virtual KBW CEO Strategy Forum at 9:30 a.m. … Vice Chair Michael Barr delivers a virtual speech at the American Enterprise Institute on bank capital at 3 p.m.

THE BIGGEST INFLATION CHALLENGE — Our Victoria Guida: "Federal Reserve Chair Jerome Powell on Wednesday said the biggest remaining barrier to taming inflation is the shortage of workers , which is giving Americans greater clout to seek higher pay. Powell also again signaled that the Fed will begin raising interest rates in smaller increments, but underscored that significantly higher borrowing costs still lie ahead."

MORE DEALBOOK — Also from Sam: "Treasury Secretary Janet Yellen says there's still room for the government to bring down soaring prices without triggering a recession , even as risks mount from China, a potential national railroad strike and a growing number of geopolitical hotspots.

"'I believe there are some paths by which that could happen. There are risks around that path, but I believe it's certainly possible for us to have a soft landing,' Yellen said at a New York Times conference on Wednesday."

— Yellen also weighed in on Elon Musk's claims that Apple has threatened to remove Twitter from the App Store as he undertakes a complete overhaul of the social media's content moderation policies.

"It's a good thing if Apple is looking at the content. Most broadcast stations are subject to standards in terms of what they broadcast to the public. And Twitter's not that different from other broadcast stations," she said. "It is a kind of control that I think is needed."

— In some respects, private sector gatekeepers are doing a better job of cracking down on misinformation and dangerous content than federal agencies, Scott Galloway, a professor of marketing at New York University, told MM at the conference. Apple CEO "Tim Cook is the regulator we've all been waiting for," he said.

BROWN: REGULATORS NEED MORE CRYPTO POWER — Our Zacahry Warmbrodt: "Senate Banking Chair Sherrod Brown in an interview indicated that cryptocurrency legislation he aims to draft next year would give a range of regulatory agencies more authority over digital assets . Brown, one of the industry's biggest critics on Capitol Hill, escalated his role in the crypto regulatory debate on Wednesday when he asked Treasury Secretary Janet Yellen for feedback on potential legislation."

TRUMP TAX RETURNS — Our Brian Faler: "The top Democratic tax writer in the House now has access to former President Donald Trump's long-hidden tax returns . The Treasury Department confirmed Wednesday that Chair Richard Neal (D-Mass.) is able to examine six years' worth of Trump's personal and business filings, after the Supreme Court rejected a last-ditch effort by the former president to prevent them from being handed over."

RAIL UPDATE — Our Alex Daugherty: "A House-passed bill to head off a nationwide freight rail strike faces an uncertain future in the Senate … On Wednesday evening, Republican positions on the legislation were widely divergent. If Democrats call a vote it will require 10 GOP yes votes joined by every Democrat."

Regulatory Corner

SEC CLIMATE RULES — Our Marcia Brown: "Republican senators have introduced a bill that would block the Securities and Exchange Commission from implementing its proposed rule that would require publicly traded companies to disclose greenhouse gas emissions throughout their supply chains. Opponents of the SEC rule have long emphasized that the proposal would unfairly hurt farmers and ranchers that supply large companies."

STARBUCKS RULING — Bloomberg's Josh Eidelson: "Starbucks Corp. violated labor law when it refused to bargain with unionizing workers in Seattle, the US National Labor Relations Board ruled Wednesday. The decision, issued unanimously by a bipartisan trio of board members, orders the company to negotiate with the union Starbucks Workers United."

Economy

WHAT LAYOFFS? — WSJ's Justin Lahart: "Every day it feels like another big American company is announcing layoffs. But even if you squint, it is hard to find those layoffs showing up in job-market statistics."

RENT RELIEF — Bloomberg's Prashant Gopal: "Apartment rents across the US dropped in November by the most in at least five years , a sign that a key cost tracked by the Federal Reserve could be easing up."

FED SPLIT — FT's Colby Smith: "A united front among Federal Reserve officials is in danger of splintering as sharper divisions emerge among policymakers over how forcefully to squeeze the economy to tackle inflation, economists have warned."

Jobs Report

David Lipton, Treasury Secretary Janet Yellen's top adviser on international affairs who played a key role in helping to reassert U.S. economic leadership during the Biden administration, is leaving the agency this week , a Treasury official confirmed Wednesday.

John Morton is also leaving Treasury, where he has been climate counselor to the secretary, two people familiar with the matter told our Daniel Lippman. And Laura Hussain is joining Treasury as a counselor in the general counsel's front office, where she will focus on oversight issues. Hussain most recently was assistant general counsel for litigation and oversight at the Consumer Financial Protection Bureau.

Dechert is shaking up its management team effective June 30, 2023. partners David Forti and Mark Thierfelder have been named co-chairs of the global law firm. Meanwhile, Sabina Comis and Vincent Cohen, Jr. will become the firm's first global managing partners. Dechert's management team will succeed current Chair Andy Levander and CEO Henry Nassau.

GO INSIDE THE MILKEN INSTITUTE FUTURE OF HEALTH SUMMIT: POLITICO is featuring a special edition of our "Future Pulse" newsletter at the 2022 Milken Institute Future of Health Summit from Dec. 6 to 8. The newsletter takes readers inside one of the most influential gatherings of health industry leaders and innovators solving the biggest global health issues to ensure a healthier, more resilient future for all. SUBSCRIBE TODAY TO RECEIVE EXCLUSIVE COVERAGE .

Fly Around

Policymakers in Asia and Africa voiced growing economic optimism at a Reuters conference on Wednesday , chiming with a rally in emerging markets, an expected slowdown in U.S. rate hikes and an easing of COVID restrictions in China. — Reuters' Mark Bendeich

Young people in China, who were at the heart of a nationwide wave of demonstrations after a fatal fire in the western city of Urumqi was blamed on a lockdown, face a bleak economic outlook . — FT's Thomas Hale and Arjun Neil Alim

The cost of gasoline is falling so fast that it is beginning to put real money back in the pockets of drivers , defying earlier projections and offering an unexpected gift for the holidays. — WaPo's Evan Halper

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