Sam Bankman-Fried was going to have a bad Tuesday.
The disgraced former CEO of bankrupt cryptocurrency exchange FTX had agreed to spend his day testifying about the collapse of his empire in front of the House Financial Services Committee. He did prepare written testimony, obtained Monday by Forbes. It wasn’t clear that he was going to say much, as he warned, “There is a limit to what I will be able to say, and I won’t be as helpful as I’d like.” This was a weird change of tone, given that SBF has spent the past month on a never-ending media tour, giving interviews to seemingly any reporter who would put a recorder in his face, plus some randos hosting Twitter Spaces. Perhaps it was because people do not take an oath to tell the truth under penalty of a felony when they speak to journalists but they very much do when they talk to Congress. If prosecutors and regulators are actively investigating you, testifying before Congress is not a fun weekday.
It turns out SBF has had a much worse day. Bahamian law enforcement took him into custody Monday night and released a statement saying it had done so after receiving word from across the Florida straits that SBF was being charged by the U.S. Department of Justice. It happened even more quickly than a financial law expert I’d talked with had thought it would, and American authorities have a whole laundry list of allegations: charges on wire fraud on both his customers and lenders, conspiracy to defraud the United States, and—this one is the curveball—a campaign finance charge for using other people’s names to exceed the maximum donation amounts to candidates allowed under federal law. The Securities and Exchange Commission has further civil charges that do not add to SBF’s potential prison time but will likely get expensive.
The downfall of FTX has lent itself to a lot of conspiracy theorizing, and the truth is that a lot of it is rather reasonable. Even before the Justice Department had its say, there was little reason to trust a word that came out of SBF’s mouth. Someone thinks the billions of dollars of missing FTX customer deposits are now in the form of a fleet of yachts that SBF is hiding in the Caribbean? Sure! I can believe that!
There was one sort of FTX conspiracy theory that just never really held up, though. This one:
Bankman-Fried was indeed a major Democratic political donor. But others on FTX’s leadership team gave a bunch of cash to Republicans, and SBF might have too, though you can decide whether you take him at his word about where his dark money went. Anyway, it is immaterial, because there is no evidence that Joe Biden or the Democratic Party lean on the Justice Department to protect friends and prosecute enemies the way Donald Trump tried to. More pressingly, the cratering of FTX has been the biggest financial story of the whole year, and it’s only going to stay in the news as its bankruptcy proceedings continue and authorities try to find all the money SBF lost. People would notice if the U.S. government weren’t doing something about a cataclysmic fraud that cost investors, many of them regular people, billions of dollars. It would not be a political winner. SBF’s money would be toxic too. Whatever was left of it, anyway.
Anyway, the dumb theory advanced by Elon Musk is at least rooted in a thing that has sometimes been real: that people in power will cross ethical bridges to protect themselves and their allies.
Now there is a new dumb theory. This one is much worse, and it might actually be the single silliest conspiracy theory of Democratic corruption that any American conservative has ever advanced. Behold it from Rep. Lee Zeldin, a congressman who just lost a race for New York’s governorship and who will probably one day attempt to rise further up the ladder in Republican politics:
This idea has gotten a good bit of traction in conservative circles, and perhaps also in crypto circles that are hoping SBF becomes the lone fall guy for an industry in crisis. Democrats still control House committees for a few weeks before the chamber’s majority changes hands, and SBF has given money to Democrats, and Democrats appointed the attorney general and head of the SEC. Let’s see another:
Let’s walk this concept out, I guess.
SBF was going to testify in front of the House, where it would be pretty hard for him to lie. He could’ve lied, but lots of people with lots of resources are investigating him, and lying to Congress is perjury. So, even if SBF is a serial liar, it was a tall order for him to go into Congress and lie. If SBF had lied, he might have been arrested later. So, a Democratic cabal intervened to help their patron by … arresting him right now, charging him with a bunch of felonies, and sparing him from the possibility that he might be arrested for perjury later on. Unless he lied to the other people investigating him, because that would be perjury too. (This theory also ignores the fact that it’s unclear when the U.S. asked the Bahamas to turn him over.)
There is, of course, a corollary to this theory: that SBF, in an open hearing, would’ve aired Democratic dirty laundry under questioning from the cunning minds of Republican backbenchers on the Financial Services Committee. Believing as much requires a belief that (for instance) Texas Rep. Pete Sessions is better equipped to get details of a conspiracy out of Sam Bankman-Fried than is (for instance) a financial crimes prosecutor at the Justice Department or a civil regulator at the SEC.
The tl;dr of this right-wing fan fiction: Democrats saved SBF from getting arrested by arresting him, and they saved him from questioning from members of Congress by … having him extradited and brought up on multiple felonies, for which he will face an actual trial unless he pleads guilty to at least some of the charges ahead of time.
SBF’s fall from grace is one of the dumbest financial stories in memory. To a significant extent (though apparently not in full), it is the result of SBF and his team’s making up some crypto tokens that weren’t actually worth much money and then accepting them as collateral in exchange for loaning out customers’ money to a hedge fund they also controlled. The details—the true facts already in public light—of this story are so mind-bogglingly silly that someone could tell people almost anything about it and I would entertain the possibility it was true. Somehow, Lee Zeldin found the one thing that’s too ridiculous even for a story that has pushed all boundaries of ridiculousness to new limits. Achievement unlocked.