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FTX’s Sam Bankman-Fried cashed out $300M during funding spree

wsj.com

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Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#21

Post by kkielhofner »

Schnitz wrote: post #11
leet_thow wrote: post #4

How common was it for founders to cash out on common shares in the Series C-E rounds the last decade?

Very. It's usually not this egregious though. Founders might want stable finances for their family or the ability to buy a reasonable home, but VCs want them to keep going, so VCs allow founders to cash out some of their equity so that founders don't go for an exit for the sake of their personal finances.

Agreed but it's never this significant. In the world of "real companies" investors, boards, teams, etc are not OK with providing a founder with "F U money" (which this certainly is) so that they can go on and do nothing, leave for another venture, etc.

For the others involved from investors to employees it's never good to be working with someone who could (theoretically) stand up from a meeting and walk out to go on and do whatever they want forever.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#22

Post by wmf »

kkielhofner wrote: post #21
Schnitz wrote: post #11

Earlier quoted context omitted.

Very. It's usually not this egregious though. Founders might want stable finances for their family or the ability to buy a reasonable home, but VCs want them to keep going, so VCs allow founders to cash out some of their equity so that founders don't go for an exit for the sake of their personal finances.

Agreed but it's never this significant. In the world of "real companies" investors, boards, teams, etc are not OK with providing a founder with "F U money" (which this certainly is) so that they can go on and do nothing, leave for another venture, etc. For the others involved from investors to employees it's never good to be working with someone who could (theoretically) stand up from a meeting and walk out to go on…

I'm reminded of the "Grouponzi" round from 2010. https://venturebeat.com/entrepreneur/groupon-fundraising/

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#24

Post by kjs3 »

slap_shot wrote: post #5

> the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. The most fascinating part of this whole story to me is just how few checks and balances there were in this company. Even without a board, did major investors not get his quarterly financials? If the leaked balance sheet was any indication of their level financial engineering cap…

I thought that was the whole point: unregulated (or at least extremely minimally regulated, preferably in a jurisdiction that has a looooong history of looking the other way and in a perfect world with no extradition treaties), decentralized, anonymous financial systems. It doesn't surprise me in the least that these clowns were running across the high wire without a net using other peoples money. The fascinating part to me is that anyone didn't think this was the inevitable outcome. But then I spent an hour this morning with some banking industry blockchain folks spinning this as "well obviously this debacle is great because it finally will shake out the bad actors and leave just us good-guys taking crusty old banking into the glorious crypto future". Just like they've said about every debacle since Mt Gox.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#26

Post by kkielhofner »

wmf wrote: post #22
kkielhofner wrote: post #21

Earlier quoted context omitted.

Agreed but it's never this significant. In the world of "real companies" investors, boards, teams, etc are not OK with providing a founder with "F U money" (which this certainly is) so that they can go on and do nothing, leave for another venture, etc. For the others involved from investors to employees it's never good to be working with someone who could (theoretically) stand up from a meeting and walk out to go on…

I'm reminded of the "Grouponzi" round from 2010. https://venturebeat.com/entrepreneur/groupon-fundraising/

Bingo. It could be argued the relative failure of Groupon was largely driven by key stakeholders/insiders cashing out way too big way too early.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#27

Post by anticrisis »

kjs3 wrote: post #24
slap_shot wrote: post #5

> the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. The most fascinating part of this whole story to me is just how few checks and balances there were in this company. Even without a board, did major investors not get his quarterly financials? If the leaked balance sheet was any indication of their level financial engineering cap…

I thought that was the whole point: unregulated (or at least extremely minimally regulated, preferably in a jurisdiction that has a looooong history of looking the other way and in a perfect world with no extradition treaties), decentralized, anonymous financial systems. It doesn't surprise me in the least that these clowns were running across the high wire without a net using other peoples money. The fascinating par…

The whole circus is a mass delusion. I would really like to see some academic studies on the phenomenon.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#28

Post by dmitryminkovsky »

wmf wrote: post #22
kkielhofner wrote: post #21

Earlier quoted context omitted.

Agreed but it's never this significant. In the world of "real companies" investors, boards, teams, etc are not OK with providing a founder with "F U money" (which this certainly is) so that they can go on and do nothing, leave for another venture, etc. For the others involved from investors to employees it's never good to be working with someone who could (theoretically) stand up from a meeting and walk out to go on…

I'm reminded of the "Grouponzi" round from 2010. https://venturebeat.com/entrepreneur/groupon-fundraising/

Thanks for this. Love the end:

> And this stealth IPO has one more advantage: There’s nothing preventing Groupon from doing a real IPO in 2011. If anything, the reassuring cash pile makes it a more attractive investment.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#29

Post by luckylion »

kieselguhr_kid wrote: post #20
oldgradstudent wrote: post #14

Earlier quoted context omitted.

Fraud ands theft are already illegal.

Yes, but the total lack of corporate governance that contributed to it is totally legal, and could have possibly prevented the fraud and theft.

Not investing into companies that are obviously either frauds or extremely incompetent is the investor's job. We don't need a lot of new regulation to make it harder for you to buy bridges from people you meet on the subway.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#30

Post by karmakurtisaani »

slap_shot wrote: post #5

> the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. The most fascinating part of this whole story to me is just how few checks and balances there were in this company. Even without a board, did major investors not get his quarterly financials? If the leaked balance sheet was any indication of their level financial engineering cap…

I think the reason is that he was seen as a financial genius boy wonder who just understood crypto better than anyone from the "old guard". So he got away with wildly inappropriate things.

More generally, we (as a society) seem to be worshiping those who make a fortune, and forget that they too are just as faulty as the rest of us. Initial innovative success gets projected to mythical proportions, and once the investment streams are open there is no limit to the wealth they accumulate. Looking at you Elon and Zuck.

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