'The Naked Emperor' holds a mirror up to Sam Bankman-Fried and the collapse of FTX

Sam Bankman-Fried was at the top of the game. 

He was a billionaire by the time he turned 30 and the trusted face of crypto with his trading platform FTX. Its logo was on the Miami Heat's arena and the uniforms of Major League Baseball umpires. Despite his dorm room lifestyle, Bankman-Fried, or SBF, charmed celebrities, politicians and Silicon Valley. That is, until it all came crashing down. 

Today, Bankman-Fried faces charges that could send him to jail for the rest of his life. He is accused of looting billions of dollars in FTX customer deposits to support his Alameda Research hedge fund, buy real estate and make millions of dollars in political contributions. Prosecutors have called it a fraud of epic proportions. 

"I'm going to explain how Sam Bankman-Fried built and destroyed a multibillion-dollar crypto empire, who helped and who's left holding the bag," tech and crypto journalist Jacob Silverman told CBC Podcasts.

Silverman hosts the new, four-part series about the stratospheric rise and spectacular fall of SBF — in which familiarity with crypto is very much not required. This is the story of an unusual guy who was given great money and power, much like the folktale The Emperor's New Clothes.

"The emperor's advisors were incentivized to tell him he looked great, even though they knew he had no clothes on — that he was naked," Silverman explained.

Silverman spoke with CBC Podcasts about the new series. Here is part of that conversation.

Over the last few years, you've been watching Sam Bankman-Fried charm customers and market FTX as this safe and easy way to invest in crypto. What is your assessment of him? Did you ever think that you could trust him? 

JS: As a journalist, I did not think I could trust him because I think it was my job not to. We communicated a little bit and met once over the last year. But I talk to a lot of people, frankly, in the industries I cover ... and I have to verify information. I also know that when I'm dealing with someone who is powerful, whether they have a lot of money or political influence, I have to be skeptical. 

For a lot of people, there was a certain charm to Sam. He had this kind of nerd genius persona that was appealing to some folks — and he came from what people thought was a good family with elite academic credentials and all the meritocratic achievements that are supposed to make you trust someone according to our cultural standards. So on the surface, it all seemed really great — and there was so much money being thrown around and people were getting rich.

[For] customers, I totally see how they might find that appealing. Investors had incentives to look the other way. I think people in government failed, in that regard, because their responsibility is to not [look away]. And my responsibility as a journalist is just, to honestly sometimes have conversations with people who I don't trust — or who I don't know if what they're telling me is accurate — and then take that in and write it down and work from there. That's how I felt about Sam. 

He did reach out to people like me. He sent me direct messages on Twitter sometimes, in response to a tweet I would write publicly…. I think that's a little bit unusual. I'm not saying it's unprecedented, but I think maybe it's part of what we see now ... giving interviews and such since his arrest. There's something about him where he did want to talk to people and maybe manipulate people a little bit. 

It's been more than 20 years since the Enron scandal. Aren't there regulations in place to protect customers and investors from "old-fashioned embezzlement," as the new CEO of FTX, John J. Ray III, alleged this was?

Crypto people might tell you this was an offshore company and the main, alleged crime is fraud and theft, so that has nothing to do with crypto…. I understand why they might say that but at the same time, there are laws that exist that could deal with a lot of the crime or fraud that has accompanied crypto because FTX wasn't the first company to collapse over the last year. It was the most significant one. Some of these other companies were U.S. based, like Celsius.

It could have been dealt with, in some way, earlier and perhaps uncovered some of the more serious crimes. But Congress was essentially bought, I suppose, by the crypto industry. I mean, a third of Congress received donations from FTX or Sam. And just, in general, there is a very pro-industry agenda throughout Congress in both parties… and then you combine that with agencies like the SEC [U.S. Securities and Exchange Commission] [who are] now doing a lot of enforcement, but they're very slow.

I think people need to understand that a lot of laws and regulations do exist to deal with this stuff and the institutions do exist. It's, you know, are they doing their jobs? Are they somehow corrupted or are they incentivized to really follow through on their responsibilities and manage to protect people? People could have been more protected.

There were several celebrities working with FTX as brand ambassadors, including Canadian businessman Kevin O'Leary from the reality show Shark Tank. He defended FTX even after the company collapsed. What did he have to say when you questioned him? I heard he's on the podcast.

He's been more out front, I would say, than pretty much any public figure or celebrity, talking about his endorsement and how much money he was paid and how he lost a lot of that because he kept on the platform. 

We argue with him a bit about [it] on the show: "Did you do your due diligence?" And I think his answer is a little unsatisfying because he admits that he trusted a lot of his peers and other investors because there were all these major investors behind FTX. 

The Current22:43New CBC podcast looks at Sam Bankman-Fried and the collapse of FTX

A new CBC podcast explores the collapse of the FTX cryptocurrency exchange, and the man at its centre: Sam Bankman-Fried. We talk to Jacob Silverman, host of The Naked Emperor.

Public figures … they'll probably be OK. The people that they convinced to buy in — and there were people that they convinced by their endorsement, we talked to some of them — those people really lost out. 

There is this big gap in crypto, I think, between the investors and the wealthy people, the celebrities who endorse it all. They'll move on to something else, and then [there are] the everyday people who, for them, losing $500 or $50,000 was a big deal.

Also, I think it's worth noting that people like O'Leary are being named in lawsuits. Some lawsuits will be dismissed. Kevin O'Leary himself, you know, has a grievance with Sam Bankman-Fried. He's seeking his own money back. So there are a lot of competing agendas and interests going on here. Some of the celebrities feel cheated, or at least will tell you that. 

What are you hoping listeners will take away from this podcast? 

I hope they enjoy it and they get a sense of what happened here. 

You don't need to know much about crypto, you don't need to even be that interested in crypto to kind of appreciate a corporate thriller — or sort of a fraught story. But specifically to this and to crypto, I hope people approach the next tech fad or financial sort of "get rich quick" scheme with some skepticism because there are people trying to sell this stuff who don't always have our best interests at heart — and some of them might be more malevolent than others. We need to understand those kinds of stories and we need to understand how these folks become powerful and exercise power over others and who's left holding the bag.