Preface:
Mr. Sam Bankman-Fried was the CEO of FTX.US and FTX International, as well as over having various titles and various amounts of control of over 100 other corporations. Which were incorporated in a diverse group of countries. I suspect he paid attention to only a few of them, and the rest served specific legal purposes to reduce his legal risk and financial liabilities.
Since both his parents are law professors at one of the most prestigious law schools in the US, and perhaps the world. I think we can safely assume that Mr. SBF had some of the best lawyers, best accountants and the most knowledgeable former regulators assisting him. They can be assumed to have been employed or picked by his parents and their know doubt extensive contacts in the legal and financial world. I also assume their created the corporate legal structure we are slowly becoming aware of and made sure it provided more then adequete legally protection for his activities.
In all probability, Mr. SBF probably conducted only legal operations with his FTX.US operation, and all operations carried out in his FTX International branch probably broke no US laws since FTX, International technically had no US customers. And since there are no International cryptocurrency laws, only country specific laws, I think we can assume that a billion dollar corporation could afford the cost of accountant and lawyers fees to stay on the right side of the law in the country of it's incorportion, as nothing else would make sense.
I hope I don't trigger anyone's anger by saying this, but... We should unemotionally analyze what he/they did, and learn from it. In truth we should view this situation as a Free Master Class, and take notes.
Introduction
This post is a simple discussion of an interesting legal term, unsurprisingly named in a rather crude way the clawback. While I don't presume to suggest this was the only reason Mr. SBF has not been arrested, I suspect this was merely one small piece an elaborate and very thouroughal corporate legal structure which has resulted in a nearly inpenetrable wall of legal protection around Mr SBF. The small piece I discus here is a human wall of protection, based on the very human trait of protecting one's own self interest. This is the essence of the Clawback, in my non-legal mind. Which may even have happened semi-accidentally.
Follow the money… clawback
- Clawback refers to money recovered from second parties in a bankruptcy or crime commited by a first party.
- So if company A was to give 100 million dollars to party B in 2021, and then declare bankruptcy in 2022. The bankruptcy court would Claw back or demand the return of that 100 million from party B, and give it to Company A’s creditors, in a bankruptcy.
- And if there is a criminal trial, and company A is found guilty of fraud or embezzlement, then those funds given to party B would be considered stolen funds.
- And party B would be compelled by law to return all the funds. And to make matters worse for party B, if they don’t have the money, they would have to liquidate their assets to pay back the stolen funds.
How does this apply to FTX CEO Sam Bankman-Fried?
- Well, Sam Bankman-Fried is the first party, or his company FTX is the first party.
- ‘The second party or parties are the people he gave millions of dollars to… or shall I say more precisely: his company gave millions to politicians, charities, newspapers and other media startup businesses. He gave a near record amount of political contributions in 2019, 2020 and 2021.
- So in the event of a FTX bankruptcy, these second parties; politicians, charity leaders, media company leaders and other politically connected people could be asked to return millions of dollars given to them by FTX, to FTX's creditors and depositors.
- This is the large mass of people Elon Musk was alluding to in his recent Twitter Tweet:
I would get more favorable press if I was as good as Sam Bankman-Fried at buying the Media..
- Hmm... Elon Musk is clearly suggesting that Sam Bankman-Fried bought favorable media coverage.
Favorable Media Coverage and Political influence.
- I am not going to claim Sam Bankman-Fried paid money to a lot of politicians.
- I will let the United States Election commission say it: they named him the top political donor in the United States in possibly 2019, 2020, and 2021.
- I won’t say how much he donated, but the person in second place last year donated 90 million dollars USD.
- These political donations were to politicians, and both political parties: Repubilicans and Democrats.
- But he also is reported by some sources to have donated nearly 200 million dollars since 2018 to charities, media companies and social media influencers. Plus he paid many celebrities and finance gurus to endorse his company FTX, one example is the Millionaire Businessmen from Shark Tank: Kevin O’Leary, who received 15 million dollars.
- If I was cynical I might say these people have a vested interest in no action being taken against Mr SBF, so they don’t have to pay back the money he paid or donated to them to bankruptcy court or criminal courts. These courts would likely consider Sam Bankman-Freid’s payments, and donations to be the property of his creditors.
- If I was a cynic, I would say Mr Sam Bankman-Fried, monetary gifts make it very difficult for any of the recipeints of these gifts, to say anything bad about him, or encourage his prosecution. Self-interest is very reliable. It's not his complete defense, but a shrewd part of it. Now whether it's intentionally or unintentionably, it's still very smart.
- The rich have been playing the poor, middleclass, upper middleclass and our political leaders like instruments for generations. Why stop now, and why not employ multiple strategies?
- It looks like the moves of a master in the 3D chess of life, law and finance. And as observers we may be witnessing a move in Chess called a Checkmate.
@shortsegments
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