Sam Bankman-Fried pushed for a deal with Taylor Swift as FTX bled money and executives called for restraint

Earlier this year, as the crypto meltdown drained the industry of cash, FTX executives pleaded with company founder Sam Bankman-Fried to preserve cash and stop spending hundreds of millions dollars in celebrity endorsements.

But the 30-year-old billionaire, who had relied on branding and hype to quickly take his crypto exchange from rookie to loyal, was determined to sign another big name.

Three people close to FTX and Bankman-Fried told CNBC that the former CEO aggressively lobbied for a partnership with 11-time Grammy winner Taylor Swift. The deal, which would have cost the now-bankrupt company more than $100 million over three years, was close to fruition before collapsing in the spring, said the people, who asked not to not be named due to confidentiality agreements.

The former executives, who had direct knowledge of the negotiations, said the partnership would have been a disaster for FTX due to the high price. Bankman-Fried’s commitment to completing the Swift deal despite the deteriorating business environment matches a tendency to ignore its lieutenants and go it alone, said half a dozen former company insiders and Commercial Partners.

The Financial Times earlier reported that FTX held talks with Swift about a potential sponsorship.

Bankman-Fried’s overconfidence was rooted in an organization that had few controls over its leader and no board of directors to hold him accountable. Meanwhile, Bankman-Fried portrayed a very different persona to the public, showing himself as an eccentric young genius comfortable in shorts and a t-shirt or a suit in front of Congress who repeatedly professed his belief in a effective altruism, a philosophy that promotes the idea of ​​earning lots of money to donate to the most important causes.

Valued at $32 billion earlier this year by private investors, FTX went bankrupt last month after skepticism emerged about the health of the crypto exchange’s finances and customers began demanding withdrawals for being told that their money was not available. Even in the face of potential criminal charges and the possibility of years in prison, Bankman-Fried continued to avoid advisers by speaking out publicly, offering press interviews and tweeting his defense.

“I have a duty to talk to people, I have a duty to explain what happened,” Bankman-Fried said in a video interview at The New York Times DealBook Summit last week, acknowledging that his attorneys are opposed to its current tactics. “I don’t see what good is accomplished by sitting locked in a room pretending the outside world doesn’t exist.”

Between appearing on DealBook, an interview with ABC’s “Good Morning America,” and commenting on various podcasts, Bankman-Fried has repeatedly claimed that FTX’s downfall was the result of sloppy management and mismanagement. excessive risk.

Bankman-Fried denied committing fraud and said he was unaware of much of the fund mixing that took place between FTX and Alameda Research, Bankman-Fried’s hedge fund. At least $8 billion in FTX client funds are no longer counted and have been used to cover billions in loan losses at Alameda.

Bankman-Fried also ran fast and free with company money. Just over two years after FTX launched in 2019, Bankman-Fried signed a 19-year, $135 million deal with the NBA’s Miami Heat for naming rights to the team’s arena. He also signed endorsements with the Golden State Warriors, Major League Baseball and Formula 1, and had Larry David promote the company in a Super Bowl ad. Gisele Bündchen, Tom Brady, Shaquille O’Neal, Stephen Curry, David Ortiz and Naomi Osaka were among the brand ambassadors.

Part of the Swift deal would have included the singer producing a collection of non-fungible tokens (NFTs), or digital items that can go up and down in value. Beyond that, there was a lack of clarity about what Swift would do for the company, sources said. After the Swift deal fell through, talks emerged internally over a deal with Katy Perry as recently as August, one person has claimed.

Representatives for Swift declined to comment, and Perry did not respond to CNBC’s request for comment.

FTX insiders said that if some people in and around the company questioned Bankman-Fried’s decisions, he most immediately surrounded himself with a team of yes men. Two sources have used the word “islander” to describe his leadership style. Bankman-Fried primarily sought advice from a tight-knit group of knights in the Bahamas, where he lived and where the company was headquartered, sources said.

A former FTX executive said Bankman-Fried tended to chew out employees who disagreed with him in a way that deterred others from speaking up. When Bankman-Fried got angry, sources said his knee-jerk reaction was to immediately blame the underlings. Some former insiders said Bankman-Fried acted for the public, portraying himself as an easygoing CEO.

Bankman-Fried said in a message to CNBC that he disagreed with the characterizations provided by these former employees. He declined to comment on details of the Swift negotiations.

“Partnerships was an area that was more controversial and on the fringe, I was initially supportive and eventually started pushing back on new ones,” Bankman-Fried said in the post.

John Ray III, the new CEO tasked with restructuring FTX, said in his filings that in his 40 years of legal experience, including the liquidation of Enron, he had never seen “such a complete failure of corporate controls and such a complete lack of reliable financial reporting as has happened here.”

One of Bankman-Fried’s closest confidants was Caroline Ellison, the ex-CEO of Alameda Research, whom he once dated. The couple often took lunch walks around FTX’s fenced-in headquarters in Nassau, an FTX executive said.

Outside of his Bahamas cohort, Bankman-Fried went to great lengths to avoid talking to others and stayed away from face-to-face confrontations, preferring the encrypted messaging app Signal or Slack. said a senior MP. He frequently ignored messages from C-level executives if he disagreed with them.

Another former insider said employees were afraid of Bankman-Fried, adding that “there were very few people who were willing to challenge Sam.”

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