Disgraced FTX CEO Bankman-Fried Also Invested In Elon Musk's SpaceX, The Boring Company

Zinger Key Points
  • FTX founder and CEO Sam Bankman-Fried was considered a genius by many of his followers.
  • Bankman-Fried reportedly has $225 million of exposure to two of Elon Musk's companies.
Disgraced FTX CEO Bankman-Fried Also Invested In Elon Musk's SpaceX, The Boring Company

FTX founder and CEO Sam Bankman-Fried could face criminal charges following the collapse of the popular cryptocurrency exchange last week.

Bankman-Fried was known as a market genius by his cult-like group of crypto followers, and internal FTX documents reportedly show that Bankman-Fried had significant financial exposure to another popular market guru with a cult-like following: Tesla Inc TSLA CEO Elon Musk.

Bankman-Fried's Alameda Research allegedly used FTX customer funds for proprietary trading without customer consent, triggering an investigation by the Manhattan U.S. attorney’s office.

Yale School of Management Senior Associate Dean Jeffrey Sonnenfeld did not dispute the genius label for Bankman-Fried in an interview with CNBC last week.

"Without a doubt, Sam Bankman-Fried is a genius," Sonnenfeld said.

"But when they develop one of these emperor-for-life models…then you really don’t have accountability."

SBF And Musk: After FTX filed for bankruptcy, Musk weighed in on Bankman-Fried, who reached out in March to express interest in helping Musk fund his $44 billion buyout of Twitter with "at least $3 billion" in funding.

In September, leaked text messages between Musk and Morgan Stanley banker Michael Grimes revealed Bankman-Fried was interested in discussing "social media blockchain integration" with Musk.

"I do believe you will like him," Grimes said to Musk about Bankman-Fried at the time of the offer. "Ultra genius and doer builder like your formula. Built FTX from scratch after MIT physics."

Musk did not end up accepting Bankman-Fried's offer.

"He set off my bs detector, which is why I did not think he had $3B," Musk tweeted on Friday.

But while he did not assist Musk in funding his Twitter deal, the Financial Times reported Friday that the disgraced Bankman-Fried has "billions of dollars of illiquid venture capital investments," including significant exposure to two of Musk's private companies: SpaceX and The Boring Company. Internal records reportedly show Bankman-Fried's companies had roughly $225 million invested in SpaceX and The Boring Company.

Benzinga's Take: Whether it be FTX, Theranos, WeWork, Nikola Corp NKLA or any other company with a charismatic leader considered a genius by followers, investors should always be skeptical and critical of company management rather than assuming there's some kind of link between IQ and integrity. It takes a smart, savvy person to build, run and maintain a high-level market scheme, so there has been a so-called genius behind most major market scams throughout history.

Photo: Courtesy of Bybit on flickr.

Posted In: Elon MuskFTXJeffrey SonnenfeldSam Bankman-FriedCryptocurrencyNewsPenny StocksSmall CapTop StoriesMarkets