Many have expressed surprise about my interest in the FTX situation and my openness to the possibility that @SBF_FTX may be telling the truth as I have no economic interest or relationship with any of the parties. Perhaps some background on my life experiences will help explain.
20 years ago on 12/9/02, I released a white paper entitled âIs MBIA Triple-Aâ where in 55-pages I questioned the AAA credit ratings of the largest bond insurer. I disclosed on page one that my firm, Gotham Partners, held a short position in the company.
A few weeks later, then-NYAG Eliot Spitzer launched an investigation accusing me of market manipulation. As a high profile hedge fund manager and with this being Spitzerâs second major initiative after his successful Wall Street analyst investigation, it was front page news.
The SEC shortly launched its own investigation. I spent the next seven months delivering 170k documents and giving a dozen days of on-the-record testimony to the two regulators. My lawyers advised me to say nothing publicly and I was presumed guilty by the public at large.
I had naively believed that regulators were only interested in the truth. I was wrong. While the SEC took a somewhat measured approach to the investigation, it became clear that some lawyers at the NYAG were interested in finding me guilty regardless of the facts.
And that was driven by incentives. As a high profile target that attracted headlines, I was potentially a prosecutorâs âticketâ to a partnership at a top white collar law firm at 30 to 50 times the annual salaries in the AGâs office. That revolving door continues to spin today.
Ultimately the AG and the @SECgov found no wrongdoing. They later launched successful investigations against MBIA. The company finally blew up when the financial crisis made clear that it was swimming naked.
When I launched Pershing Square in Jan. 2004, my reputation was still clouded by the investigations because the AG and SEC would not publicly state that the investigations were over. They just went quiet. I was only able to launch PS because Leucadia National backed me with $50m.
After MBIA blew up, Spitzer, to his credit, publicly apologized to me. The SEC then sent me a letter confirming the withdrawal of the investigation and no finding of wrongdoing, but only after I sent a strong email to the SEC chair, to the commissioners and its general counsel.
While I had always believed in the U.S. legal principle that one should be presumed innocent unless and until proven guilty, I became more religious in this belief. I am one of the largest donors to the @innocence Project.
I have supported the legal defense of many defendants that cannot afford to defend themselves. And I treat allegations of wrongdoing as allegations and nothing more. I understand why investors who have lost money want @SBF_FTX to go to jail.
I also understand why victims of crimes and their families wish for justice to be served promptly. And I write all of this having spent all of today on jury duty.
Letâs not sacrifice our core values in a rush to convict @SBF_FTX as it does no one any good. It doesnât bring anyone to justice faster or return investor funds any faster. At best it makes some unhappy investors feel better that someone is suffering consequences for their loss.
But you might ask, with his former girlfriend and partner pleading guilty, how is it possible that SBF could be innocent? Again, incentives play a role. SBF is the biggest prize for a prosecutor because he was on the cover of multiple magazines and everyone knows his name.
An SBF conviction means a partnership at the best white collar defense firm for an aspiring prosecutor. SBFâs two associates would gladly see him convicted in exchange for dramatically reduced sentences for themselves so we canât rely on their words as proof that he is guilty.
In sum, I donât know whether SBF is guilty of a crime. I therefore reserve judgment until our legal process arrives at a conclusion. Donât be so fast to convict on the basis of what you read in the press or without all of the facts.
To be very clear, I am not supporting or defending SBF. I am just presuming he is innocent unless and until he is proven guilty. And in light of the two guilty pleadings, what we do know is that his former girlfriend and partner are guilty. We donât yet know about SBF.
Lastly, SBF has behaved differently from every other guilty defendant of which I am aware. That doesnât mean he is innocent but his desire to speak publicly to anyone who will take an interview is unique in my experience for someone who is accused of a financial crime.
While it is important to understand the incentives of all the parties here, I want to be perfectly clear that I have enormous respect for our legal system and the prosecutors who enforce our laws. While there are some bad apples that I have come across in my career,
the vast majority of them are extremely intelligent, highly motivated, quality individuals who are under compensated for the work they do. Our justice system is one of the best in the world. Letâs let it do its job.
Someday, you might be accused of a crime. Put yourself in the position of an accused innocent person and ask yourself how you would like the media, your friends, and the countless unknown people who read about your case to act while the case is adjudicated.
It is often years before a case is finally decided. The accused are owed the presumption of innocence during this period. And from a personal perspective, it sucks. You are treated like a crook.
I remember the other parents pulling their children away from me and my daughter at nursery school drop off when the Spitzer news about me dropped. I will never forget. And I was lucky as I had the resources to hire good lawyers and defend myself.
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