Elon Musk revealed that former FTX chief executive Sam Bankman-Fried set off his “bs detector” earlier this year when the now-disgraced cryptocurrency entrepreneur asked to invest in the acquisition of Twitter.
FTX, headquartered in the Bahamas, went bankrupt on Friday after users discovered that companies controlled by Bankman-Fried were likely fraudulently intertwined, triggering a liquidity crisis. Bankman-Fried went from maintaining a $15.6 billion net worth to having “no material wealth” virtually overnight, according to data from the Bloomberg Billionaires Index.
Bankman-Fried had contacted Musk through investment banker Michael Grimes, who aided Musk with his recent purchase of Twitter. As shown by messages between Grimes and Musk previously leaked during legal proceedings related to the acquisition, the former said that the latter should “want to take” a meeting with Bankman-Fried, who was prepared to contribute up to $5 billion for the acquisition and “do the engineering for social media blockchain integration.”
Musk, however, said that he was “backlogged with a mountain of critical work matters” and observed that supporting Twitter via blockchain would be “impossible” since the bandwidth requirements would demand an “absolutely gigantic” peer-to-peer network that would defeat the purpose of decentralization. When Grimes said that Bankman-Fried would still be interested in Musk’s vision for Twitter purely from an investment standpoint, the world’s richest man agreed to speak with him later as long as he did not “have to have a laborious blockchain debate.”
Musk also questioned whether Bankman-Fried truly had access to liquid capital. Grimes expressed confidence in Bankman-Fried, noting that he had graduated from MIT and built his cryptocurrency platform from scratch before emerging as the second-largest contributor to the campaign of President Joe Biden.
After FTX went bankrupt, Musk confirmed on social media that he never trusted Bankman-Fried. “He set off my bs detector,” Musk said, “which is why I did not think he had” $3 billion.
Bankman-Fried, a self-proclaimed “effective altruist,” donated nearly $39 million to support Democrats in the midterm elections, which occurred days before his company imploded, according to data from Open Secrets. He had been preparing to spend as much as $1 billion during the 2024 election cycle to keep the Democratic Party in control of the White House.
The 30-year-old former tycoon comes from an extraordinarily well-connected family. His father, Joseph Bankman, is a tax scholar who teaches at Stanford Law, while his mother, Barbara Fried, is a fellow Stanford Law professor who also leads Mind the Gap, a political action committee that fundraises for the Democratic Party among wealthy Silicon Valley donors.
The messages between Grimes and Musk did not reveal why Bankman-Fried thought he would align with Musk’s mission for Twitter, which largely centers upon fostering open dialogue and free expression online.
“The reason I acquired Twitter is because it is important to the future of civilization to have a common digital town square, where a wide range of beliefs can be debated in a healthy manner, without resorting to violence,” Musk said in a recent statement. “There is currently great danger that social media will splinter into far right wing and far left wing echo chambers that generate more hate and divide our society.”