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Sam Bankman-Fried tries to broker FTX bailout from his home in the Bahamas, despite being booted from the crypto company

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Sam Bankman-Fried, CEO and Founder of FTX, walks near the U.S. Capitol, in Washington, D.C., September 15, 2022.

Graeme Sloan | Sipa via AP Images

NASSAU, Bahamas — Despite being pushed out of the cryptocurrency giant he founded, Sam Bankman-Fried told CNBC he is trying to lock down a multibillion-dollar deal to bail out FTX, which filed for Chapter 11 bankruptcy protection earlier this month.

In a brief interview with CNBC late Friday, the FTX founder declined to give details about the downfall of his crypto conglomerate, or what he knew beyond liabilities being “billions of dollars larger than I thought.” Bankman-Fried declined an on-camera interview or broader discussion on the record. He said he was focused on retrieving customer funds and is still on a quest to secure a deal. 

“I think we should be trying to get as much value to users as possible. I hate what happened and deeply wish that I had been more careful,” Bankman-Fried told CNBC. 

Bankman-Fried also maintained that there are “billions” of dollars in customer assets in jurisdictions “where there were segregated balances,” including in the U.S., and said “there are billions of dollars of potential funding opportunities out there” to make customers whole. 

What was once a $32 billion global empire has imploded in recent weeks. Rival Binance had signed a letter of intent to buy FTX’s international business as it faced a liquidity crunch. But its team decided the exchange was beyond saving, with one Binance executive describing the balance sheet as if “a bomb went off.” FTX filed for Chapter 11 bankruptcy protection on Nov. 11 and appointed John Ray III as the new CEO, whose corporate experience includes restructuring Enron in the wake of its historic collapse. 

Despite losing access to his corporate email and all company systems, Bankman-Fried maintains that he can play a role in the next steps. Venture capital investors have told CNBC the 30-year-old had been calling to try and secure funding in recent weeks. Still, investors said they couldn’t imagine any firm with a large enough balance sheet or risk appetite to bail out the beleaguered FTX. 

A long-shot, Bankman-Fried-brokered deal would be viewed in the same way as any competitive bailout offer, according to legal experts.

“He’s no different than any third-party suitor at this point, other than the fact that he’s a majority FTX shareholder,” said Adam Levitin, a Georgetown University law professor and principal at Gordian Crypto Advisors. “He could come into Delaware with an unsolicited offer, and say I want to buy out all the creditors for a price. But that would have to be approved by the bankruptcy court — he can’t force a deal.”

FTX’s new CEO has also said he’s open to a bailout. On Saturday, Ray said the crypto company is looking to sell or restructure its global empire. 

“Based on our review over the past week, we are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the United States, have solvent balance sheets, responsible management and valuable franchises,” FTX chief Ray, said in a statement, adding it is “a priority” in the coming weeks to “explore sales, recapitalizations or other strategic transactions.”

After reviewing the state of FTX’s finances last week, Ray said he’s never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information” in his 40-year career. He added that Bankman-Fried and the top executives were “a very small group of inexperienced, unsophisticated and potentially compromised individuals,” calling the situation “unprecedented.”

Battle in the Bahamas 

Part of Bankman-Fried’s ability to sign a deal may come down to which jurisdiction has more say in the bankruptcy process.

In a recent filing, Ray cited a conversation with a Vox reporter last week in which Bankman-Fried suggested that customers would be in a better position if “we” can “win a jurisdictional battle versus Delaware.” He also told Vox he “regrets” filing for Chapter 11 bankruptcy, which took any FTX restructuring out of his control, adding “f— regulators.”

Billions in FTX customer assets are now caught in limbo between a bankruptcy court in Delaware, and liquidation in the Bahamas

Ray put FTX and more than 100 subsidiaries under Chapter 11 bankruptcy protection in Delaware — but that didn’t include FTX Digital Markets, which is based in the Bahamas. The Nassau-based leg of FTX doesn’t own or control any other entities, according to the organizational chart filed by Ray.

The Securities Commission of the Bahamas has hired its own liquidators to oversee the recovery of assets and is backing a Chapter 15 process in New York, which gives foreign representatives recognition in U.S. proceedings. As part of that process, Bahamas regulators said they transferred customers’ cryptocurrency to another account to “protect” creditors and clients. It also said the U.S. Chapter 11 bankruptcy process doesn’t apply to them. 

The Bahamas move flies in the face of what’s happening in Delaware.

The FTX estate said that those withdrawals were “unauthorized” and accused the Bahamas government of working with Bankman-Fried on that transfer. FTX’s new leadership team has challenged Bahamian liquidators, and asked the U.S. court to intervene while enforcing an automatic stay — a standard feature of Chapter 11 proceedings. Typically, bankruptcy is meant to fence off assets to make sure they can’t be touched without court approval.

FTX’s team said the Bahamian group had no right to move money and called the Bahamas withdrawals “unauthorized.” Data firm Elliptic estimated the value of the transfer, which was initially thought to be a hack, to be around $477 million.

“There are some issues that require either coordination or fighting to figure out — there’s going to be some jockeying when it comes to assets in the Bahamas vs. the U.S.,” said Daniel Besikof, partner at Loeb & Loeb. “The Bahamas folks are taking a broader read of their mandate and the U.S. is taking a more technical read.”

The bankruptcy mayhem is partly a result of messy accounting on the part of FTX. Under Bankman-Fried’s leadership, Ray said the company “did not maintain centralized control of its cash” — “there was no accurate list of bank accounts and signatories” — and “an insufficient attention to the creditworthiness of banking partners.” 

Part of the Bahamas’ motivation for control may come down to economic interests. FTX hosted a high-profile finance conference with SALT in Nassau and planned to invest $60 million in a new headquarters that one top executive likened to Google’s or Apple’s campus in Silicon Valley. 

“Some of it is about protecting domestic creditors — this is a Bahamas company. There’s also a lot of money to be made for local Bahamian law firms, you have the whole trickle down effect,” said Georgetown’s Levitin. “There’s going to be some level of a staring contest between the Delaware bankruptcy court and the Bahamas regulator.”

Bankman-Fried’s future

Some experts say Bankman-Fried may be gunning for a bailout to reduce his own criminal liability and possible jail time. Bankman-Fried did not respond to a request for comment on potential charges.

Justin Danilewitz, a partner at Saul Ewing who focuses on white-collar crime, said while the odds of anyone flocking to make FTX whole are “highly unlikely given the staggering losses,” mitigating client losses can be a tactic to look better in the eyes of the court.

“That’s often highly advisable if a defendant is in a real pickle and the proof is compelling — it’s a good idea to try and make amends as promptly as possible,” Danilewitz said.

Some have likened that outcome to what happened at MF Global, formerly run by ex New Jersey Gov. Jon Corzine. The company was accused of using customer money to pay bills for the firm. But Corzine settled with the CFTC for $5 million, without admitting or denying misconduct.

The approach could backfire, Danilewitz said. That move could “reflect a degree of culpability or be viewed as an admission, and someone taking responsibility for what happened.”

Even if Bankman-Fried manages to play a role in recovering funds through a bailout, or somehow gains more control through a Bahamas liquidation process, he may face years of legal fights from possible wire fraud to civil litigation.

Wire fraud requires proof that a defendant engaged in a scheme to defraud, and used interstate wires to achieve that. The statutory maximum term is a 20-year sentence, in addition to fines. Danilewitz called it a “federal prosecutor’s favorite tool in the toolbox.” The key question, he said, will have to do with the defendant’s intent. “Was this all a big mishap, or was there intentional misconduct that could give rise to federal criminal liability?”

Others have likened Bankman-Fried’s legal situation to Bernie Madoff and Elizabeth Holmes, the latter of whom on Friday was sentenced to 11 years in prison for fraud after deceiving investors about the purported efficacy of her company’s blood-testing technology.

“The Theranos verdict should not have left him feeling good,” said Georgetown’s Levitin. “He has a real risk here. There’s the possibility of criminal liability, and civil liability.”


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Two children and two adults survive after Tesla plunges 250 feet off California cliff

View from the helicopter during a rescue operation after a vehicle carrying two adults and two children went over a cliff in Devil’s Slide, San Mateo county, California, U.S., January 2, 2023, plunging hundreds of feet, according to the Department of Forestry and Fire Protection, in this still image obtained from social media video.

CHP – Golden Gate Division | Reuters

Two adults and two children were rescued from a Tesla that plunged 250 feet off a cliff Monday morning in San Mateo County, California, officials said. 

The car was traveling southbound on the Pacific Coast Highway when it went over the cliff at Devil’s Slide, south of the Tom Lantos tunnel, and landed near the water’s edge below, the Cal Fire San Mateo-Santa Cruz Unit said. 

The car flipped and landed on its wheels in the fall, CAL FIRE/Coastside Fire Incident Commander Brian Pottenger said. Witnesses saw the accident and called 911. 

As crews were lowered down, they were able to see movement in the front seat, through their binoculars, meaning someone was alive.

“We were actually very shocked when we found survivable victims in the vehicle. So, that actually was a really hopeful moment for us,” Pottenger said. 

Fire officials called for helicopters to help hoist the survivors to safety. As they waited, firefighters rappelled to the scene and rescued the two children.

Rescue teams are seen at the scene as a Tesla with four occupants plunged over a cliff on Pacific Coast Highway 1 at Devils Slide on January 2, 2022 in San Mateo County, California, United States.

Tayfun Coskun | Anadolu Agency | Getty Images

The California Highway Patrol shared video on social media showing helicopters lower first responders to the scene to extricate and rescue two adults inside. 

All four were hospitalized. The San Mateo Sheriff’s Office said the two adults suffered non-life-threatening injuries and the two children were unharmed.

It’s not clear what caused the car to go over the cliff. CHP is handling the investigation. 

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Tesla shares tumble more than 10% following deliveries report

Tesla vehicles are shown at a sales and service center in Vista, California, June 3, 2022.

Mike Blake | Reuters

Shares of Tesla dropped 13% on Tuesday morning, a day after the electric auto maker reported fourth-quarter vehicle production and delivery numbers for 2022.

Deliveries are the closest approximation of sales disclosed by Tesla. The company reported 405,278 total deliveries for the quarter and 1.31 million total deliveries for the year. These numbers represented a record for the Elon Musk-led automaker and growth of 40% in deliveries year over year, but they fell shy of analysts’ expectations.

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According to a consensus of analysts’ estimates compiled by FactSet, as of Dec. 31, 2022, Wall Street was expecting Tesla to report around 427,000 deliveries for the final quarter of the year. Estimates updated in December, and included in the FactSet consensus, ranged from 409,000 to 433,000.

Those more recent estimates were in line with a company-compiled consensus distributed by Tesla investor relations Vice President Martin Viecha. 

Some Wall Street analysts think Tesla’s deliveries miss spells trouble for the electric vehicle maker, but others see a buying opportunity for the company in 2023.

Baird analyst Ben Kallo, who recently named Tesla a top pick for 2023, maintained an outperform rating and said he would remain a buyer of the stock ahead of the company’s earnings report, which is scheduled for Jan. 25.

“Q4 deliveries missed consensus but beat our estimates,” he said in a Tuesday note. “Importantly, production increased ~20% q/q which we expect to continue into 2023 as gigafactories in Berlin and Austin continue to ramp.”

Analysts at Goldman Sachs said they consider the delivery report to be an “incremental negative,” and view Tesla as a company that is “well positioned for long-term growth.” Goldman reiterated its buy rating on the stock in a Monday note and said that making vehicles more affordable in a challenging macroeconomic environment will be a “key driver of growth.”

“We believe key debates from here will be on whether vehicle deliveries can reaccelerate, margins and Tesla’s brand,” the analysts said.

Shares of Tesla suffered an extreme yearlong sell-off in 2022, prompting CEO Musk to tell employees in late December not to be “too bothered by stock market craziness.”

Musk has blamed Tesla’s declining share price in part on rising interest rates. But critics point to his rocky $44 billion Twitter takeover as a bigger culprit for the slide.

Morgan Stanley analysts said they think the company’s share price weakness is a “window of opportunity to buy.”

“Between a worsening macro backdrop, record high unaffordability, and increasing competition, there are hurdles for all auto companies to overcome in the year ahead,” they said in a note Tuesday. “However, within this backdrop we believe TSLA has the potential to widen its lead in the EV race, as it leverages its cost and scale advantages to further itself from the competition.”

CNBC’s Lora Kolodny and Michael Bloom contributed to this report.

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Tesla makes China boss Tom Zhu its highest-profile executive after Elon Musk

Tom Zhu Xiaotong, Tesla’s current executive in charge of China, speaks as a new Tesla experience store opens on Aug. 18, 2015 in Hangzhou, China.

Visual China Group | Getty Images

Tesla’s China chief Tom Zhu has been promoted to take direct oversight of the electric carmaker’s U.S. assembly plants as well as sales operations in North America and Europe, according to an internal posting of reporting lines reviewed by Reuters.

The Tesla posting showed that Zhu’s title of vice president for Greater China had not changed and that he also retained his responsibilities as Tesla’s most senior executive for sales in the rest of Asia as of Tuesday.

The move makes Zhu the highest-profile executive at Tesla after Chief Executive Elon Musk, with direct oversight for deliveries in all of its major markets and operations of its key production hubs.

The reporting lines for Zhu would keep Tesla’s vehicle design and development — both areas where Musk has been heavily involved — separate while creating an apparent deputy to Musk on the more near-term challenges of managing global sales and output.

Tesla did not immediately respond to a Reuters request for comment.

Reuters reviewed the organizational chart that had been posted internally by Tesla and confirmed the change with two people who had seen it. They asked not to be named because they were not authorized to discuss the matter.

Elon Musk needs to go back to Tesla and have others run Twitter, says Jim Cramer

Zhu and a team of his reports were brought in by Tesla late last year to troubleshoot production issues in the United States, driving an expectation among his colleagues then that he was being groomed for a bigger role.

Zhu’s appointment to a global role comes at a time when Musk has been distracted by his acquisition of Twitter and Tesla analysts and investors have urged action that would deepen the senior executive bench and allow him to focus on Tesla.

Under Zhu, Tesla’s Shanghai plant rebounded strongly from Covid lockdowns in China.

Tesla said on Monday that it had delivered 405,278 vehicles in the fourth quarter, short of Wall Street estimates, according to data compiled by Refinitiv.

The company had delivered 308,600 vehicles in the same period a year earlier.

The Tesla managers reporting to Zhu include: Jason Shawhan, director of manufacturing at the Gigafactory in Texas; Hrushikesh Sagar, senior director of manufacturing at Tesla’s Fremont factory; Joe Ward, vice president in charge of Europe, the Middle East and Africa; and Troy Jones, vice president of North America sales and service, according to the Tesla notice on reporting lines reviewed by Reuters.

Tesla country managers in China, Japan, Australia and New Zealand continued to report to Zhu, the notice showed.

Zhu does not have a direct report at Tesla’s still-ramping Berlin plant, but a person with knowledge of the matter said responsibility for that operation would come with the reporting line for Amsterdam-based Ward. Ward could not be immediately reached for comment.

Zhu, who was born in China but now holds a New Zealand passport, joined Tesla in 2014. Before that he was a project manager at a company established by his MBA classmates at Duke University, advising Chinese contractors working on infrastructure projects in Africa.

During Shanghai’s two-month Covid lockdown, Zhu was among the first batch of employees sleeping in the factory as they sought to keep it running, people who work with him have said.

Zhu, a no-fuss manager who sports a buzz cut, favors Tesla-branded fleece jackets and has lived in a government-subsidized apartment that is a 10-minute drive from the Shanghai Gigafactory. It was not immediately clear whether he would move after his promotion.

He takes charge of Tesla’s main production hubs at a time when the company is readying the launch of Cybertruck and a revamped version of its Model 3 sedan. Tesla has also said it is developing a cheaper electric vehicle but has not provided details on that plan.

When Tesla posted a picture on Twitter last month to celebrate its Austin, Texas, plant hitting a production milestone for its Model Y, Zhu was among hundreds of workers smiling on the factory floor.

Why China is beating the U.S. in electric vehicles

Allan Wang, who was promoted to vice president in charge of sales in China in July, was listed as the legal representative for the operation in registration papers filed with Chinese regulators in a change by the company last month.

Tesla board member James Murdoch said in November the company had recently identified a potential successor to Musk without naming the person. Murdoch did not respond to a request for comment.

Electrek previously reported that Zhu would take responsibility for U.S. sales, delivery and service.

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