New York City, NY

Is SBF the Worst Possible Version of Elizabeth Holmes?

Aron Solomon
Photo bySDNY public court filing 12.13.2022

Mere days after the defendant, COO and investor Sunny Balwani, was sentenced in the second of two Theranos trials, Sam Bankman-Fried was taken into custody in the Bahamas, charged with defrauding close to $2 billion from investors - twice the amount as the Theranos fraud.

Discussing the indictment, the Securities and Exchange Commission highlighted the same house of cards analogy that built the foundation of the Theranos prosecution; that the founder/CEO in each of these startups built a knowingly unstable foundation of their business designed to deceive investors and the public.

“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” SEC chair, Gary Gensler, said in a statement quoted by the New York Times.

The SEC filed a 28-page complaint late on Monday in the Southern District of New York.

David Gelman, a New Jersey criminal lawyer, points out that “While this initial SEC complaint is a civil securities fraud charge, federal prosecutors in the SDNY will go public on Tuesday with a criminal indictment that will make things much worse for Mr. Bankman-Fried.”

On Tuesday morning, federal prosecutors in the Southern District of New York did exactly that, making public their criminal complaint against SBF, the gist of which is that SBF lied extensively and made many false and misleading statements. He is being charged with multiple counts of wire fraud, wire fraud conspiracy, commodities fraud conspiracy, and securities fraud.

For those wondering why SBF wasn’t arrested earlier, his media tour, beginning with the New York Times DealBook interview, was the stuff made of dreams for prosecutors. I was surprised that he was taken into custody on Monday night, as I expected that he would be allowed to testify virtually in front of Congress on Tuesday morning, then be arrested in the Bahamas. If there was ever a lesson on why startup founders should hire good lawyers and listen to them, SBF’s ongoing tale is historical gold.

It is very early days to look at all of the points of intersection between the unraveling of Theranos and that of FTX, but it is going to be one of the biggest startup and crypto news stories of 2013.

My initial thoughts are that the big difference between the Elizabeth Holmes and Sam Bankman-Fried defense is that it’s going to be infinitely tougher for SBF’s counsel to put forth a “fake it ‘till you make it” argument, which was absolutely true with Elizabeth Holmes. While Theranos obviously devolved at some point from Holmes deeply believing that her company would turn the corner by their technology catching up with their idea, it seems inconceivable that SBF could even attempt a similar argument here.

With so many people hypothesizing that the public trial of Elizabeth Holmes and the aggressive 11.5-year sentence she received would be fair warning to all startup founders to double and triple check the way they did business, the saga of SBF and his FTX may provide yet another example for the ages of the irresistible power of FOMO, just as Theranos did.

The allure for investors of getting in on the next big thing to get much richer far too quickly continues to prove beyond the ability of many to resist. If l’affaire Theranos was supposed to be a warning to Silicon Valley, it failed abysmally, as did the blood-testing startup. What the unraveling of SBF and FTX will come to mean is something we won’t know for a while, but as we watch this unfold in real time, we are witnessing the ongoing failed promise of some of our best and brightest and question why they seem far more intent upon doing the wrong thing when given the opportunity to use their talents to help so many people.

About Aron Solomon

A Pulitzer Prize-nominated writer, Aron Solomon, JD, is the chief legal analyst for Esquire Digital. He has taught entrepreneurship at McGill University and the University of Pennsylvania and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in Forbes, CBS News, Crunchbase, Variety, CNBC, USA Today, ESPN, TechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Fortune China, Yahoo!, ABA Journal,, The Boston Globe, NewsBreak, and many other leading publications.

Comments / 0

Published by

Aron Solomon, JD, is the Chief Legal Analyst for Esquire Digital, who has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world.


More from Aron Solomon

Comments / 0