Thursday, December 8, 2022

Old Enemies Rebuffed FTX's SBF

Three years ago Taylor Swift pleaded with The Carlyle Group for help getting permission to use her old music for an American Music Awards medley.  Carlyle financed the purchase of Swift's music collection.

Both Taylor Swift and Carlyle Group co-founder David Rubenstein turned down FTX's Sam Bankman-Fried.  SBF wanted Swift to promote FTX and reportedly offered her $100 million.  Insider asked:

How does Taylor Swift have better due diligence practices than half of Silicon Valley? What does it say about venture investing in general that a pop star with no background in finance could vet a deal better than them?

Taylor knows a snake when she sees one.  She took on the greed and leverage boys over rights to her music creations.  

Rubenstein just wrote a book on great investors.  His Bloomberg television show interviewed SBF. The "peer to peer" program aired September 1, 2022.  The pair neglected to disclose they each had invested in Paxos, SBF through MacLaurin Investments Ltd. and Rubenstein through his family office Declaration Partners.

They also failed to mention SBF hit up Declaration Partners for funding.  One might expect a business interviewer to review those materials and ask cogent questions.  That did not happen, but Rubenstein said this in hindsight:

Did you invest in FTX?

I didn’t. My family office team looked at FTX at the $30bn valuation [earlier this year]. It didn’t move forward, and the memo never reached me, but the other day they showed me what they had prepared. The memo pointed out all the concerns about conflicts of interest. There wasn’t a lot of transparency.

The Carlyle Group's latest 10-K gave similar warnings:

Our failure to deal appropriately with conflicts of interest in our investment business could damage our reputation and adversely affect our businesses.

Carlyle Group Management L.L.C. has significant influence over us and its interests may conflict with ours or yours. 

Our certificate of incorporation will not limit the ability of our former general partner, founders, directors, officers or stockholders to compete with us.

And that's why Declaration Partners exists.  Rubenstein's appetite for money is insatiable.

SBF courted old enemies and lost prior to FTX's implosion.  He did win by being designated a peer of David Rubenstein.  That should go down in history.