To be fair, this could trigger lawsuits. I hope someone is reflecting on FTX, but I wouldn’t expect anyone to be keen on discussing their own involvement with FTX publicly and in great detail.
I think that’s right, although I would distinguish between corporate and personal exposure here to some extent:
I’m most hesitant to criticize people for not personally taking actions that could increase their personal legal exposure.
I’m most willing to criticize people and organizations for not taking actions that could increase organizational legal exposure. Non-profit organizations are supposed to exist in the public interest, while individuals do not carry any above-average obligations in that way. Organizations are not moral persons whose welfare is important to me. Moreover, organizations are better able to manage risk than individuals. For purposes of the norm that s/he who benefits from an action should also generally expect to bear the attendant costs, I am more willing to ascribe the benefits of action to an organization than to an individual doing their job.[1]
Organizational decisions to remain silent to avoid risk to individuals pose thornier questions for me. I’d have to think more about that intuition after my lunch break, but some of it relate to reasonable expectations of privacy. For example, disclosure of the contents of an organizational e-mail account (where the employee had notice that it belonged to the employer without a reasonable expectation of privacy) strikes me as less problematic than asking people to divulge their personal records, information about off-work activities, and the like.
Personal liability regimes are often pernicious to people doing their jobs in a socially desirable and optimal way. The reason is that the benefit of doing the job properly / taking risks is socialized, while the costs / risks are privatized. Thus, the actor fearful of personal liability will undervalue the social benefits of proper performance / risk acceptance.
Who would be able to sue? Would it really be possible for FTX customers/investors to sue someone for not making public “I heard Sam lies a lot and once misplaced money at Alameda early on it and didn’t seem too concerned, and reneged on a verbal agreement to share ownership”. Just because someone worked at the Future Fund? Or even someone who worked at EV?
I’d note that Nick Beckstead was in active litigation with the Alameda bankruptcy estate until that was dismissed last month (Docket No. 93). I think it would be very reasonable for anyone who worked at FTXFF to be concerned about their personal legal exposure here. (I am not opining as to whether exposure exists, only that I would find it extremely hard to fault anyone who worked at FTXFF for believing that they were at risk. After all, Nick already got sued!)
It’s harder to assess exposure for other groups of people. To your question, there may be a difference between mere silence in the face of knowledge/suspicion and somewhat supportive statements/actions in the face of the same knowledge. As a reference point, there was that suit against Tom Brady et al. (haven’t seen a recent status update). Obviously, the promotional activity is more explicit there than anything I expect an EA-associated person did. However, the theory against Brady et al. may rely more on generic failure to investigate, while one could perhaps dig for a stronger case against certain EA-related persons on actual knowledge of suspicious facts. I can only encourage people with concerns to consult their own personal legal counsel.
But at the general community level, I would be hesitant to fault various other individuals for being concerned about potential personal legal exposure. Remember, the pain of legal involvement isn’t limited to actual liability. Merely getting sued is itself painful; discovery is even more painful. Public statements could give someone motivation to try and/or ammo to get past a motion to dismiss for failure to state a viable claim.
As am aside, this isn’t really action relevant, but insofar as being involved with the legal system is a massive punishment even when the legal system itself is very likely going to eventually come to the conclusion you’ve done nothing legally wrong, that seems bad? Here it also seems to be having a knock on effect of making it harder to find out what actually happened, rather than being painful but producing useful information.
The suit against Brady also sounds like a complete waste of society’s time and money to me.
the legal system itself is very likely going to eventually come to the conclusion you’ve done nothing legally wrong,
The legal system doesn’t know ex ante whether you’ve done anything wrong, though. It’s really hard to set up a system that balances out all the different ways a legal system can be imbalanced. If you don’t give plaintiffs enough leeway to discover evidence for their claims, then tortfeasors will be insufficiently deterred from committing torts. If you go too far (the current U.S. system), you incentivize lawfare, harassment, and legalized extortion of some defendants. Imposing litigation costs / attorney fees on the losers often harms the little guy due to lower ability to shoulder risk & the marginal utility of money. Having parties bear their own costs / fees (generally, the U.S. system) encourages tactics that run up the bill for the other guy. And defendants are more vulnerable to that than plaintiffs as a general rule.
Here it also seems to be having a knock on effect of making it harder to find out what actually happened, rather than being painful but producing useful information.
Maybe. Maybe people would talk but for litigation exposure. Or maybe people are using litigation exposure as a convenient excuse to cover the fact that they don’t want to (and wouldn’t) talk anyway. I will generally take individuals at face value given the difficulty of discerning between the two, though.
Would it be possible to set up a fund that pays people for the damages they incurred for a lawsuit where they end up being innocent? That way the EA community could make it less risky for those who haven’t spoken up, and also signal how valuable their information is to them.
Yes, although it is likely cheaper (in expected costs) and otherwise superior to make a ~unconditional offer to cover at least the legal fees for would-be speakers. The reason is that an externally legible, credible guarantee of legal-expense coverage ordinarily acts as a strong deterrent to bringing a weak lawsuit in the first place. As implied by my prior comment, one of the main tools in the plaintiff’s arsenal is to bully a defendant in a weak case to settle by threatening them with liability for massive legal bills. If you take that tactic way by making the defendant ~insensitive to the size of their legal bills, you should stop a lot of suits from ever being brought in the first place. Rather, one would expect would-be plaintiffs to sue only if the expected value of their suit (e.g., the odds of winning and collecting on a judgment multiplied by judgment size) exceed the expected costs of litigating to trial (or to a point at which the defendant decides to settle without factoring in legal bills). If you think the odds of plaintiff success at trial are low and/or that the would-be individual defendant doesn’t have a ton of assets to collect from, then the most likely number of lawsuits is zero.[1]
That does tip the balance of abstract fairness toward defendants and away from plaintiffs. But that can be appropriate in some cases. As noted in an earlier comment of mine, personal-liability regimes underproduce public goods because the public goods are enjoyed by the public while the risk is borne by the individual. Litigation immunities (especially “qualified immunity” in the US) can be a controversial topic, but they reflect that kind of rationale. In some cases, society would rather limit or foreclose someone’s ability to collect damages for torts they suffered than squelch the willingness to provide public goods.
One might not want to extend this offer to those for whom you have a higher degree of suspicion that they did something they really should be sued for, or to those who you think face a high probability of being sued even without speaking up.
This is why you wouldn’t want to bind yourself to indemnify defendants who lost for their judgments. Doing so would create a much larger target on their backs, as the upside from litigation would no longer be limited to what the plaintiff could collect from the defendant. In the worst-case scenario in which a defendant loses unjustly, there are ways for third parties to protect the defendant without further enriching the plaintiff (e.g., making gifts after bankruptcy discharge, well-designed trusts).
How big is the legal risk for a high profile EA person who, say:
knew SBF was an asshole, incautious, and lived in a luxury villa, but had no knowledge of any specific fraud
publicly promoted him as a moral and frugal person
?
Is this automatically tort-worthy, but hard to prove? Laughed out of court no matter what? Does speaking about it publicly extend the court case, so it’s more expensive even if the promoter will ultimately win?
If I am betting $5 of play money on Manifold (meaning off-the-cuff gut check with no research) I would generally bet low as long as the person did not ~specifically promote FTX. If there was specific promotion of FTX, you could see claims like these which would be beyond my willingness to speculate $5 of play money at this time.
Here are some off-the-cuff questions I might want to ask (again, no research) if I were thinking about a specific case:
Could anyone potentially show that they actually and reasonably relied on the statements that were made to transact business with FTX?
How relevant were the statements to a reasonable person who might be considering transacting business with FTX? For example, one might think “Joe told me SBF was frugal despite knowing that was a quarter-truth at best, I wouldn’t have opened an FTX account had he not said that, and it was reasonable for me to rely on SBF’s frugality to decide whether to open an account” sounds like a stretch. On the other hand, reliance on “Jane had very good reason to believe SBF had done shady and illegal stuff, yet forcefully presented him as a trustworthy paragon of moral virtue on her podcast” starts feeling a little more realistic.
How much of the speaker’s content (not just the allegedly false/misleading statements about SBF) was about FTX? If it talked a lot about the advantages of doing business with FTX, etc., then the nexus between the speech and reliance seems stronger. If the context is SBF as a role model for EA EtGers, that would seem a real stretch.
Was there a direct or indirect financial benefit to the speaker or a related entity? If SBF gave the speaker (or more likely, their organization) tons of money, this starts looking more like a ~paid endorsement. And we are generally more willing to put duties on ~paid endorsers than on (say) on you and my comments on this Forum.
Also questions 3 and 4 get into potential causes of action for assisting with the sales of unregistered securities (cf. page 36 here). It’s unclear to me how an EA leader speaking out would increase their exposure to such a lawsuit.
There’s also the more realist answer to your question, which goes like this: the greater your income and assets, the greater your risk. My parents (on Social Security which can’t be garnished, only significant asset is the marital home which is difficult for creditors to access) probably wouldn’t need to worry. Unless you’re doing it for ideological reasons, why sue if you can’t collect more than what litigation costs?
(understanding you are a guy betting $5 on manifold)
re: #3. Does this get blurred if the company made an explicit marketing push about what a great guy their CEO was? I imagine that still wouldn’t affect statements on him as a role model[1] , but might matter if they said many positive statements about him on a platform aimed at the general public.
Not a crypto-focused platform (e.g., Joe’s Crypto Podcast?) No particular reason to know or believe that the company (had / was going to) use something Person said as part of their marketing campaign? If negative to both, it doesn’t affect my $5 Manifold bet.
I’m a pretty big fan of Nate’s public write-up on his relationship to Sam and FTX. Though, sure, this is going to be scarier for people who were way more involved and who did stuff that twitter mobs can more easily get mad about.
This is part of why the main thing I’m asking for is a professional investigation, not a tell-all blog post by every person involved in this mess (though the latter are great too). An investigation can discover useful facts and share them privately, and its public write-up can accurately convey the broad strokes of what happened, and a large number of the details, while taking basic steps to protect the innocent.
To be fair, this could trigger lawsuits. I hope someone is reflecting on FTX, but I wouldn’t expect anyone to be keen on discussing their own involvement with FTX publicly and in great detail.
I think that’s right, although I would distinguish between corporate and personal exposure here to some extent:
I’m most hesitant to criticize people for not personally taking actions that could increase their personal legal exposure.
I’m most willing to criticize people and organizations for not taking actions that could increase organizational legal exposure. Non-profit organizations are supposed to exist in the public interest, while individuals do not carry any above-average obligations in that way. Organizations are not moral persons whose welfare is important to me. Moreover, organizations are better able to manage risk than individuals. For purposes of the norm that s/he who benefits from an action should also generally expect to bear the attendant costs, I am more willing to ascribe the benefits of action to an organization than to an individual doing their job.[1]
Organizational decisions to remain silent to avoid risk to individuals pose thornier questions for me. I’d have to think more about that intuition after my lunch break, but some of it relate to reasonable expectations of privacy. For example, disclosure of the contents of an organizational e-mail account (where the employee had notice that it belonged to the employer without a reasonable expectation of privacy) strikes me as less problematic than asking people to divulge their personal records, information about off-work activities, and the like.
Personal liability regimes are often pernicious to people doing their jobs in a socially desirable and optimal way. The reason is that the benefit of doing the job properly / taking risks is socialized, while the costs / risks are privatized. Thus, the actor fearful of personal liability will undervalue the social benefits of proper performance / risk acceptance.
Who would be able to sue? Would it really be possible for FTX customers/investors to sue someone for not making public “I heard Sam lies a lot and once misplaced money at Alameda early on it and didn’t seem too concerned, and reneged on a verbal agreement to share ownership”. Just because someone worked at the Future Fund? Or even someone who worked at EV?
I’d note that Nick Beckstead was in active litigation with the Alameda bankruptcy estate until that was dismissed last month (Docket No. 93). I think it would be very reasonable for anyone who worked at FTXFF to be concerned about their personal legal exposure here. (I am not opining as to whether exposure exists, only that I would find it extremely hard to fault anyone who worked at FTXFF for believing that they were at risk. After all, Nick already got sued!)
It’s harder to assess exposure for other groups of people. To your question, there may be a difference between mere silence in the face of knowledge/suspicion and somewhat supportive statements/actions in the face of the same knowledge. As a reference point, there was that suit against Tom Brady et al. (haven’t seen a recent status update). Obviously, the promotional activity is more explicit there than anything I expect an EA-associated person did. However, the theory against Brady et al. may rely more on generic failure to investigate, while one could perhaps dig for a stronger case against certain EA-related persons on actual knowledge of suspicious facts. I can only encourage people with concerns to consult their own personal legal counsel.
But at the general community level, I would be hesitant to fault various other individuals for being concerned about potential personal legal exposure. Remember, the pain of legal involvement isn’t limited to actual liability. Merely getting sued is itself painful; discovery is even more painful. Public statements could give someone motivation to try and/or ammo to get past a motion to dismiss for failure to state a viable claim.
As am aside, this isn’t really action relevant, but insofar as being involved with the legal system is a massive punishment even when the legal system itself is very likely going to eventually come to the conclusion you’ve done nothing legally wrong, that seems bad? Here it also seems to be having a knock on effect of making it harder to find out what actually happened, rather than being painful but producing useful information.
The suit against Brady also sounds like a complete waste of society’s time and money to me.
The legal system doesn’t know ex ante whether you’ve done anything wrong, though. It’s really hard to set up a system that balances out all the different ways a legal system can be imbalanced. If you don’t give plaintiffs enough leeway to discover evidence for their claims, then tortfeasors will be insufficiently deterred from committing torts. If you go too far (the current U.S. system), you incentivize lawfare, harassment, and legalized extortion of some defendants. Imposing litigation costs / attorney fees on the losers often harms the little guy due to lower ability to shoulder risk & the marginal utility of money. Having parties bear their own costs / fees (generally, the U.S. system) encourages tactics that run up the bill for the other guy. And defendants are more vulnerable to that than plaintiffs as a general rule.
Maybe. Maybe people would talk but for litigation exposure. Or maybe people are using litigation exposure as a convenient excuse to cover the fact that they don’t want to (and wouldn’t) talk anyway. I will generally take individuals at face value given the difficulty of discerning between the two, though.
Would it be possible to set up a fund that pays people for the damages they incurred for a lawsuit where they end up being innocent? That way the EA community could make it less risky for those who haven’t spoken up, and also signal how valuable their information is to them.
Yes, although it is likely cheaper (in expected costs) and otherwise superior to make a ~unconditional offer to cover at least the legal fees for would-be speakers. The reason is that an externally legible, credible guarantee of legal-expense coverage ordinarily acts as a strong deterrent to bringing a weak lawsuit in the first place. As implied by my prior comment, one of the main tools in the plaintiff’s arsenal is to bully a defendant in a weak case to settle by threatening them with liability for massive legal bills. If you take that tactic way by making the defendant ~insensitive to the size of their legal bills, you should stop a lot of suits from ever being brought in the first place. Rather, one would expect would-be plaintiffs to sue only if the expected value of their suit (e.g., the odds of winning and collecting on a judgment multiplied by judgment size) exceed the expected costs of litigating to trial (or to a point at which the defendant decides to settle without factoring in legal bills). If you think the odds of plaintiff success at trial are low and/or that the would-be individual defendant doesn’t have a ton of assets to collect from, then the most likely number of lawsuits is zero.[1]
That does tip the balance of abstract fairness toward defendants and away from plaintiffs. But that can be appropriate in some cases. As noted in an earlier comment of mine, personal-liability regimes underproduce public goods because the public goods are enjoyed by the public while the risk is borne by the individual. Litigation immunities (especially “qualified immunity” in the US) can be a controversial topic, but they reflect that kind of rationale. In some cases, society would rather limit or foreclose someone’s ability to collect damages for torts they suffered than squelch the willingness to provide public goods.
One might not want to extend this offer to those for whom you have a higher degree of suspicion that they did something they really should be sued for, or to those who you think face a high probability of being sued even without speaking up.
This is why you wouldn’t want to bind yourself to indemnify defendants who lost for their judgments. Doing so would create a much larger target on their backs, as the upside from litigation would no longer be limited to what the plaintiff could collect from the defendant. In the worst-case scenario in which a defendant loses unjustly, there are ways for third parties to protect the defendant without further enriching the plaintiff (e.g., making gifts after bankruptcy discharge, well-designed trusts).
How big is the legal risk for a high profile EA person who, say:
knew SBF was an asshole, incautious, and lived in a luxury villa, but had no knowledge of any specific fraud
publicly promoted him as a moral and frugal person
?
Is this automatically tort-worthy, but hard to prove? Laughed out of court no matter what? Does speaking about it publicly extend the court case, so it’s more expensive even if the promoter will ultimately win?
If I am betting $5 of play money on Manifold (meaning off-the-cuff gut check with no research) I would generally bet low as long as the person did not ~specifically promote FTX. If there was specific promotion of FTX, you could see claims like these which would be beyond my willingness to speculate $5 of play money at this time.
Here are some off-the-cuff questions I might want to ask (again, no research) if I were thinking about a specific case:
Could anyone potentially show that they actually and reasonably relied on the statements that were made to transact business with FTX?
How relevant were the statements to a reasonable person who might be considering transacting business with FTX? For example, one might think “Joe told me SBF was frugal despite knowing that was a quarter-truth at best, I wouldn’t have opened an FTX account had he not said that, and it was reasonable for me to rely on SBF’s frugality to decide whether to open an account” sounds like a stretch. On the other hand, reliance on “Jane had very good reason to believe SBF had done shady and illegal stuff, yet forcefully presented him as a trustworthy paragon of moral virtue on her podcast” starts feeling a little more realistic.
How much of the speaker’s content (not just the allegedly false/misleading statements about SBF) was about FTX? If it talked a lot about the advantages of doing business with FTX, etc., then the nexus between the speech and reliance seems stronger. If the context is SBF as a role model for EA EtGers, that would seem a real stretch.
Was there a direct or indirect financial benefit to the speaker or a related entity? If SBF gave the speaker (or more likely, their organization) tons of money, this starts looking more like a ~paid endorsement. And we are generally more willing to put duties on ~paid endorsers than on (say) on you and my comments on this Forum.
Also questions 3 and 4 get into potential causes of action for assisting with the sales of unregistered securities (cf. page 36 here). It’s unclear to me how an EA leader speaking out would increase their exposure to such a lawsuit.
There’s also the more realist answer to your question, which goes like this: the greater your income and assets, the greater your risk. My parents (on Social Security which can’t be garnished, only significant asset is the marital home which is difficult for creditors to access) probably wouldn’t need to worry. Unless you’re doing it for ideological reasons, why sue if you can’t collect more than what litigation costs?
(understanding you are a guy betting $5 on manifold)
re: #3. Does this get blurred if the company made an explicit marketing push about what a great guy their CEO was? I imagine that still wouldn’t affect statements on him as a role model[1] , but might matter if they said many positive statements about him on a platform aimed at the general public.
legally
Not a crypto-focused platform (e.g., Joe’s Crypto Podcast?) No particular reason to know or believe that the company (had / was going to) use something Person said as part of their marketing campaign? If negative to both, it doesn’t affect my $5 Manifold bet.
thanks, I appreciate all this info.
I guess I kinda want to say fiat justitia ruat caelum here 🤷
You folks impress me! But seriously, that’s a big ask.
I’m a pretty big fan of Nate’s public write-up on his relationship to Sam and FTX. Though, sure, this is going to be scarier for people who were way more involved and who did stuff that twitter mobs can more easily get mad about.
This is part of why the main thing I’m asking for is a professional investigation, not a tell-all blog post by every person involved in this mess (though the latter are great too). An investigation can discover useful facts and share them privately, and its public write-up can accurately convey the broad strokes of what happened, and a large number of the details, while taking basic steps to protect the innocent.