Sharon Waxman On the Business of Entertainment
The founder and editor of TheWrap’s take on life on the left coast, high culture, low culture and the business of entertainment and media. Waxman writes frequently on the inside doings of Hollywood, and is is also the author of two books, Rebels on the Back Lot and Loot
Semafor, the global media company launched by Justin Smith and Ben Smith just two and a half months ago, plans to return the investment it took from accused crypto entrepreneur Sam Bankman-Fried, an individual familiar with the matter told TheWrap.
“The company intends to redeem the investment,” the individual said, who took care not to use the word “return,” but could not specify the difference between redeeming or simply returning the investment.
A spokeswoman for Semafor declined to disclose the amount of Bankman-Fried’s investment in the company’s $25 million seed round in June, but issued this statement to TheWrap:
“We are actively working with the relevant legal and governmental bodies who are managing this situation and are following their guidance on the most appropriate next steps to ensure the most ethical and responsible outcome for Sam Bankman-Fried’s creditors and the judicial process underway.”
Bankman-Fried was released on a $250 million bond package on December 22 while he awaits trial over the collapse of the FTX crypto exchange, which a U.S. prosecutor called a “fraud of epic proportions.”
Before the collapse of the exchange, Bankman-Fried both personally and through a family foundation gave millions of dollars to political candidates, mostly Democrats, and invested in or donated to numerous media companies.
ProPublica, the investigative non-profit, said in late December that it would return a $5 million donation, noting it “will return the initial $1.6 million it received in what was supposed to be a three-year, $5 million grant, and that it has terminated its relationship with the Building a Stronger Future foundation following allegations of fraudulent activities against Sam Bankman-Fried.”
The donation was meant to support journalism investigations into ongoing questions about the COVID-19 pandemic, biosecurity and public health preparedness.
But Semafor has been less clear about its intentions regarding the investment, including disclosing the amount. The lack of clarity has led to on-air trolling by Fox News’ Tucker Carlson , particularly since editor-in-chief Ben Smith is one of the country’s most noted media critics, most recently as a columnist at the New York Times. CEO Justin Smith has an equally serious media pedigree, as former CEO of Bloomberg Media Group.
According to Justin Smith, Bankman-Fried invested in Semafor’s pre-seed round in May 2022, which raised a total of $25 million to launch the company in October. Other investors included former Atlantic magazine owner David Bradley, The Information CEO Jessica Lessin, investor John Thornton and Jorge Paolo Lemann, co-founder of 3G Capital.
In a December 2 note to staff which he shared on Twitter, Smith said that Bankman-Fried’s investment had not yet converted to equity. (Theoretically that should make returning the cash easier.) In that same note, Smith said he was awaiting “guidance” from the government agencies investigating the crypto founder before deciding what to do.
“While we continue to monitor the legal situation closely, the best thing we can do is to continue to report on this story with the relentless tenacity that audiences are coming to expect from us,” Smith wrote.
Bankman-Fried was arrested three weeks ago in the Bahamas and is accused of fraud and mismanagement of billions of dollars in the FTX crypto fund he founded and which is now bankrupt.
The investment in Semafor was from Bankman-Fried personally. The company launched in late October.
The individual familiar with Semafor’s strategy said returning the investment posed difficulties, because the money could not ethically be returned to Bankman-Fried himself. For that reason, this person said, Semafor is waiting for guidance from government prosecutors about the best way to respond.
