Welltower: Exposing the Shell Game; Ordinary Investors Who Jumped Into Crypto Are Saying: Now What?; More on Sam Bankman-Fried; Slow-mo video; Ackman lunch

1) I haven't had a chance to review the report Hindenburg Research just released on health care real estate investment trust ("REIT") Welltower (WELL)... but given founder Nate Anderson's track record of exposing fraud and malfeasance, Welltower investors would be wise to read this closely: Welltower: Exposing the Shell Game. Excerpt:

• Despite the high praise from Welltower's management and claims of being a well-experienced operator, Integra seems to barely exist. The entity was registered 6 months ago, according to Delaware corporate records. Its website was registered on the same day. 
• Integra's CEO, 29-year-old David Gefner, appears to have no background in the skilled nursing space at all. Integra has no employees on LinkedIn except for Gefner, who claims to have worked at the six-month-old entity for 11 months.
• A senior ProMedica employee told us Integra had no operating experience and came in after the company couldn't find genuine operators. A former Welltower executive told us he had never heard of Gefner, saying that Integra would need "a lot of people" to manage the deal with Welltower.

2) Part of the reason I'm writing so much about Sam Bankman-Fried ("SBF") and the implosion of his firms, FTX and Alameda Research, is because I tend to get obsessed with wild stories of fraud – just search in the archives for everything I wrote about Elizabeth Holmes/Theranos and Billy McFarland/Fyre Festival (for McFarland's latest antics, see this Daily Beast article: Fyre Fest Fraudster Billy McFarland Is Out of Prison and Back on His Bullsh*t).

And this is so much larger – it's "likely the fastest big corporate failure in American history," according to the trustee handling FTX's bankruptcy proceedings.

It's also emblematic of the overall blowup of the crypto sector, which sucked in millions of ordinary investors – the ones regulators are supposed to protect – mostly right at the top, and totally incinerated them. This article on the front page of yesterday's New York Times highlights what happened: Ordinary Investors Who Jumped Into Crypto Are Saying: Now What? Excerpt:

In early November, Adrian Butkus, a 43-year-old father of two, put $600,000 – much of his life savings – into an account at BlockFi, a cryptocurrency trading firm. BlockFi had marketed the account as risk free, yielding 6.5 percent interest, more than Mr. Butkus could get anywhere else.

Just days later, as the collapse of the cryptocurrency exchange FTX shook the entire crypto industry, Mr. Butkus asked BlockFi for his money back. But the firm had suspended customer withdrawals, citing its close financial ties to FTX. By late November, BlockFi, too, had filed for bankruptcy.

Mr. Butkus doesn't know when – or if – he will see his money again. He is one of millions of individual investors around the world who poured money into digital assets, believing the cryptocurrency industry was a stable financial system. They were cleareyed about the volatility and big price swings of Bitcoin and other cryptocurrencies. But what has come as a big surprise to many is that the firms where they deposited their money lacked the basic protections offered by a brokerage or a bank.

As companies like FTX took on the marketing tactics and girth of mainstream financial firms, their customers came to believe they were safe places to deposit cash in exchange for cryptocurrency. The fact that big-name venture capital and other funds backed some of these companies only added to their allure.

"It just angers me," Mr. Butkus said. "Now I'm in a fight to get back some of my money."

Cryptocurrency firms, led by FTX, exploded into the mainstream in the past couple of years, pitching their products in extensive advertising campaigns as stable and safe investments. Unlike traditional banks and brokerages, which are limited in what they can say, the crypto firms aren't subject to the same rules.

"These companies are all giving the impression of bank-like security," said Joshua Fairfield, a professor at Washington & Lee Law School who specializes in technology issues. "These companies want to have customer trust but with none of the responsibility that comes with a regulated financial entity. And that just doesn't work."

Moreover, when a bank or brokerage fails, there are government-guaranteed funds to ensure that investors generally get their money back. The cryptocurrency industry, for the most part, has no such guardrails. And with the companies in bankruptcy and the value of some crypto assets uncertain, ordinary customers stand at the end of a long line when it comes to getting their money back, behind the large trading firms and lenders.

3) Here are the latest, most interesting stories I've read on SBF...

His latest interview with Puck: The Confessions of SBF. Excerpt:

An occasionally chilling conversation with Sam Bankman-Fried about accountability, naivety, family, prison, politics, and the strategy embedded in his walk of shame...

I can understand why some people worry that SBF is being given too much license to author his own narrative. His ubiquitous, Buttigieg-esque PR strategy has offered the media some extraordinary human theater. In conversation, SBF is meek, halting, and sad, but also prone to startling evasion and dissembling when asked about specifics, like what happened at Alameda, or whether he is worried about going to jail. He comes across as deceptively well-produced in a homespun way, as if he were a kid who got in over his head and is really, really sorry about what happened.

On Monday evening, it was my turn. Sam, still wearing an FTX-branded t-shirt despite the company now labeling him a "complete failure," called me from his bunker in The Bahamas, patched through by his new crisis PR handler Mark Botnick, a former aide to Mike Bloomberg. Other financial reporters have already probed Sam about his conduct at FTX, which is now being investigated by the Department of Justice, the SEC, and other regulators around the world. Instead, I wanted to ask him about the worldview behind his catastrophic decision-making – the political and philanthropic objectives, now under question, that might have clouded his judgment.

Over the course of 45 minutes, during which Sam occasionally played Storybook Brawl on his computer, we discussed his legal and media strategy; his bruised relationships with his brother Gabe and his mentor Will MacAskill; how his "earn to give" philosophy might have factored into his misdeeds; and his assertion that he was secretly a GOP mega-donor. The following has been lightly edited for length and clarity.

Following up on my speculation in Monday's e-mail: Could Caroline Ellison Be Cutting a Deal With the Justice Department? Excerpt:

Given that, Ellison now has every reason to play a different kind of game – not the one in which she runs to the New York Times to tell her story but the one in which she cooperates with prosecutors who may be willing to cut her some kind of deal to help them bring their case against the kingpin, Bankman-Fried.

Good questions: Earth to Reporters: Why Is No One Asking SBF What Happened to the $3.3 Billion He Borrowed? Excerpt:

Notice we have not heard anything about these lavish loans in SBF's "Oh poor confused me and I feel sorry for all my chump victims too." Since SBF seems unduly eager to try to 'splain himself, it would improve appearances in the eyes of public opinion and perhaps later a court, if he could honesty say, "I scrounged up what I could liquidate readily and used to try to save the company." If that had happened, that would also mean any investor recoveries, however meager, were due in part to SBF trying to shore up his enterprise.

I have seen no claim in the press or the bankruptcy filing that SBF either did or expressed willingness to put his own money into FTX when it was collapsing. The failure of SBF to spend any of his own funds to salvage his empire no doubt contributed to its demise. If he'd put up say $3 billion of the $8 billion supposedly needed, there is a remote possibility that his napkin-doodle balance sheet would have been forgiven: "If SBF is willing to stake that much of his personal money on the odds that he can rescue FTX, there must be some real value in there despite the mess."

And it would not be hard for a merely mildly dogged interviewer to press SBF on this topic: "You took $1 billion in personal loans from Alameda. When did that happen? You said in your Financial Times lunch earlier this year and then more recently that you had only $100,000 in bank. So where did the $999,900,000 or more go? Was it invested in real estate? Gambled away?"

Remember, he can't play "I don't remember" and act like he can't get the information. This was personal money, under his control, and he still has unimpeded access to those records. The reporter could follow up: "If you don't remember, could check your personal accounts and get back to us?" And if he demurs again, drive the knife in: "This will probably come out in court anyhow since the creditors will be looking into fraudulent conveyance. So this isn't something you will be able to hide."

Then an interviewer could follow a parallel line of questioning with Paper Bird. There SBF might give bafflegab about venture investments or crypto speculation, so if I were a member of the press, I'd start with the personal loan first since he has much less room there. Not being able to explain what happened to $1 billion, which is the route SBF is likely to take, is not a good look.

Lastly, here's a hilarious (and true) meme video:

4) This two-minute slow-motion video of objects dropping into water is so cool!

5) Following up on yesterday's e-mail about Pershing Square's Bill Ackman and philanthropy, if you'd like to have a private lunch with him, you can bid on that here (open until Monday). All proceeds benefit the David Lynch Foundation.

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.