Semafor doesn't seem interested in returning SBF's money

Ben: Among those funds there is the pretty sizable investment that S.B.F. made in Semafor. We don’t know exactly what that number is, but what is, or isn’t, happening with that money? With the caveat, of course, that this is an evolving story.

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Teddy: In terms of the size of the investment, $5 million or so is my guess. I previously reported that his team spent about $10 million on its media investments overall. I’m speculating here, but I would say five million sounds right. And the money has not been returned. Semafor says they don’t expect any changes, and C.E.O. Justin Smith put out a note on Friday that they’re monitoring the situation.

I’ve reported that there is a clawback provision in the Semafor-S.B.F. deal—which Smith confirmed in his note to staff—essentially allowing Semafor to buy out its investors if they chose to do so. So there is an escape hatch here. If Semafor feels like one of their biggest investors is ethically compromised in a way that makes staff or leadership uncomfortable, could they buy the shares back? They could, but here’s no sign that’s going to happen here. And you would think if they were going to do that, they probably already would have.

Ben: Eriq, do the creditors themselves have any kind of claim on the money that Sam invested in Semafor?

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Eriq: I expect the litigation trustee to target wherever Bankman-Fried transferred money. But even if Semafor doesn’t have to give back money, I think there’ll be a question over what S.B.F. actually owns of Semafor, and whether that is really owned by the bankruptcy estate. So, if S.B.F. owns say, 10 percent of Semafor, I would imagine that the debtor wants that 10 percent, perhaps so they could sell it and give the proceeds to creditors. Although, as I understand it, Ben Smith and Justin Smith raised money with a SAFE convertible instrument, so Bankman-Fried doesn’t yet have equity. Regardless, one way or another, I expect the Semafor investment to come up in court.

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