Freakonomics Radio - 560. Is This “the Worst Job in Corporate America” — or Maybe the Best?

Episode Date: October 5, 2023

John Ray is an emergency C.E.O., a bankruptcy expert who takes over companies that have succumbed to failure or fraud. He’s currently cleaning up the mess left by alleged crypto scammer Sam Bankman-Fried. And he loves it. RESOURCES:"United States of America v. Samuel Bankman-Fried, a/k/a 'SBF,'" by the United States District Court Southern District of New York (2023)."Does FTX’s New CEO Have the Worst Job in Corporate America?" by Ben Cohen (The Wall Street Journal, 2022)."John J. Ray III, a St. Joseph’s Grad From Pittsfield, Is Earning $1,300 an Hour to Sort Out the Remains of the FTX Cryptocurrency Collapse," by Larry Parnass (The Berkshire Eagle, 2022)."'Pit Bull' Fights to Pick Up Enron's Pieces," by Ameet Sachdev (Chicago Tribune, 2007).EXTRAS:“The Secret Life of a C.E.O.,” series by Freakonomics Radio (2018-2023)."Did Michael Lewis Just Get Lucky with Moneyball?" by Freakonomics Radio (2022)."Does the Crypto Crash Mean the Blockchain Is Over?" by Freakonomics Radio (2022)."What Can Blockchain Do for You?" series by Freakonomics Radio (2022).SOURCES:John Ray, C.E.O. of FTX.

Hey there, Stephen Dubner. Before we get started with today's episode, a quick reminder that we have just launched a membership program called Freakonomics Radio Plus. As a member, you will get a weekly bonus episode of Freakonomics Radio every Friday. Plus, you can listen without ads. To sign up for Freakonomics Radio Plus, visit the Freakonomics Radio show page on Apple Podcasts or go to Freakonomics.com slash plus. And now on to this week's episode.

Okay, it's quiz time. For one point, if I asked you to name the CEO of FTX, the giant cryptocurrency exchange, what do you say? I'm guessing the name that comes to mind is this one. Sam Bankman-Fried. Sam Bankman-Fried. FTX founder Sam Bankman-Fried. Jury selection is expected to begin for the much- trial of Sam Bankman Freed. If you said Sam Bankman Freed, I'll give you half a point. It is true that he was the CEO of FTX at one point. Before he turned 30, he was worth more than $20 billion. And FTX had such massive momentum

that Bankman Freed was being talked about as potentially the world's first trillionaire. He was also good at spending money on real estate, on donations to the effective altruism movement, also political donations. He gave publicly to Democrats and privately to Republicans. Why the secrecy there? As he later said, quote, it's because reporters freak the f*** out if you donate to Republicans. They're all super liberal, and I didn't want to have that fight. Bankman Freed is now in the middle of a much bigger fight. Late last year, he was booted from FTX and then arrested, and he's currently on trial in New York for a variety of serious fraud charges.

Those are the official charges. Unofficially, he's been charged with Olympian hubris and standard issue stupidity. He was the head of the company. He was involved in everything. And he took money and he spent it on stuff that had nothing to do with the business. And that is the current CEO of FTX. I'll give you five points if you can name him. Yeah, I didn't think so. Here you go. So I'm John Ray.

I am a turnaround specialist. My chief role is to be the head or chief restructuring officer of public companies that get into financial and or other legal trouble. John Ray is what you might call an emergency CEO. His biggest job before FTX? Enron. Today on Freakonomics Radio, a conversation with Ray about what he can and can't do as the emergency CEO at FTX. We talk about why he's been so willing to publicly trash Sam Bankman Freed and why, weirdly, there is no place he would rather be. podcast that explores the hidden side of everything. With your host, Stephen Dubner. When you talk to John Ray, one thing that becomes clear very quickly is that he loves what he does.

What I love about the business is when the economy is great, there's always stupidity and fraud. When the economy is poor, you've got both those issues, plus you've got the market impacts. When interest rates rise, companies are overleveragedaged and they're going to end up in bankruptcy. So in both good cycles and bad cycles, there's always business. Ray is a bankruptcy expert, but he's not an expert in any particular industry. I asked what he knew about cryptocurrency exchanges generally and FTX specifically before he took over. Absolutely zero. I knew of crypto, hadn't really followed it, didn't know the intricacies of it, certainly didn't know anything about FTX. But having said that, I've been involved in probably a dozen industries and never

been a specialist in the particular industry because I'm really a bankruptcy and legal process professional, and it doesn't really matter what the particular company is. The FTX case is a perfect example of me parachuting into a case literally on no notice whatsoever. Sometimes Ray is brought in to try to rescue a company in trouble. Sometimes he's brought in when a rescue isn't possible. And then his primary job is to find out where all the money went and try to claw back as much as possible for the stakeholders. That's pretty much the case with his current job, FTX. Here are just a few of the other firms where Ray has been brought in.

There was Enron, as I mentioned earlier. They were a huge energy supplier and trading firm that imploded in 2001. There was Nortel Networks, the big Canadian telecom company that went bankrupt in 2009. A Minnesota mortgage company called ResCap, which went bankrupt in 2012. He has also done work for Polaroid, Pacific Lumber, Arlington Industries, and an infrastructure fund that invested in South Africa. There's three reasons why you go into bankruptcy, right? One is a very common problem. You're just extremely over-leveraged, right? And those are, frankly, if there's no other problems, that's the easiest of bankruptcies. Why? Because you take all the people who lent money and you

say, okay, now you own the business, you reduce the amount of debt, and all of a sudden the cash flow from the business can now run the business and not have to support that over-leveraged ballooned out debt. Very simple problem. It can be done on paper, has nothing to do with the business. What are the other reasons? My favorite reasons, fraud. Fraud can take many, many forms, whether it's hijacking the balance sheet or stealing money or maybe having liabilities that you didn't tell people about. For example, I got brought into a company that was the largest U.S. transporter of crude oil. Didn't know anything about the shipping business, of course, but they brought me in because they had some tax liabilities that they had not disclosed. And it appeared as though they were relying on some advice that was knowingly inappropriate. And it was a massive liability. By the time we were resolved with the IRS, it was

over $300 million worth of undisclosed liabilities to the government. And so there you go. That's perfect example. Nothing wrong with the underlying shipping business, but what brought it in? Fraud. Okay, so you've got over-leverage. You've got many types of fraud. What else? Then there's just plain stupidity. People operate a business poorly, and they're just not smart about what they're doing,

and they drive the company into bankruptcy. And there's a couple different ways they can do that. They invest in things they shouldn't invest in. They're way outside their core competency. It's like when Michael Jordan decided that he wasn't going to play basketball. Instead, he was going to play Major League Baseball. And frankly, as good of an athlete as he kind of sucked at baseball. And then there's situations where perhaps the economy changes and the companies don't change with that, right? They don't keep pace with what's happening around them. They operate a business with blinders changes and the companies don't change with that, right? They don't keep pace with what's happening around them. They operate a business with blinders on and the world passes by them.

So other than your last reason, which was essentially lack of business flexibility, if you look at the reasons you've given for why a firm will need you, it sounds like FTX checked every box and then some, yes? Fairly so. I'm not usually brought in where there's just high leverage and all they need is a sort of a balance sheet fix. I'm typically brought in where there's a conflict of interest, say, with management or there's some elements of fraud or crime. And I'm kind of unique in this sector. Many of the CROs, an acronym for Chief Restruction Officer,

many of them are with large organizations. And when you get into the conflict scenario or the fraud scenario, a lot of the big firms have conflicts. And I'm a single guy, probably one of the few, certainly been around the longest as a single guy. I have no conflicts. So, for example, when I was brought in for Enron, one of the reasons I was brought in was because we were suing every bank virtually around the world. And all the big firms, they had conflicts. They represented the banks in multiple capacities. And when you're suing someone for multiple billions of dollars, you don't want to know that their side hustle is some other engagement with the bank. In the case of Enron, the problem wasn't just some other engagement the big restructuring firms may have had with the banks. It was the fact that the banks were accused of helping Enron

cover up what turned out to be years of high-stakes fraud, which is why John Ray, when he was brought in to help pay back Enron investors, sued those banks. We recovered several billion dollars in the litigation that no one anticipated. We were hard bargainers, and we were ready to take stuff to trial. I don't mind settling, but I always want to be ready for trial. As they say, plan for rain, pray for sun. I think it was 11 banks, all big international banks. Did any of those go to trial or were they all settled? Eventually, we all settled, but we didn't settle Citi until early the day of the trial. At the time, their then CEO had stepped down. And if you've been

around long enough and you follow this stuff, everybody knows what happens when a new CEO comes in. It's the first thing that happens, right? I grew up going to Catholic school, and we'd go to church every Sunday, and they would hand the basket out, and they'd pass it down, and everyone would throw money in. Well, when a company has a new CEO, he goes down to the CFO's office, and he holds out the prayer basket and says, throw all this stuff in here that's going to come back to haunt me and detract from earnings under my watch. And then we write the stuff off and we blame it on the old guy. So I knew that they were going to take a massive charge, right? Because that's like the first toilet flushing that happens when the new CEO comes. And I'm like, I want to be part of that big flush.

John, you've been called a lot of interesting things in the business press, a lot of descriptive labels befitting your unusual job. Do you have a favorite? The first label I ever got was when I was doing Enron. One of the creditors referred to me as a pit bull. When I get into a problem, I sink my teeth into it and I don't let out of my sight until it's resolved to my satisfaction. Very tenacious, very aggressive, but you have to be in troubled circumstances. And so once I'm onto something, you really got to shake me off. John Ray was born in 1959 and grew up in Pittsfield, Massachusetts, toward the western edge of the state. And if you actually look up Pittsfield in Wikipedia,

you'll find some very, very bizarre facts. Like, I think the first baseball game was recorded there. The first death of a Secret Service agent happened in Pittsfield, Mass. A lot of things there. But yeah, it was a GE town I grew up. GE, as in General Electric, they had a huge manufacturing facility in Pittsfield, and they were the town's biggest employer.

My dad worked for some time at GE. Then he was an outside contractor at GE. He was in the plumbing contracting business, not house plumbing, but factory kind of plumbing. And then you go to UMass Amherst. You graduate cum laude. Political science. Did fine. And after that, you interned for Senator Ted Kennedy. I did. I did. And I understand you thought about running for office.

I did. I like working for Kennedy's office. This was circa 79. I worked in their Boston office, which is basically their constituent office. And I would say 95% of the traffic that came through there, people needing help, were people who could not and would probably never vote. He wasn't helping people to vote for him or to raise money for him or to do him favors. That office literally helped people for the sake of helping people. It was like, wow, he's doing this because it's good. So I kind of caught the fever a little bit. But Ray decided against running for office. Instead, he went to law school at Drake University in Des Moines, and then he moved to Chicago. And I interviewed three different law firms,

right? Same day, all one day. I do everything quickly. By the moved to Chicago. And I interviewed three different law firms, right? Same day, all one day. I do everything quickly. By the end of the day, I had three offers. And at the time, my wife's parents lived next door at a lake house with, at that time, he was a sitting federal judge. And he said, who did you interview? And I said, A, B, and C.

And so he said, well, what you gonna go with? And I said, C. Well, C was Mayor Brown. And at the time, they had just been through Penn Square. And their client was Continental Bank. Penn Square was a small Oklahoma bank that collapsed in 1982. Continental Illinois was a bigger bank that had taken on a lot of bad loans from Penn Square. In order to prevent a catastrophic bank failure, the federal government took over

Continental. The law firm that Ray wanted to work for, Mayor Brown, had a longstanding relationship with Continental. And there was lots of tabloids about, you know, how this affects the firm and its future and its partners and all this other stuff. And I had two other law firms that were very, very good law firms. And so the federal judge looked at me and he goes, oh, my God, why would you do that? Like, didn't you read the paper? Don't you understand all the problems they're going through? And I said, that's what I kind of like about them. I said, they're kind of the underdog. They're going to work harder. They're going to have to change things. They're going to do things differently. The other firms, they're comfortable where they,

I want to go with the firm that's kind of down a little bit because where there's failure, there's opportunity for the right person. That may have been the first time John Ray understood that failure breeds opportunity, but it was far from the last. His next job was at Waste Management, the trash company. The year I got there, I think we did 300 small acquisitions. And the saying within the law firm, which was so, so true, is that if you worked at waste management in the law department, you did everything from A to Z, adultery to zoning. Wait, what's the adultery? You know, there'd be an affair, the sales guy with somebody else in the office, and

there would be some discrimination claim that would get filed out of it. It covered the waterfront of every legal issue. So it was such broad, broad experience. In 1998, Ray became general counsel at the clothing manufacturer Fruit of the Loom, best known for its underwear. A year later, the company filed for bankruptcy, and Ray was chosen to oversee that process. A few years after that, he got the Enron job. Ever since, he's been jumping from one disaster to the next. So, what's his plan for FTX?

That's coming up. I'm Stephen Dubner, and you are listening to Freakonomics Radio. In case you don't know any more about cryptocurrency than John Ray did when he was brought in to run FTX, we can help you with that. Last summer, we put out a three-part series called What Can Blockchain Do For You? You might want to start with episode number 508. It was called Does the Crypto Crash Mean the Blockchain is Over? It's optional, but perhaps useful. Anyway, just a few months after we put out that series, in early November of 2022, word started to get out that the cryptocurrency trading exchange FTX was insolvent. Co-founder and CEO Sam Bankman-Fried scrambled to raise money to save the firm, but he couldn't stop FTX customers from selling their crypto and cashing out. It was basically a bank run.

Other top FTX executives immediately quit. The firm's lawyers were telling Bankman-Fried he should declare bankruptcy and turn the company over to John Ray. At 8 p.m. on November 10th, one of the lawyers sent Bankman-Fried the paperwork that would give full control of the company to John Ray. With increasing urgency, they pushed him to sign it. At 4 in the morning on Friday, November 11th, Bankman-Fried signed. John Ray's first move as emergency CEO was to file for bankruptcy in Delaware.

There's other cases I've been involved in where there's weeks ahead of time where you're brought in, but it's a rare case where you're literally brought in within the 24 hours. A few days later, Ray submitted his first written statement to the Delaware Bankruptcy Court. I have over 40 years of legal and restructuring experience, he wrote. I have been the chief restructuring officer or chief executive officer in several of the largest corporate failures in history. Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information

as occurred here. This situation is unprecedented. Shortly after that, Ray testified in front of Congress. The FTX group's collapse appears to stem from absolute concentration of control in the hands of a small group of grossly inexperienced, unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company entrusted with other people's money or assets. When you come into these bankruptcies the way I do, there's such a freedom, right? Because you weren't involved. You didn't do anything wrong.

So you can come in there with a clean heart and an open mind and you can say what you know. Here's one thing you said to Congress. He said, this is just old-fashioned embezzlement, taking money from others and using it for your own purposes. This is not sophisticated at all. I think most people who knew anything about FTX were probably surprised by that thing. Oh my gosh, I thought it was extremely sophisticated. So what was your purpose in being that black and white, really, in your description? Well, because I think people were sort of looking at this as a condemnation of crypto, like all crypto is bad. One congressman tried to get me to call it creepy dough.

And I'm sorry, I'm not a crypto expert. I'm certainly not a regulator, but I looked at this and said, I don't think that's the issue. I think this is just someone stealing money, and not really in a sophisticated way. I mean, Enron was very sophisticated. They would set up separate special purpose vehicles and do off-balance sheet transactions and so on and so forth. Meaning when they lost, they would separate it, get it off the main books so that the company still look good. You're saying that was a sophisticated accounting fraud, at least. In this case, what were the types of sins or crimes and how unsophisticated were they?

People compare this to Enron or they compare this to Bernie Madoff. Both those companies, they didn't just have one set of books. They had two sets of books. We don't have a set of books. We don't even have one. All books. They had two sets of books. We don't have a set of books. We don't even have one, right? That's the big difference. Because if you took those two books and you put them together, you've got the true picture of what happened.

Very accurately recorded, mind you. But here, I mean, we don't have, you know, income statements and balance sheets. They don't have records of loans they made. All kinds of transactions are not documented. This is like shattering glass and looking all over the floor trying to pick up the pieces. So how do you do that? It seems like it's kind of a forensic act as much as anything. But if there are no records and if there were just tens, hundreds of millions of dollars flowing in and out of the main firm to associate firms, to outside firms, to partners, but then also these donations to political candidates,

donations to the effective altruism movement, millions and millions and millions of dollars without record keeping. Are there enough clues and trails to all of that money to essentially recreate where the money went? Or are there some things that will be forever lost? It's an exercise. It's a daunting exercise. Essentially, what we have to do is create or recreate those books as we go at a very primary level. And you start with, you know, asset movements in and out of bank accounts. And you trace the money that came in, the money that went from one entity to another, where it ultimately ended up. If it's on an outside source and you have a right to get it, you go get it. You sort of put Humpty Dumpty back together again.

So as far as I can tell, John, you generally don't spend a lot of time trashing the previous management when you take over a failed firm. But that's not the case with FTX and Sam Bankman-Fried. You've described him at length as, you know, out of control, childish, not transparent. Why is this case different? People have to have an understanding of what happened, right? Unlike some bankruptcies, a lot of bankruptcies are where commercial parties affected, right? For example, if Kmart, if you will, has a trade payable that's not paid, they're a commercial party. They negotiated a contract. They understand the industry.

They knew the risks, et cetera, et cetera. Customers are a bit different. They don't understand what happened. We have creditors all around the world in multiple languages. They're owed an explanation of what happened. So we've tried to take extra steps to tell them what happened because really it's a shock and it's unexplainable to them and you've got to give them the backstory. But the one thing that I'm responsible for is just increased value, increased value,

increased value, so that ultimately there's less to fight about. I just figure if I bring in an increased value, all the problems will naturally either be made lesser or solve themselves. But is the ultimate allocation in the hands of a judge in Delaware? Is that the way it works? At the end of the day, we put forward a plan. We try to get as many people agreeing with it. In every case I've been involved in, we've had a consensual plan. Sometimes it takes a lot of negotiations, some mediations to get there. There's compromises being made, but ultimately you try to get a compromise that everybody can agree with. Not

everybody's always 100% happy, but people get on board for things. And then we put that forward, and ultimately the judge, there's some standards and some statutory tests about fairness and equity that the judge has to opine on. And that's the process. So, John, if you had to predict now, what share of all dollars would you say will be recovered? Oh, I am not going to venture. I don't want to underestimate our ability there. What is FTX a year or two from now? Does it exist or is it wiped off the face of the earth? You know, it's hard to say. We're looking very strongly at restarting the exchange. What is FTX a year or two from now? Does it exist or is it wiped off the face of the earth? You know, it's hard to say. We're looking very strongly at restarting the exchange.

There were some capabilities to the exchange that people liked. There was certainly a need for competition within the sector. But look, if there's a life for it, the market will determine that, frankly, and will do what makes sense to maximize value for creditors. And at the end of the day, I don't have a predetermined plan. People always ask me, like, what's your plan? And I always say, my plan is to maximize value for the creditors, however plan that takes. That's what we do. You know, John, not long after this happened, I flew into Atlanta and I summoned an Uber and the guy came with the nicest car I'd ever been in, period. Forget about an Uber, must be $150,000 car. And I said, what's up? Like, what are you doing with

this car driving an Uber? And he said, well, I've got some FTX problems right now. I mean, there's people, they've got children, they've got to put them through school. They've got a house, they may have a mortgage. If you were a customer and you have money hung up, you want to get it back as quickly as possible. But I have occasion to actually talk one-on-one to creditors and hear their personal stories. You need to be able to do that. If you don't step in those shoes and see it from that angle, you're really depriving yourself of the ability

to fully understand the problem. And if you don't fully understand it, you can't solve it. Like I grew up in a very sort of rough and tumble background, but the other side is that there's a guy that grew up in a town like that, a blue collar town where people didn't necessarily get what they deserved. And so always in the back is I'm fighting for that underdog. And the process, obviously, because there's so many creditors affected and it's such a large process of investigating and collecting and sorting through the liabilities and developing a plan. There's a natural slowness to that process and bureaucracy of that process. And it's hard to convince people that people in my job care about that because we're all viewed as making lots of money and so on and so forth.

John Ray doesn't come cheap. He bills at $1,300 an hour. And on a job like this, he brings with him a large team of lawyers and consultants. As of this recording, the total bill since FTX declared bankruptcy is well over $300 million. Those fees come out of the pool that will be used to pay back creditors. Crime is very expensive. You know, a lot of people get hurt, and it's very expensive to fix it, right? But on the other hand, we're sort of investing in a recovery if you look at it from that perspective. Do you ever work on more than one bankruptcy at a time? I only do one at a time, active. There's another sort of tranche of these guys called

independent directors, and they get called in by the law firms, and they drop them into companies that are about to go into bankruptcy, and they form a special committee of these independents. And some of these guys have like 10 cases going at a time, and I just know what it's like to be involved heavily in one case. I mean, if you do it right, it sort of rips your life apart. Doing 10 of them would be absurd. So it sounds like there should be a bigger market for people like you. Why isn't there? There is a very big market for it, but I think it's channeled through these big firms. These big firms are consultants known for managing bankruptcies and bringing in chief

restructuring officers. Some of the biggest are FTI Consulting, Alex Partners, and Alvarez and Marcell. If you go to the bigger firms, they've got a pyramid model, right? Which means there's 10 people at the bottom, and above them are five people, and above them are three people, and then there's one guy above them. It's leverage. So you're billing somebody out at $1,000 an hour, but you're only paying them $300. That's the leverage model. And so everybody kind of gravitates to that model. I don't have any

leverage. Whatever I bill, net of my costs, that's what I make. And a lot of people come to me and say, like, are you dumb? Why don't you just add 10 people? And I've never wanted to do that. If I get into an industry, whether it's crypto, whether it's energy or retail, I can hire best-in-class advisors, best-in-class consultants to be my employees on any given case. The best people in the world, the best judgment, the highest output people, I don't have to rely on the Bs and Cs. I got all As. Shortly after John Ray took his current job, the Wall Street Journal published an article headlined, Does FTX's New CEO Have the Worst Job in Corporate America?

Ray thinks the journal has it backwards. He says that being an emergency CEO for whatever company is better than being a regular CEO. Every CEO in America is jealous of this job. They absolutely detest the fact that they can't do what I do. So I come in. There's an office I don't like. We're not using. I reject it out of bankruptcy.

There's a contract that's not very favorable. I get rid of it. I look at all my employees and I say, God, we've got 100 too many. I get rid of them that day. There's a business that's not making money. I go in and I just shoot it. I look at all my employees and I say, God, we've got 100 too many. I get rid of them that day. There's a business that's not making money. I go in and I just shoot it. Boom, gone, done. Numbers don't make sense. There's no probability of success. I shoot it. CEOs can't do that, right? They just can't do that. They don't have the flexibility. They don't have the processes. And everything happens so quickly. So you're taking like 10 years of a

life of a company and what optimally would be everything that you would want to accomplish, and you shrink wrap this thing down to 12, 18 months, and you sort of like turbocharge everything. It's dynamic. It's exciting. I don't know if you've ever been on a condo board, right? It's really what I call lowest common denominator business. The least objectionable idea gets done. Everything that's a problem, I want to fix like tomorrow because that's the cadence that I'm used to. And most CEOs, they'd have to have 30 separate meetings with each of the independent directors, maybe at the Harvard Club or something, and they'd have to socialize the idea. Forget that.

So, John, it turned out that the writer Michael Lewis had been hanging around with Sam Bankman Freed when FTX went under, and he was writing a book about him. I'm curious whether Michael's information was helpful to you in any way? No, I'm way too busy to help Michael on his book. No, I'm asking if there was anything in his reporting that was helpful to you, because, you know, you walked into this total chaos where there was no chronicling of anything, and I figured he has at least been chronicling. He probably had eyewitness to a lot of the bills being generated from the local restaurants,

but obviously our focus is really on collecting and marshalling assets and preventing further liability. So he's got an angle. I don't know what it is. I wish him well on that. That Michael Lewis book on Sam Bankman Freed has just been published. It's called Going Infinite, The Rise and Fall of a New Tycoon. We are actually planning to interview Lewis about that book sometime soon. If you have questions you would like us to ask him, send us an email to radio at Freakonomics.com. If you need some Michael Lewis before then, you might want to listen to an episode we made with him last year on the 20th anniversary of his book Moneyball. That's episode number 523. We called it Did

Michael Lewis Just Get Lucky with Moneyball? After the break, more with FTX's emergency CEO, John Ray. And we ask, would you want to hire Ray if you were a city that was going bankrupt? I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. So at one point, Sam Bankman Freed was worth an estimated $24 billion. What's he worth now? I would like to think zero, unless he's privated away some asset. I'm not suggesting that he has, but no, there's no value for him. Now, are you concerned for him?

I'm sort of past all that right now. Now it's about taking what assets we've got and making sure we maximize value and distributing it to the creditors. Have you ever spoken with Sam Bankman-Fried? No, never. Well, I shouldn't say that. Within about the first 48 hours, he popped out a couple calls. It wasn't a personal dialogue. It was sort of a group call. And there was a couple of words spoken by him in a very evasive answering of questions. Now, I'm seeing these emails from Sam Bankman-Fried to you in November

13. Hey, John, I'd be super happy to chat here, phone, etc. November 14. I'd actually love to talk to you, John, and I don't need my counsel to talk first. I'm ready, prepared to talk and think it would be very constructive and helpful. So you don't answer those as far as I know. No, it's pretty clear for me what happened in the company and what his role was. And I didn't really want to have any dialogue with him based on what I knew at the time. Many years ago, I had involvement with a guy and one of the things I learned, which I've kept with me for decades now, is that if you have a conversation with just one other person, you can never deny you had the conversation. And then it becomes an argument about

what you said or he or she said. Now you're no longer arguing about whether or not you ever had the conversation. Now the argument is down to who is more believable or who actually gets out the word first about what was said. So if you can just not have the conversation, you keep things cleaner. Yes. My brand, if you will, is that you may not agree with me, but you're never, ever unclear about what I'm telling you. One criticism I've heard of your being so public about how poorly the company was run was that the more chaotic and absurd you can make it sound, the more that it may be to your benefit to make your role seem even more heroic. So are you maybe overselling the chaos?

Look, if I wanted to get fame, I've certainly been doing a very, very bad job up until now, right? Because you couldn't find a picture of me on the Internet. You don't just wake up at 64 and say, you know what, I want to be the world's most famous guy. I want to look like a hero. No, I don't do that. So I've gone through my entire career. You barely can find that I existed as a human and I wanted it that way. As we speak, there's word that Binance, which is the biggest crypto exchange in the world that started in China, but they've moved around. They're now in big trouble with U.S. regulators, the Department of Justice, SEC.

If they go under, can I interest you in another emergency CEO job? You will be a crypto exchange pro by then. Would that interest you? On one occasion, I've done back-to-back industries, and I learned enough that I probably am not a repeat guy when it comes to industries. I want new people to dislike. I want to learn different things. I have a very short attention span. I don't hang around after these cases. I'm like a guy with two machetes whipping my way through the crowd.

So let's say I am an American city that's got deep-rooted financial trouble. Maybe my tax base is dwindling. Maybe I've got underfunded pensions. I may be looking at bankruptcy down the road. If I'm that city, is John Ray someone I want to call for that? Oh, absolutely. I mean, that is the total profile of a case that I would get into. So yeah, if Chicago wants to go in, I'll be there. Let's say I am the mayor of Chicago and I say, John, my city is spiraling in some familiar ways with safety and real estate and so on. How do you think about that job? Cities are no different than corporations. They're highly leveraged. In some cases, they have too many employees. They have a bad business plan. Their business plan relies too much on debt. Their income is off. Look at the city of Detroit. Detroit went through a bankruptcy,

totally changed the economics of the city. It's really no different than a private enterprise. But I would think that in the case of a city, the creditors are people like retired transit workers who have a guaranteed pension and so on. So let's say you want to declare bankruptcy in Chicago. How do you think about making creditors whole to some degree? Well, look, there's no way that everybody comes out better off than they were in any bankruptcy. That's very, very rare. I've had a number of cases where we've made creditors whole. And in every one of those situations, there has to be compromise. There has to be consensus. And really, that's kind of the role of somebody in my job is to bring people together, show them the problem, and work with them to find a solution that perhaps maybe isn't perfect, but it's the best alternative for them on a long-term

basis, as opposed to just hitting the wall and crashing. So are you okay if we call up the new mayor of Chicago and offer your services? Oh, absolutely. I know the city well. I lived there for 25 years on and off. They've got a balloon payroll. They've got a lot of legacy costs. It's right down my alleyway. We did call the office of new Chicago Mayor Brandon Johnson to see if he'd be interested in hearing from John Ray. Shockingly, we never heard back. Thanks to John Ray for today's conversation. He doesn't do a lot of interviews,

so I'm glad he did this one. Let us know what you thought. Our email is radio at Freakonomics.com. Coming up next time on the show. One big reason we don't learn enough from failures is that we don't share them systematically enough. We kick off a special series. The brain just knows that you've been abandoned.

It makes it look like maybe you were incompetent. It's a series about failure. About failed relationships. I actually don't think that they're a failure, but that's for different Darwinian reasons. Failures of the imagination. You've prepared for problems A, B, C, D, E, and F, and something like M comes out of the blue and smacks you. Failures of determination. Part of my problem was I did not ask enough questions.

And failures that cut deep. I think that was my tipping point where I just went, I'm done. And it broke me. But you don't have to stay broken. Together, we will be learning from all this failure. Our new series is called How to Succeed at Failing. And I think it's one of the best things

we've made in some time. That starts next week. Until then, take care of yourself. And if you can, someone else too. And remember to check out Freakonomics Radio Plus, our new membership program, where you'll get a weekly bonus episode every Friday. And you can hear our show ad-free. To sign up, visit the Freakonomics Radio show page on Apple Podcasts or go to Freakonomics.com

slash plus. Freakonomics Radio is produced by Stitcher and Renbud Radio. This episode was produced by Ryan Kelly and mixed by Greg Rippin with help from Jeremy Johnston. Our staff also includes Alina Cullman, Eleanor Osborne, Elsa Hernandez, Gabriel Roth, Jasmine Klinger, Julie Kanfer, Lyric Bowditch, Morgan Levy, Neil Carruth, Rebecca Lee Douglas, Sarah Lilly, and Zach Lipinski. Our theme song is Mr. Fortune by the Hitchhikers. All the other music was composed by Luis Guerra.

As always, thank you for listening. I'm like the guy on Sesame Street. Grouch? Oscar? Yeah, when things are horrible, that's good, right? He'd say to you, you know, have a bad day. That's. That's you. That's exactly right. The Freakonomics Radio Network.

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