Sam Bankman-Fried lawyer says government portrayed FTX founder as a ‘monster’
FTX Founder Sam Bankman-Fried leaves Manhattan Federal Court after a court appearance on June 15, 2023 in New York City.
Michael M. Santiago | Getty Images
As lawyers in Sam Bankman-Fried’s criminal trial presented their closing arguments on Wednesday, prosecutors reminded jurors of the mountain of evidence provided by key witnesses, while defense counsel accused the government of portraying the FTX founder as a “monster.”
The prosecution kicked off the proceedings, trying to give the 12 jurors a clear sense of why they’ve spent the past four weeks sitting in a lower Manhattan courtroom.
“Almost a year ago, thousands of people from all over the world who deposited money with FTX started withdrawing funds,” Assistant U.S. Attorney Nicolas Roos told the court.
Roos said there’s “no serious dispute” that $10 billion in customer money that was sitting in FTX’s crypto exchange went missing, with some of it going to to pay for real estate, investments, loan repayments and political donations.
The main thing the jury has to decide, Roos said, is whether Bankman-Fried knew that taking the money was wrong.
“The defendant schemed and lied to get money, which he spent,” Roos said.
Bankman-Fried, the 31-year old son of two Stanford legal scholars and graduate of Massachusetts Institute of Technology, faces a potential life sentence if convicted on charges, which include wire fraud, securities fraud and money laundering, all tied to the collapse late last year of FTX and sister hedge fund Alameda Research. He pleaded not guilty.
The trial, which began in early October and is set to wrap up in the coming days, has largely pitted the testimony of Bankman-Fried’s former close friends and top lieutenants against the sworn statements of their former boss and, for many of them, former roommate.
The government’s key witnesses included Caroline Ellison, Bankman-Fried’s ex-girlfriend and the former head of Alameda, and FTX co-founder Gary Wang, who was Bankman-Fried’s childhood friend from math camp. Both pleaded guilty in December to multiple charges and cooperated as witnesses for the prosecution.
FTX founder Sam Bankman-Fried is questioned by prosecutor Danielle Sassoon (not seen) during his fraud trial over the collapse of the bankrupt cryptocurrency exchange at federal court in New York City, U.S., October 31, 2023 in this courtroom sketch.
Jane Rosenberg | Reuters
When it was time for Bankman-Fried’s team to mount a defense, lead counsel Mark Cohen left the bulk of the case to his client, who spent three days on the stand telling the jury that he didn’t defraud anyone, didn’t take customer money and tried to work with his deputies to keep FTX from failing.
Roos spent Wednesday morning asking the jury to look at the evidence. At one point, he asked, “Who is responsible? He then stepped out from behind the podium and towards the defense table, pointed at the defendant and said, “This man, Samuel-Bankman-Fried.”
“A pyramid of deceit was built by the defendant,” Roos said. “That ultimately collapsed.”
The facts, as listed by Roos, were that customers believed their deposits were their own and not to be used by anyone else; that FTX ads continually said the exchange was the safest and easiest way to buy cryptocurrency; and that $10 billion was missing.
‘Uncomfortable to hear’
Roos told the jury that Bankman-Fried lied to them, reminding them how smooth the defendant was in answering questions from his own attorney but how “he was a different person” when it was the prosecutors’ turn. He had a perfect memory on Friday, Roos said, telling the jury that Bankman-Fried knew the details about the layout of his Airbnb office in California, the reason he went to Hong Kong and why he picked the Miami Heat arena as the one for FTX to sponsor.
That all changed when the government was asking the questions.
“It was uncomfortable to hear,” Roos said, adding that Bankman-Fried said “I can’t recall” over 140 times during questioning by the government.
“To believe his story, you’d have to ignore the evidence,” Roos said. “You’d have to believe the defendant, who graduated from MIT and built two multibillion-dollar companies, was actually clueless.”
Critical to the failure of FTX was the use of customer funds to cover losses in Alameda’s books following the plunge in crypto prices last year. Roos said Bankman-Fried is the one who gave special privileges to Alameda, which he started before founding FTX, allowing it to siphon customer money. He knew it was wrong, Roos said, which is why he kept it secretive.
Roos said Bankman-Fried had been lying to the public about Alameda’s “secret advantages,” and was being untruthful when he told the public and the media that Alameda was just like everyone else.
“Those were lies,” Roos said. Had they known the truth, “investors would have run for the exits,” he said.
Bankman-Fried blamed “messy accounting,” Roos said, adding “give me a break.” He said those comments contradicted what he told Congress, that he’d reconciled the books.
Judge Lewis Kaplan, who presided over the trial, started court almost a half hour late on Wednesday because a juror was stuck in traffic. Then there were technical issues, as the second row of monitors in the jury box stopped working. That led to a 1- minute break.
Later in Roos’s closing, he brought up the infamous spreadsheet of the seven alternate versions of Alameda’s finances that Ellison had put together when third-party lenders were asking for an update. Bankman-Fried testified that he’d seen a spreadsheet but didn’t remember the details and didn’t ask Ellison questions about it. Roos called the explanation “implausible.”
FTX founder Sam Bankman-Fried is questioned by defense lawyer Mark Cohen as he testifies in his fraud trial over the collapse of the bankrupt cryptocurrency exchange, at federal court in New York City, U.S., October 30, 2023 in this courtroom sketch.
Jane Rosenberg | Reuters
Roos referred to metadata showing that Bankman-Fried was part of a meeting for about 30 minutes where the hole in FTX’s balance sheet and repaying lenders were discussed. Metadata shows he was studying the Google Doc of the company’s finances, with numbers indicating the billions in borrowing from FTX.
Roos brought up testimony from three firsthand witnesses who said that they’d spoken with Bankman-Fried about the giant hole in the balance sheet. Ellison said there was no way to repay it, and Singh testified that Bankman-Fried admitted to him that “we are a little short on deliverables.”
Bankman-Fried “had the arrogance to think he could get away with it,” Roos said.
Spending freely
Another point speaking to the defendant’s intent, Roos said, was his tweeting.
Bankman-Fried’s plan last November, when he knew there was only enough money to process one-third of client assets, was to send a confident tweet thread. Singh testified that he wasn’t comfortable with the plan, yet Bankman-Fried went on to tweet that “assets are fine” as the bank run was underway, Roos said.
Bankman-Fried knew Alameda had a negative net asset value of $2.7 billion, Roos said, but wanted to make another $3 billion in venture investments. The only way to do that was with FTX customer funds, he said.
Additionally, Roos told the jury, client money went to $100 million in real estate expenses, including a $30 million penthouse in the Bahamas and $16 million for his parents’ home.
In referencing the Super Bowl picture with Katy Perry and others, Roos called Bankman-Fried a “celebrity chaser.”
Roos walked the jury through a timeline of key moments, as follows:
- On Sept. 1, Bankman-Fried saw that FTX had a $13.7 billion hole.
- On Sept. 7, Bankman-Fried wrote a long memo proposing the shutdown of Alameda. Still, he spent $45 million for a stake in Skybridge Capital.
- Then, on Sept. 22, he paid $4 million to himself.
- Four days later, he sent $250 million to Modulo Capital, a hedge fund in the Bahamas.
- And on Oct. 3, he funneled $6 million for political donations.
“That’s all you need to know to find him guilty,” Roos said.
In closing the prosecution’s case, Roos referenced the seven charges facing Bankman-Fried and why he can be convicted of each.
In highlighting counts three and four, which charge the defendant with wire fraud against Alameda’s lenders, Roos emphasized the importance of Bankman-Fried’s knowledge of the alternative balance sheet. For count five, conspiracy to commit securities fraud on FTX investors, the primary evidence came from investors who expressed concern about a conflict of interest between Alameda and FTX and who said they wouldn’t have put in money if they knew the truth. Bankman-Fried also lied about revenue, Roos said.
The prosecution reminded the court that Bankman-Fried directed losses to be shifted to Alameda and that FTX’s insurance fund had made up numbers. Add it all up, Roos said, and it debunks the defense’s main argument that Bankman-Fried acted in good faith and believed everything would work out.
“This was a fraud that occurred on a massive scale,” he said.
‘Every movie needs a villain’
Following the government’s closing argument, Cohen began his statements at a little before 3 p.m. He said the government is portraying Bankman-Fried as a “monster” and depicting him as a “villain” and a “bad guy.” Lawyers brought out testimony about his sex life and showed photos of him “looking awkward with celebrities,” Cohen said.
He said Bankman-Fried would talk to just about anyone who would listen, behavior that could make life messy but isn’t criminal. He said the prosecution has made the case into a “movie,” and the defense is showing what it’s like in the real world, where things are messy.
“Every movie needs a villain,” Cohen said.
He claimed the case against his client was built on the false premise that FTX was a fraudulent enterprise to intentionally steal customer funds.
Cohen broke the case up into two time periods. The first was 2019 to 2021, when there’s no indication of criminal intent. Up until June 2022, everyone involved thought they were operating the most successful crypto exchange in the world, Cohen said.
The second period was from June to November of 2022. Crypto winter had led to the failure of a number of businesses in the industry. That’s the first time it became clear that Alameda was using customer funds. In the fall of that year, Bankman-Fried saw a liquidity problem, not a solvency problem, Cohen said. He always thought there were sufficient funds on and off the exchange.
While FTX’s lack of a risk management system or chief risk officer reflected poor system controls, bad business decisions aren’t crimes, Cohen said.
The government carries the heavy burden of proving Bankman-Fried operated with criminal intent, and “it has not,” Cohen said. He said that prosecutors called Bankman-Fried “evil” and “arrogant” and described him as a “criminal mastermind.” But in getting into specific actions, “there’s nothing wrongful about margin trading,” he said.
Cohen said his client provided the court with good faith answers about what he remembered, and asked why a criminal mastermind would go speak in front of Congress. He described the government’s assumptions as “heads I win, tales you lose.”
With the defense continuing its closing argument, Judge Kaplan said the jury will likely be asked to stay late on Wednesday.
— CNBC’s Dawn Giel contributed to this report.
Technology
Britain seeks to build homegrown rival to OpenAI in bid to become world leader in artificial intelligence
Britain’s Prime Minister Keir Starmer gives a media interview while attending the 79th United Nations General Assembly at the United Nations Headquarters in New York, U.S. September 25, 2024.
Leon Neal | Via Reuters
LONDON — The U.K is looking to build a homegrown challenger to OpenAI and drastically increase national computing infrastructure, as Prime Minister Keir Starmer’s government sets its sights on becoming a global leader in artificial intelligence.
Starmer is set to visit Bristol, England, on Monday to announce the pledge, which follows work done by British tech investor Matt Clifford to establish an “AI Opportunities Action Plan.” The plan aims to help the U.K. take advantage of the potential of AI.
The government is primarily seeking to expand data center capacity across the U.K. to boost developers of powerful AI models which rely on high-performance computing equipment hosted in remote locations to train and run their systems.
A target of increasing “sovereign,” or public sector, compute capacity in the U.K. by twentyfold by 2030 has been set. As part of that pledge, the government will begin opening access to the AI Research Resource, an initiative aimed at bolstering U.K. computing infrastructure.
Starmer’s administration last year canceled £1.3 billion of taxpayer-funded spending commitments towards two significant computing initiatives in order to prioritize other fiscal plans. The projects, an AI Research Resource and a next-generation “exascale” supercomputer, were pledges were made under Starmer’s predecessor, Rishi Sunak.
Sovereign AI has become a hot topic for policymakers, particularly in Europe. The term refers to the idea that technologies critical to economic growth and national security should be built and developed in the countries people are adopting them in.
To further bolster Britain’s computing infrastructure, the government also committed to setting up several AI “growth zones,” where rules on planning permission will be relaxed in certain places to allow for the creation of new data centers.
Meanwhile, an “AI Energy Council” formed of industry leaders from both energy and AI will be set up to explore the role of renewable and low-carbon sources of energy, like nuclear.
Building a challenger to OpenAI
The last major initiative the U.K. government proposed was to create homegrown AI “champions” of a similar scale to American tech giants responsible for the foundational AI models that power today’s generative AI tools such as OpenAI’s ChatGPT.
Britain plans to use the AI growth zones and a newly established National Data Library to connect public institutions — such as universities — to enhance the country’s ability to create “sovereign” AI models which aren’t reliant on Silicon Valley.
It’s worth highlighting that the U.K. faces serious challenges in its bid to create an effective OpenAI alternative. For one, several entrepreneurs in the country have bemoaned funding challenges that make it difficult for startups in the country to raise the kind of cash available to AI success stories.
Many U.K. founders and venture capitalists have called for the country’s pension funds to allocate a greater portion of their portfolios toward riskier, growth-focused startups — a reform the government has committed to pushing previously.
“In the U.K., there’s $7 trillion in this pocket,” Magnus Grimeland, CEO and founder of venture capital firm Antler, told CNBC in an interview last year. “Imagine if you take just 5% of that and allocate it to innovation — you solve the problem.”
U.K. tech leaders have nevertheless generally praised the government’s AI action plan. Zahra Bahrololoumi, Salesforce’s U.K. boss, told CNBC the plan is a “forward-thinking strategy,” adding she’s encouraged by the government’s “bold vision for AI and emphasis on transparency, safety and collaboration.”
Chintan Patel, Cisco’s chief technology officer in the U.K., said he’s “encouraged” by the action plan. “Having a clearly defined roadmap is critical for the UK to achieve its ambition to become an AI superpower and a leading destination for AI investment,” he said.
Britain doesn’t yet have formal regulations for AI. Starmer’s government has previously said it plans to draw up legislation for AI — but details remain thin.
Last month, the government announced a consultation on measures to regulate the use of copyrighted content to train AI models.
More generally, the U.K. is pitching a differentiated regulatory regime from the EU following Brexit as a positive factor — meaning, it can introduce regulatory oversight for AI but in a way that’s less strict than the EU, which has taken a more hard-line approach to regulating the technology with its AI Act.
Republican presidential nominee and former U.S. President Donald Trump gestures at the Bitcoin 2024 event in Nashville, Tennessee, U.S., July 27, 2024.
Kevin Wurm | Reuters
With the levers of power in Washington, D.C., about to change hands, a raft of pro-crypto legislation is expected from Congress and the Trump administration. To date, there’s been less focus on the cybersecurity side of the political effort, which could be an issue for crypto in relation to its popularity among a wary U.S. population.
Cryptocurrency, which includes not just bitcoin but ethereum, dogecoin, and others, has a faithful following among American adults. According to the Pew Research Center, 17% of American adults have traded in crypto, but that market share of American wallets has remained virtually unchanged since 2021. Meanwhile, according to a poll Pew conducted shortly before the election, 63% of adults say they have little to no confidence in crypto investing or trading, and don’t think cryptocurrencies are reliable and safe.
The incoming Trump administration has been touting its crypto bona fides, with a focus on the industry rather than the consumer.
“The No. 1 most important priority for the industry is to make sure they have a regulatory framework so that they can do business,” said Dusty Johnson (R-South Dakota), who helped author the Financial Innovation and Technology for the 21st Century Act (FIT21) that addresses the treatment of digital assets under U.S. law. The law passed in the House with bipartisan support but has not been taken up by the Senate.
FIT21 did contain specific crypto-cybersecurity provisions, which Johnson predicts will be built upon in the new administration.
Glenn “GT” Thompson (R-Pennsylvania), Chairman of the House Committee on Agriculture and a co-author of FIT21, says the cybersecurity provisions in the bill are still key in the upcoming administration.
“FIT21 requires important cybersecurity safeguards for financial intermediaries engaging with digital assets,” Thompson said in a statement to CNBC, adding that FIT21 includes explicit provisions to ensure that regulated firms take steps to evaluate and mitigate cyber vulnerabilities to protect both the services they offer and assets they hold on behalf of their customers.
“These cybersecurity requirements are critical for protecting digital asset markets and market participants,” Thompson said.
Some experts, however, doubt that there will be as much action on the security side of the legislation, given that crypto proponents are closely advising the Trump administration.
“Personnel is policy,” says Jeff Le, vice president of global government affairs and public policy at Security Scorecard and a former assistant cabinet secretary in the California governor’s office. The top ranks of the incoming economic team, made up of SEC Chair-designate Paul Atkins, Commerce Secretary Howard Lutnick, and Treasury Secretary-designate Scott Bessent, “have had a track record of supporting cryptocurrencies,” Le said.
Among other major posts in his second administration, President-elect Trump has appointed venture capital investor David Sacks to be his AI and crypto “czar.”
Crypto industry’s role in political realignment
The crypto industry donated significant sums to the 2024 election cycle, contributions that were not limited to the GOP, but focused more broadly on lawmakers with an industry-friendly view of crypto regulation. It’s likely that will continue to influence political calculations. The pro-crypto and bipartisan super PAC Fairshake and its affiliates have already raised over $100 million for the 2026 midterm elections, including commitments from Coinbase and Silicon Valley venture fund Andreessen Horowitz, an early backer of Coinbase. Top Andreessen Horowitz executives have been tapped for roles in the Trump administration.
“We have the most pro-crypto Congress ever [in] history, we have an extraordinarily pro-crypto president coming into office,” Faryar Shirzad, chief policy officer at Coinbase, recently told CNBC.
“It is rare to see cryptocurrency proponents advocate for increased regulation in the space, regardless of reason,” said Jason Baker, senior threat intelligence consultant at GuidePoint Security.
Baker says the anonymity and independence of cryptocurrency are often cited as primary benefits that legislation would curtail, and cryptocurrency’s decentralized nature makes it hard to regulate in a traditional sense.
“Given current signaling from the incoming administration and the interests of cryptocurrency proponents influential to the administration, we do not anticipate significant advances in cryptocurrency regulation within the next four years,” Baker said.
If there isn’t much action on regulation, there are some obvious ramifications for cybersecurity, he said, driven by the correlation between a pro-crypto Washington, D.C., and bullish bets by investors on digital assets.
“Cybercrime is often driven by benefits from increasing cryptocurrency value. In ransomware, for example, ransoms are commonly demanded in USD, but payments are made most frequently in bitcoin. When the value of bitcoin increases, cybercriminals will benefit,” Baker said.
The value of bitcoin has risen significantly over the past three months in what has been a risk-on market environment.
“Future de-emphasis on cryptocurrency regulation may positively signal that cybercrime operations in bitcoin remain viable and unlikely to suffer government disruption to operators in the space,” Baker said.
Cybercriminals have also been changing tactics to evade legislation and scrutiny, Baker added, switching to more under-the-radar cryptocurrencies like Monero.
Ransomware’s potential role in Congressional action
Baker predicts regulation centered on organizations issuing cryptocurrency payments — whether in the form of a ransom payment or for other purposes — is more likely achievable and palatable in the current regulatory environment.
“This could include, for example, increased requirements for reporting ransom payments when made, a policy which has been floated without gaining substantial traction in recent years,” Baker said. This approach can be argued as regulating end users and purposes rather than the underlying cryptocurrency itself.
In addition to ransomware payments to restore access to technology systems, there are other reasons why payment in cryptocurrency is common in digital extortion schemes, including to protect the identity and operational security of the criminal. Private organizations may also opt to use crypto to purchase leaked data or credentials which have been made available on illicit forums.
There could also be situations where private individuals attempt to report and receive payment for discovered vulnerabilities under a “bug bounty” program — whether voluntary or coerced (so-called “beg bounty”). They may request payment in cryptocurrency out of personal preference or general desire for privacy, and private organizations may or may not oblige.
“While there are doubtless other options for organizations to use cryptocurrency in some form, these are the primary forms we see on a regular or more frequent basis,” Baker said. “Though such actions would almost certainly have downstream impacts on cryptocurrency value by virtue of their impact on transaction volume,” Baker added.
Steve McNew, global leader of blockchain and digital assets at FTI Consulting, thinks some cyber-crypto legislation may happen, especially governing when a company victimized by a ransomware pays their attackers in cryptocurrency.
“There’s more than just public policy at issue,” said McNew. If a company has been compromised in a cyberattack and is required to make public disclosure of the ransoms it paid out, it can result in the company becoming a bigger future target for other criminal enterprises, McNew said. While it might make sense, on one hand, to provide disclosure as to where funds are going and what cryptocurrencies were used in a payment, doing so can put the company (and by extension its customers, employees and partners) in harm’s way.
“So, any policy decisions around cryptocurrency disclosures in this context will require balancing the need for transparency around the use of cryptocurrency in criminal matters alongside the risks such transparency might exacerbate,” McNew says.
Though FIT21 passed the House with broad bipartisan support, it did not address these issues specifically.
Le expects some legislation action that may attempt to address this topic. “The next Congress could see more traction for proposed legislation like Cryptocurrency Cybersecurity Information Sharing Act of 2022, which allows companies to share information regarding cybersecurity threats with the federal government and with one another,” he said.
Le said Congress may also revisit the work of outgoing Financial Services Chair Patrick McHenry (R-North Carolina) and Rep. Brittany Pettersen (D-Colorado) and the Ransomware and Financial Stability Act of 2024, which aimed at “strengthening the resilience of the U.S. financial system against ransomware attacks, establishing clear protocols for ransom payments, and ensuring that such payments, including those involving cryptocurrencies, are made within a controlled and legally compliant framework.”
But he added that it is unclear if the Trump administration will continue the Biden administration’s leadership role in the International Counter Ransomware Initiative, a 68-country coalition aimed at preventing the payments of ransomware.
The broader bitcoin governance battle
McNew says that many basic parameters surrounding crypto, even down to its definition, could hamstring legislation, even aspects of it intended to foster innovation and adoption of the industry.
“U.S. lawmakers have work to do in determining roles, responsibilities, and basic parameters for how the industry will be governed before any meaningful legislation can take hold,” McNew said. As an example, establishing a designated authority for digital assets is an imperative that has yet to be addressed.
Basic governance structure was a major sticking point during the Biden administration, and a primary reason Securities and Exchange Commission Chair Gary Gensler was a thorn in the side of the crypto industry.
“Lawmakers must decide whether responsibility will fall under the SEC, the CFTC, or another body. Issues around taxation and broker-dealer definitions for digital assets markets will also need to be defined and provided with a set of clear rules for legislation to be effective,” McNew said, adding that given how closely divided the House will be in the next session, it may be tough to craft an agreement.
Jakub Porzycki | Nurphoto | Getty Images
Before Jack Nader started posting beauty videos on TikTok in 2023, he was working as a Starbucks barista in Chicago and living at home with his parents.
But after Nader, who’s now 21, started taking his videos seriously in April of that year, his TikTok account blew up. With more than half a million followers, he was able to generate enough income through brand sponsorships and his share of ad revenue that he quit his coffee shop gig and got his own apartment.
“This is my 9-to-5 job,” Nader, who said he makes between $1,000 and $12,000 per month as a creator, told CNBC. “This is what I do to make a living. This is how I pay for my groceries. This is how millions of small businesses make their money.”
Nader’s new reality, however, is far from stable. TikTok, which is owned by China’s ByteDance, is nearing a Jan. 19 deadline by which it has to be sold, or it faces a ban in the U.S. Like many other creators who have come to rely on TikTok, Nader has been urging his fans to find him on other social media apps before he potentially loses them altogether and the substantial income stream that they represent.
“Not everyone from my TikTok following is going to come over, and that’s really sad,” Nader said.
The TikTok risk has been present for years, but was amped up in April, after President Joe Biden signed a law that requires ByteDance to divest the short-form video app this month. If ByteDance fails to sell TikTok in time, Apple and Google will be forced by law to ensure their platforms no longer support the app in the U.S.
President-elect Donald Trump, who favored a TikTok ban during his first administration, has since flip-flopped on the matter. Late last month, he urged the Supreme Court to intervene and forcibly delay implementation of Biden’s ban to give him time to find a “political resolution.” His inauguration is Jan. 20.
Trump’s rhetoric on TikTok began to turn after he met in February with billionaire Jeff Yass, a Republican megadonor and a major investor in ByteDance who also owns a stake in the owner of Truth Social, Trump’s social media company.
The Supreme Court heard oral arguments from both sides on Jan. 10. During the more than two-hour session, justices peppered TikTok’s head lawyer with questions about the app’s ties to China and appeared generally unconvinced by TikTok’s main argument, that the law violates the free speech rights of its millions of individual users in the U.S.
On Thursday, businessman Frank McCourt’s internet advocacy group Project Liberty announced it had submitted a proposal to buy TikTok from ByteDance. Calling it, “The People’s Bid for TikTok,” the group said it would restructure the app to exist on an American-owned platform and prioritize users’ digital safety, though it didn’t disclose terms of its bid.
Jack Nader, 21 of Chicago, is a full-time TikTok creator who has begun moving his content from the Chinese-owned app onto Meta’s Instagram Reels and Alphabet’s YouTube Shorts.
Courtesy of Jack Nader
A ruling could come at an point. Nader isn’t waiting for a resolution to figure out what’s next.
He’s currently downloading four or five of his TikTok videos each day to save them as he migrates his content to Meta’s Instagram Reels and Alphabet’s YouTube Shorts. After downloading the videos, Nader re-edits them, optimizing the clips for each app.
“It took me over a year and a half to build the following that I have right now on TikTok to make it my full time job,” Nader said. “Now it’s kind of about rebuilding that entire brand on another platform, which is not ideal.”
Nader said he isn’t yet making any money from Reels or Shorts.
‘This isn’t just a silly app’
Danisha Carter, 27, is in a similar spot. A resident of Los Angeles, Carter has been a full-time creator since 2021, posting social commentary and lifestyle videos. Although she’d known about the TikTok ban for months, she said she had a wake-up call in the middle of the night in November.
“I need to start taking this seriously before I lose access to the platform that I built and the followers that I built,” Carter said, recalling her panicked realization. “I need to not waste any more time.”
Carter, who previously worked in luxury retail, has ended her TikTok videos by telling her followers that they can find her on YouTube, Instagram and Patreon.
“This isn’t just a silly app that people have been using to post dance videos,” said Carter, who makes about $4,000 per month on average from her TikTok activity. “It’s been remarkable in terms of changing people’s lives, changing people’s businesses.”
Danisha Carter, 27 of Los Angeles, is a full-time TikTok creator who has begun ending her videos by asking her fans to follow her on YouTube, Instagram and Patreon before the Jan. 19 law banning the Chinese-owned app takes effect.
Courtesy of Danisha Carter
TikTok could still find a way to stay operational in the U.S., but if the app does get suspended, YouTube, Facebook and Instagram are poised to be the biggest winners in the fallout, experts predict.
TikTok has about 115 million monthly active users in the U.S., well behind YouTube at 258 million and Facebook at 253 million, according to market intelligence firm Sensor Tower. Instagram has 131 million. Short videos, the kind that mimic clips on TikTok, are gaining viewership across those apps, accounting for about 41% of user time on Instagram, Sensor Tower data shows.
While TikTok has a smaller userbase in the U.S. and lower share of total ad dollars than its top rivals, it’s the dominant platform for creators, particularly those focused on short-form content.
Influencer marketing platform HyperAuditor defines a creator as a user with over 1,000 subscribers. TikTok has nearly 8.5 million people in the U.S. who fit that category, compared with about 5.2 million on Instagram and 1.1 million on YouTube, according to HyperAuditor.
Meanwhile, TikTok accounts for 9% of digital ad spend on social media platforms in the U.S., according to Sensor Tower, compared to 31% for Facebook, 25% for Instagram and 21% for YouTube.
Should TikTok go away, “this equates to billions of dollars potentially up in the air for competitors to seize,” Sensor Tower told CNBC in an email. Emarketer estimates that Meta and YouTube could grab about half of the reallocated dollars should a ban go into effect.
That type of market shift has taken place elsewhere. India banned TikTok in June 2020, when the app had about 150 million monthly users in the country. A year later, Instagram’s monthly active users in India had increased by 20% while YouTube’s had gone up 11% year-over-year, according to Sensor Tower estimates.
“That’s when we saw the biggest jump in Reels utilization ever,” said Meghana Dhar, a former Instagram executive who was at the company at the time of the India ban. “Should TikTok get banned and creators have to scramble, between YouTube Shorts and Instagram, a lot of creators are already hedging their bets.”
At Meta, leaders within Instagram scheduled numerous impromptu meetings on Friday after listening to the oral arguments before the Supreme Court, a person familiar with the matter told CNBC. Though many within the company had long expected TikTok would remain active in the U.S., leaders at Instagram began directing their teams to prepare for a potential influx of users should the ban go through, said the person, who asked not to be named due to confidentiality.
(L-R) Sarah Baus of Charleston, S.C., holds a sign that reads “Keep TikTok” as she and other content creators Sallye Miley of Jackson, Mississippi, and Callie Goodwin of Columbia, S.C., stand outside the U.S. Supreme Court Building as the court hears oral arguments on whether to overturn or delay a law that could lead to a ban of TikTok in the U.S., on January 10, 2025 in Washington, DC.
Andrew Harnik | Getty Images
Need to diversify
Kristina Nolan, vice president of media services at marketing agency DMi Partners, said the TikTok situation is the latest example of why social media creators should always be diversifying their followings.
“We’re consistently reminding them to create audience depth on other platforms,” said Nolan, whose agency works with more than 50,000 creators.
In recent weeks weeks, DMi has seen more of its creators start to migrate followers elsewhere in a variety of ways, Nolan said. But they have to be careful. Nolan said that some creators worry that TikTok will “shadow ban” them, or reduce their exposure to users, if the technology recognizes that they’re promoting profiles elsewhere.
Some creators will suggest followers find them on “fbook,” for example, rather than writing out Facebook. Others will bleep out just enough words to get the message to their followers while hoping to avoid TikTok’s detection, Nolan said. Some creators are teaming up with brands to incentivize users by holding prize giveaways for users who follow them on other apps, she added.
“They’re obviously not saying, ‘Come over to Instagram,'” Nolan said. “They’re like, ‘Go follow me on’ and they’re mouthing it.”
After working on a horse farm, Nealie Boschma, 27, was able to move to Los Angeles and live full-time as a creator after starting to post videos to TikTok in 2022.
Courtesy of Nealie Boschma
Even with multiple other options for finding large audiences, creators are worried about trying to rebuild their business and whether enough followers will migrate with them.
“Whatever is going to happen is going to happen, and we’re just going to make the most of it,” said Nealie Boschma, 27 of Los Angeles, who has been living as a full-time creator since 2022. “That’s just how I have to look at it, so I don’t panic.”
Despite the potential upheaval, Boschma, said she views the potential ban as an opportunity to expand her career and get more creative.
Boschma started making TikTok videos after quitting her job working on a horse farm, choosing to live off of her savings while experimenting as a creator. Boschma’s bet on herself worked and she’s earned enough to live in Los Angeles, paying for her own place and a car.
Now she’s making sure her TikTok fans see the links to her other profiles so they can find her on other apps, including YouTube. If the ban goes through, Boschma said she plans to make a video specifically asking her fans to follow her elsewhere.
It’s going to be quite a lift, as she currently has 2 million TikTok followers compared to just 278,000 on YouTube. But Boschma said she is going to try her hand at making longer-form videos, something she’s always wanted to explore.
“Whether TikTok goes away or not, I do think something will work out” Boschma said. “I’ll find my footing in other places, like I did on TikTok.”
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