Sam Bankman-Fried Is Trying to Find the Guy Who Did This

At the The New York Times' Dealbook conference, the former FTX CEO said he just wanted figure out what happened.
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Screencap via New York Times

To hear Sam Bankman-Fried tell it, he didn't have much of an idea of how his now-bankrupt companies—exchange FTX and trading firm Alameda Research—were being run. The internal dashboards displayed wrong information. He wasn't consulted on trading decisions. He didn't, and doesn't, have the details, though he also believes that he didn’t do anything criminal. “I didn’t ever try to commit fraud on anyone,” he said Wednesday. 

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Bankman-Fried’s appearance at The New York Times' Dealbook conference had been hotly anticipated. While the former FTX CEO had already taken the unusual steps of speaking on the record to the Times, Vox, and even YouTube personalities in the weeks after his company’s sudden implosion, his willingness to be interviewed on camera at a major news conference the day before a Senate hearing on FTX’s collapse was seen by many onlookers as highly irregular. 

His answers to pointed questions posed by interviewer Andrew Ross Sorkin at Dealbook about how his companies were being run are unlikely to satisfy angry customers, bankrupt business partners, and lawmakers. Throughout the interview, he emphasized repeatedly that he did not exercise as much oversight over his dangerously intertwined companies as he should have—that it was ultimately his responsibility—but only offered excuses for what actually went wrong. He used the phrase, "I have limited access to data," for examples, two times.

To recap, Bankman-Fried's FTX empire collapsed under the pressure of the crypto equivalent of a bank run that he described at the time as a "liquidity crunch," an industry term for not having enough money on hand to honor withdrawals. During a chaotic week earlier this month, the now-former CEO confirmed the firm's financial problems at the same time as announcing a tentative rescue sale to Binance, a larger rival exchange. Binance walked away from the deal, saying FTX was "beyond our control or ability to help." In an interview with Axios this week, Bankman-Fried said the last time he checked his bank account, he only had $100,000 in it. His net worth had previously peaked at roughly $27 billion.

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The core issue with FTX's collapse was its intertwined relationship with Alameda Research, a trading firm that Bankman-Fried founded before FTX. Alameda was the main liquidity provider on FTX, and traded on the platform. But Alameda also held a significant reserve of FTX's own token, which experienced a price collapse this year due to a crisis of confidence following reporting that revealed just how linked the two companies were. FTX had also reportedly loaned Alameda Research billions of dollars—allegedly including customer funds—which it used to pay for risky bets in the ailing crypto industry that did not pan out. 

At Dealbook, Bankman-Fried largely claimed ignorance of the companies he ran and founded. "I wasn’t running Alameda," he said. (Alameda's CEO was 28-year-old Caroline Ellison.) "I didn’t know exactly what was going on, I didn’t know the size of their position, a lot of these are things I learned over the last month as I was frantically digging into this."

In Bankman-Fried's telling, he was simply not involved with Alameda's trading decisions—although he admitted to being involved in select investment deals—and also was not keeping a close eye on its activities on FTX, despite its important role on the platform. He was, he claimed, "nervous" about being involved with Alameda due to conflicts of interest. He said he was not aware of how much leverage Alameda was using—a term for trading with borrowed funds, where higher prices see higher returns, but crashes cut deeper—and "substantially underestimated what the size of a market crash would look like and the speed of what it would look like."

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He was not looking at Alameda's positions on FTX, he said, instead focusing on trading volume. FTX's internal dashboards, he said, also displayed wrong information, which he blamed on customers wiring Alameda money directly. 

"Customers were wiring money to Alameda research to get credit on FTX and that was a substantial sum," he said. "FTX’s internal accounting tried to debit Alameda for those funds but it didn’t happen in the primary account, it created a discrepancy between the display of the account and what was really going on there. That did make that position size substantially larger than I thought."

Bankman–Fried denied that he commingled customer funds when loaning money from FTX to Alameda Research. More specifically, he said, "I wasn't trying to commingle funds." 

The important questions now are how much Bankman-Fried knew about what was going on, whether he was involved himself, and if he realized the risk Alameda posed to FTX and its customers. He claims he did not know how risky Alameda's trading strategies were, but he admitted during the Dealbook interview that Alameda made him "nervous" prior to FTX's meltdown. "I didn’t think it would be existential for FTX or lead to massive losses for FTX customers. I was looking at this like, Alameda is going to be very tight on funds, and it would have some impact on FTX, but not one that would hurt customers," he said. 

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Bankman-Fried said he is ignoring the advice of his lawyers to not speak publicly. “I have a duty to explain what happened,” he said. “I don't see what good is accomplished by me just sitting locked in a room pretending the outside world doesn't exist.”

He portrayed his frequent, ill-advised public speaking as representing his selflessness. "I've had a bad month”—a line that earned a laugh from the audience—“but that’s not what matters here. What matters is the millions of customers and all the stakeholders in FTX who got hurt, and trying to do everything I can to help them out," he said. 

His lawyer, Greg Joseph, a former president of the American College of Trial Lawyers, did not respond to Motherboard when asked last week whether or not he was advising his client on these interactions. Neither did David Mills, another lawyer who is reportedly advising Bankman-Fried. Mills works at Stanford Law School, where Bankman-Fried’s parents are professors. It is not clear if Bankman-Fried has employed a public relations firm to help him make decisions either. One reporter who has interviewed Bankman-Fried this month told Motherboard they were not aware of Bankman-Fried employing a public relations firm.

At a minimum, Bankman-Fried’s unwillingness to stop talking and tweeting has become a source of frustration to those now in charge of FTX’s bankruptcy proceedings. Earlier this month, lawyers for the bankrupt exchange stated in court filings that his "incessant and disruptive tweeting” was hampering their efforts. 

Bankman-Fried’s previous lawyer, Martin Flumenbaum—who defended infamous Wall Street criminal Michael Milken—decided to walk away from Bankman-Fried right around then, though he didn’t say exactly why, only saying in a prepared statement that the decision was made as a result of unstated “conflicts” that had recently “arisen.” 

It seemed at times as if Bankman-Fried couldn’t quite wrap his head around the fact that he had lost it all—not just his money, but his reputation. When asked about his future, he noted that there had been “fairly strong interest” from investors to help FTX out of its hole, and that he believe there was a “chance that customers could end up made a lot more whole, I don't know, maybe even fully whole if there was a really strong concerted effort” by those investors to bail the company out. 

“I would have thought that there'd be a chance for a pathway forward here that would bring more value to customers and what would happen if you just sort of sold everything for scraps,” he said. 

What the Dealbook talk ultimately represents is Bankman-Fried pointing fingers away from himself, and claiming ignorance, while taking the minimal amount of responsibility that he should have been more on the ball. He was just an absent-minded, yet forward looking, big-picture kind of guy, who got in over his head. This is the same image of the dishevelled, yet brilliant, crypto wunderkind that took him to the heights he has now fallen from. Will that image save him now that it's all come tumbling down?