The New York Times Andrew Ross Sorkin on behalf of the whole world interviewed former co founder and CEO of FTX, Sam Bankman-Fried who is currently in headlines after the collapse of the crypto exchange company, FTX.
The interview starts with Andrew calling out his audience with today’s guest – Sam Bankman-Fried. He introduced him as the white knight of the crypto world who ran one of the biggest exchanges company.
He also added the history of the downfall of other crypto companies like BlockFi and the fall of Bitcoin over the years which certainly creates confusion and doubt about the future of the cryto empire once built.
He expressed that being a journalist it is their duty to convey details to the audience about the whole accident that occurred in FTX, to which he replied as,
“Thanks for having me. At the end of the day, I was C.E.O. of FTX, and that means whatever happened, why ever it happened — I had a duty. I had a duty to all of our stakeholders, to our customers, our creditors. I had a duty to our employees, to our investors and to the regulators of the world to do right by them and make sure the right things happened at the company. And clearly, I did not do a good job with that”
“Clearly I made a lot of mistakes. There are things I would give anything to be able to do over again. I did not ever try to commit fraud on anyone. I was excited about the prospects of FTX a month ago. I saw it as a thriving, growing business. I was shocked by what happened this month. And reconstructing it, were there things I wish I had done differently.” He added.
Andrew goes on with his questions. He asked Sam what might be the things that would have done differently to avoid the loss. He further read a letter to Sam from a gentleman who said that Sam lost his savings with a subject line “Sam Bankman-Fried stole $2 million from me.”
He says: “Andrew, can you please ask S.B.F. why he decided to steal my life savings and the $10 billion more from customers to give to his hedge fund, Alameda? Can you ask him why his hedge fund was leveraging long all of these S coins?” I’m going to keep it polite for the kids. “Please ask him if he thinks what happened was fraud.”
These are the kinds of letters that I’ve been getting repeatedly over the past several days.
To which Sam replied, “I am deeply sorry about what happened. The long and short of what happened — I will start by saying, just to make a distinction here — you look at the U.S. platform, you look at the international platform. The U.S. platform is a U.S.-regulated platform with American users. To my knowledge, that’s fully solvent; that’s fully funded. I believe that withdrawals could be opened up today, and everyone could be made whole from that and none of these problems plague the U.S. platform. Then you look at the international platform for their non-U. S. users.
As the letter says, Alameda Research did have a long position. And the international platform — it’s a margin trade platform, it’s a derivatives platform. It’s a platform where all the clients were going on — placing something as collateral and using that to put on a position, whether that’s a futures position, a spot position, a borrow. And you know what the exchange was storing was the collateral from all of those positions.
Alameda Research was one of those that put on positions there. And as I tried to reconstruct this over the last month — I have limited access to data, but my view of it, from what I have been able to see, is roughly that basically, look, a year ago, Alameda had, I think, something like 10 percent leverage, had something like 10 times the assets of the position that it had on. Over the course of the last year, there were a number of market crashes that drove the value of those assets down and the leverage up. I think it was, to my knowledge, still under 2X leverage as of a month ago.
You look at what happened this month, and in a few days, all-out P.R. assault, which led to a total market collapse in a pretty short period of time, no bid-side liquidity. I think more than $10 billion wiped off in a matter of days. And realistically speaking, no ability for FTX to be able to liquidate that position and generate everything that was owed.”
Sorkin further questioned Sam about the funding of Alameda and from where it receive the loan.
BANKMAN-FRIED: So, there is that piece from the terms of service. But there were a number of other parts of the terms of service and a number of other parts of the platform on top of that. There is the borrow/lending facility, where users were lending billions of dollars of assets to each other, collateralized by assets on the exchange.
And you had, obviously, futures contracts where there were leveraged positions on. Of course, all of this — it’s meant to be the case that these are positions where FTX could, if it needed to, margin-call those positions and close them down in time, such that it would cover all those shorts, all those liabilities. Obviously that wasn’t the case here, and that’s a massive failure of oversight of risk management and of diffusion of responsibility from myself running FTX.
Andrew question him again on the topic to clear it out whether there was commingling of funds which he seemed pretty much looked like.
BANKMAN-FRIED: I didn’t knowingly commingle funds. And again, one piece of this, you have the margin trading. You have, you know, customers borrowing from each other. Alameda is one of those. I was frankly surprised by how big Alameda’s position was, which points to another failure of oversight on my part and failure to appoint someone to be chiefly in charge of that. But I wasn’t trying to commingle funds.
Sorkin points out an interview of Sam with Bloomberg where he was asked about his connection with Alameda and FTX.
BANKMAN-FRIED: Most of Alameda was not there. I don’t live there now. I have not lived there for most of the time. I did live with — with one or two members of Alameda for a little while. And I’ll also say that as I was — earlier this summer, looking at the relationship, and this is a pretty big mistake and oversight of mine, I was viewing it as primarily from the trading volume perspective, because that is what drives our revenue. And so when I was looking at how intertwined are FTX and Alameda, I was looking at what fraction of trading volume, what fraction of liquidity on the platform does Alameda represent? That had fallen off from something like 45 percent in 2019 to something like 2 percent this year. But in terms of positions and balances, it was a much larger fraction. I hadn’t been looking at that. That’s a pretty big oversight.
He questioned that Sam owned it to which he replied, “I was a large owner of it. That is true. I had a lot of exposure on that side. But I wasn’t running it.”
Sorkin questions further about the relationship between the two.
BANKMAN-FRIED: I think it had been, in some ways, reducing. When you scroll back to 2019, Alameda and FTX were very connected in a number of ways. One of these was that Alameda was the primary liquidity provider on FTX, it was 40-something percent of volume. It was the backstop liquidity provider. You scroll forward to 2022, it was down to 2 percent of volume. We had a lot of backstop liquidity providers. But it still had a big margin position on it. I was failing to pay nearly enough attention to positions and positional risk on the exchange, and to Alameda’s in particular. And I also, frankly, made a mistake that I feel pretty embarrassed to have made. A lot of these are. I substantially underestimated what the scale of market crash could look like and what the speed of it could look like and how correlated it would.
Q. When do you think you knew there was a problem?
BANKMAN-FRIED: The time that I really knew there was a problem was Nov. 6. Nov. 6 was — that was the date that the tweet about FTT came out. By late on Nov. 6, we were putting together all of the data and putting together the information that obviously I should have put together way earlier. That obviously should have been a part of the dashboards I was always looking at. When we looked at that, there was a potential serious problem there. Alameda’s position was big on FTX. It had just taken a huge hit. It had taken hits over the course of the year, but that was a particularly large one and very abrupt. We’re seeing a run on the bank start, and that was leading to $4 billion a day of client withdrawals. At that point, we started calling prospective sources of financing, because I was nervous about what was going to happen there. If you rewind even a few days, I was a little bit nervous, but not on nearly the same scale, and I was thinking about risks that were substantially less.
Sorkin interrogates where he was actually nervous. Like before the company was going down or when it was caught.
BANKMAN-FRIED: I think before then, what I was nervous about was that basically, and this started, I would say, Nov. 2 or so, when there was the Alameda balance sheet through CoinDesk — and when I started to think a bit more about this, I was nervous that that would lead to substantial losses for Alameda and that it would be a bit messy. I didn’t think it was existential for FTX. I didn’t think it was going to lead to a massive loss for FTX’s customers.
I was thinking of this as more like, Alameda is going to be really tight on funds. And that maybe it would end up having some small impact on FTX, but not a significant one, not one that hurt customers at all.
When you’re talking about Nov. 6, late Nov. 6 — then, and especially as we bleed into Nov. 7 and 8, I start to become nervous that FTX is not going to be able to fill customer withdrawals. And by late Nov. 6, I am very nervous about that, and I’m starting to think about emergency scenarios. And I’m starting to think about, things might — things might end quite badly here.
The core metric that I’m thinking of there is, will we be able to make sure all customers are whole? And on Nov. 5, I was feeling quite good about that. On Nov. 7, I was feeling quite uneasy about that.
Q. You’re in the Bahamas right now. Are you in the Bahamas because you think you can’t leave?
BANKMAN-FRIED: I’m in the Bahamas — I have been in the Bahamas for the last year, and I’ve been running FTX from the Bahamas. I’ve been running FTX Digital Market, our primary operating entity, down here with Bahamian regulators and others in contact. Right now, I am looking to be helpful anywhere I can with any of the global entities that would want my help.
Right now, look, I’ve had a bad month. This has not been a fun month for me. But that’s not what matters here. What matters here is the millions of customers. What matters here is all the stakeholders in FTX who got hurt and trying to do everything to help them out. As long as that’s the case, I don’t think that what happens to me is the important part of that, and I don’t think that’s what it makes sense for me to be focusing on.
When you look at Nov. 6, I was feeling nervous, but I felt like things were probably going to end up OK. We still had — I mean, assets way larger than liabilities. And yeah, there was increasing withdrawal demand, but we were meeting all of it. We were processing all of it. Although it was a weekend, so we were a day delayed on a lot of wire transfers and stablecoin creations, and Bitcoin node was overloaded, but our assets were continuing to process. By Nov. 8, I did not think the odds were that high that we were going to be able to meet all client demand, and I was worried that there was going to be a substantial liquidity shortfall.
Nov. 7 — that was sort of the transition day. Even just the start versus the end of Nov. 7, I felt — I felt fairly different. I can’t remember exactly what I was thinking or when I sent that. But I remember trying to think about — feeling conflicted about what to say and trying to think about what I could say that I believed. By not that long later, I no longer believed that. I no longer — that no longer felt like it had much — like that was a at all reasonable representation of where my mind was at. And I don’t remember exactly when I deleted it, but I remember at some point I was like, “Ah, it shouldn’t be there.”
I think that the U.S. team took actions to seize some of the assets and put it in custody from the exchange. I believe that it has been announced that the Bahamian regulators took some of the assets into safekeeping as well around that same time. And I think there may — in addition to both of those also been some actually improper access of assets on the exchange. I don’t know the details of that. I don’t have the resources to trace through exactly what happened there. And I don’t know who is behind that third part.
Sorkin asked about the big investments that Sam made in media companies.
BANKMAN-FRIED: Media matters a lot, and I wanted to support good media ventures. That was the whole thesis there. I don’t have governance over any of these. I was not looking for governance over them. I was looking to support journalists doing great work because I think what they do is really important. I think there needs to be a critical eye on stories. I’m certainly seeing — being on the, getting the brunt of a lot of that right now. Frankly, I think it is healthy for the world that there is real investigative journalism.
Sorkin curiously asked Sam about his future and what he is planning for.
BANKMAN-FRIED: What is my future? I don’t know what my far future is. When you fast-forward, I don’t know what I’ll be doing a long time from now. When I look at the near- and medium-term, what am I thinking? And again, I don’t know what’s going to happen. A lot is not in my hands at this point. I want to be helpful wherever I can to regulators, administrators, internationally, who are working to help FTX’s customers, and I want to be helpful wherever I can on anything that could help bring a lot more value to those customers. I don’t know where that will lead.
I can say that prior to filing, there have been a lot of interest in financing, a lot of fairly strong interest. Billions of dollars worth. I can’t make any promises about anything. I would have thought there would be a chance for a pathway forward here that would bring more value to customers then what would happen if you just sold everything off for scraps. I don’t have confidence. I can’t promise anyone anything, and it’s not really in my hands to a large extent, but I would think it would make sense to be exploring that. I think there is a chance that customers could end up being made a lot more whole or maybe even fully whole if there was a really strong concerted effort.
Q. Sam, how much money do you have left at this point?
BANKMAN-FRIED: I mean, to my, like, knowledge, close to nothing. Everything was in the company.
Q. Do you agree that over time you also lied?
BANKMAN-FRIED: Do I agree that I lied? I don’t know of times when I lied. Look, there are times when I, certainly times when I was acting as a representative, as a marketer for FTX and when I was looking for how can I — in a way which is truthful — paint FTX in as a compelling way as possible. And as an exciting and optimistic way as possible. I wasn’t thinking about, and I wasn’t talking about what are the risks involved with FTX. I obviously wish that I had spent more time dwelling on the downsides and less time thinking about the upsides.