The Collapse of FTX, in Sam’s Own Words

We may not know for weeks whether Sam Bankman-Fried will take the stand at his own trial. He may want the chance to explain himself to the jury, but his lawyers are surely wary of the withering cross-examination such a tactic would invite. No matter: the unconventional former crypto executive has already said – publicly – plenty about what went down in FTX’s final days.

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What follows are a series of excerpts from interviews that SBF gave in the month between FTX’s collapse and his arrest in the Bahamas. They provide a picture of the mind of the man prosecutors allege was behind one of the greatest financial frauds in history. According to the man himself, he was a well-meaning altruist whose heady risk-taking got him in over his head.

In early December, a Wall Street Journal interviewer pressed SBF on his knowledge of operations at Alameda, the crypto hedge fund accused of borrowing billions of dollars in crypto from FTX and its unknowing customers. According to SBF, who had a 90% ownership stake in Alameda and lived with its CEO, Caroline Ellison, he, too, didn’t fully know what was going on there, a refrain he later echoed in documents shared with the New York Times.

“FTX was a full-time job,” he told the Journal. “It was more than a full-time job. And I didn’t have enough brain cycles left to understand everything going on at Alameda if I wanted to. I also didn’t want to because I was concerned about conflicts of interest. And I felt like it would be inappropriate for me to be looped into, certainly to details of what was going on there.”

Prosecutors are almost certainly keen on demonstrating the opposite to the jury. Here, testimony from Ellison herself may prove critical in showcasing what SBF knew, and when.

One thing he did seem to know (or at least, claimed) was that FTX’s U.S. operations did not go kaput when its sister exchange, International, fell into the black hole of those Alameda loans.

“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,” SBF told Andrew Ross Sorkin in the New York Times’ headline-grabbing first interview with the felled CEO. Despite SBF’s insistence, U.S. customers still haven’t gotten their money back. Look out for prosecutors to explain why – this argument is the source of at least one ongoing procedural dispute between the defense and DOJ.

Part of his identity has always hinged on the idea of amassing great wealth in order to give it all away. SBF’s “effective altruism” was a philosophical tilt and also an ad tagline for crypto’s white knight. Was it real? A Vox interviewer asked SBF over Twitter DMs if “the ethics stuff” was “mostly a front.”

“Yeah. I mean that’s not all of it. But it’s a lot,” he said. Later on in the screenshotted conversation SBF said “I feel bad” for those who don’t say the right things and therefore lose “this dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us.”

SBF’s apology tour was set to culminate with him providing congressional testimony in mid-December – an unheard-of gamble for a felled financial executive dogged by scandal. His plan derailed when Bahamian authorities took him into custody on Dec. 13, 2022. But a leaked notepad of what appears to be his roadmap for remarks includes a strange characterization of FTX’s internal controls.

According to SBF, he and others inside the FTX empire lost track of Alameda’s massive loans “because of a historical accounting quirk” that mucked up all-important dashboards, and that this oops-level oversight led the hole ballooning much bigger than he realized.

“Historical accounting quirk” is a hell of a way to describe the hardcoded $65 billion ceiling that Alameda could borrow from FTX. In filings prosecutors have alleged the hedge fund had access to an infinite money glitch bigger even than FTX’s total deposits. And we’ll hear more about this soon because…

Sam Bankman-Fried’s trial begins today. He faces two counts of wire fraud and five counts of conspiracy to commit wire, securities and commodities fraud. Watch CoinDesk.com for updates as they happen, and stay tuned for this newsletter to catch up in a single pocket. For those of you planning to attend in person, here are the logistics details:

Who: U.S. prosecutors, Sam Bankman-Fried, and his defense attorneys

What: U.S.A. v. Samuel Bankman-Fried

Where: The Daniel Patrick Moynihan United States Courthouse in lower Manhattan (500 Pearl St., for those of you who want something you can plug into your GPS).

What we’re expecting

Though today is the first day of trial, we won’t hear too much – opening arguments won’t begin until at least tomorrow. Instead, today’s the voir dire process. We should get final confirmation from Judge Lewis Kaplan about whether he intends to use any of the proposed questions from the Department of Justice and defense.

We may also get an updated witness list, depending on if that’s shared publicly as an exhibit. A past court filing did suggest it may come up during voir dire, in terms of checking whether any of the potential jurors know the witnesses.

The DOJ and court both expect jury selection to take no more than a day; if this holds true, we could start opening arguments as soon as tomorrow.