FTX founder Sam Bankman-Fried talked from an undisclosed location in the Bahamas today with reporter Andrew Ross Sorkin for a DealBook event, a discussion that his legal team “very much” did not approve of, he told Sorkin with a boyish grin.
Hedge fund billionaire Bill Ackman tweeted afterward that he felt “SBF” was “telling the truth.” But we’re not so sure. In fact, having watched the livestream, we’re still wrestling with whether he was credible.
Throughout the back-and-forth, Bankman-Fried sounded almost studiously amateurish, insisting he didn’t knowingly commingle funds between FTX and the trading firm he controlled, Alameda Research, where it has since been discovered that the exchange had funneled $10 billion in customer assets to Alameda for use in trading, lending and investing activities.
Though between $1 billion and $2 billion appears to be missing, and though company executives reportedly set up a bookkeeping “back door” to circumnavigate red flags, when Sorkin asked about the outfits’ reliance on one another, Bankman-Fried said that he was “frankly surprised by how big Alameda’s position was, which points to another failure of oversight on my part, and a failure to appoint someone to be chiefly in charge of that.”
Notably, Bankman-Fried ultimately used “oversight” nine times, even as he appeared to blame others. Asked if he should have taken money from FTX’s users’ accounts at all, he pointed the finger at Alameda, saying, “I wasn’t running [it], I didn’t know exactly what was going on. I didn’t know the size of their position. A lot of these are things that I’ve learned over the last month that I learned as I was sort of frantically digging into this.” Obviously, he added, “that’s a pretty big mistake. I mark that as a pretty big oversight that I wasn’t more aware of.”
At many points during his back and forth with Sorkin, Bankman-Fried came across, too, as delusional. He said that before FTX filed for bankruptcy — a move he authorized grudgingly four days after it was first proposed — “There had been a lot of interest in financing [FTX]. A lot of fairly strong interest, you know, many billions of dollars’ worth.”
It really didn’t seem that way. There wasn’t interest from Binance, as was well-documented. There wasn’t interest from his scorched venture backers, who, by the way, Bankman-Fried spared today in the interview. (Asked by Sorkin whether “Sequoia Capital, Paradigm and some very big venture capital firms” that funded FTX ever asked Bankman-Fried about how much risk he was taking on and “whether they bear any responsibility,” he answered, “I don’t think that they’re responsible … most of what they were focused on was … what might FTX become …”)
Indeed, in many ways, Bankman-Fried behaved today very much like someone who doesn’t comprehend that his life just changed dramatically and who instead believes he can still steer the outcome of FTX, despite the fact that he was forced to resign. (FTX’s new chief executive, a corporate turnaround specialist, has called Bankman-Fried’s stewardship a “complete failure of corporate control.”)
He talked of “a lot of assets that are on hand [still at FTX], although many of them are not liquid. They were worth quite a bit more than the new liabilities a month ago, even, a lot of them a year ago.” Bankman-Fried relatedly suggested that he hasn’t accepted that his customers will lose everything.
He said toward the end of the interview, “I can’t promise you and I can’t promise anyone anything there, and it’s not really in my hands to a large extent. But I would think that it would make sense to be exploring [a pathway forward] because I think there’s a chance that customers could end up a lot more whole — I don’t know, maybe even fully whole — if there was a really strong, concerted effort.”
It was such a strange showing, we wondered why some of the most sophisticated investors in the world put him on a pedestal in the first place.
Sure, he has “had a bad month,” as he told Sorkin, to audience laughter. Yet it’s just as likely that Bankman-Fried and his circle are busily making the argument that he was simply inept — in over his head — and never intentionally participated in artifice.
It makes a big difference. U.S. prosecutors can pursue a civil action against someone accused of ineptitude or negligence, and that individual might face significant financial consequences. But if it’s proven that an individual schemed to mislead others, then fraud crimes are on the table, which also means jail time is on the table. It could mean a far bleaker future for Bankman-Fried.
The U.S. Attorney’s Office in Manhattan has reportedly launched an investigation into FTX; the Securities and Exchange Commission and the Justice Department are also, naturally, poking around and trying to determine whether Bankman-Fried’s maneuverings intended to deceive or were instead an astonishing series of blunders.
It’s tempting to conclude the former, that Bankman-Fried made his decisions knowingly. Given his “crypto genius” status until recently, it’s hard to imagine he was so in the dark. But it was quite a performance today if so.