The recent FTX crash was one of the biggest (negative) events in the cryptocurrency market, creating a domino effect that brought down other companies and, most importantly, ruined many people’s lives. The key piece of the whole scandal is Sam Bankman Fried (SBF)the founder of the company, considered by many to be a con artist who deliberately misled his customers.
With that, many awaited the first official statement in an interview by SBF, which took place on a live New York Times panel. In the conversation, which lasted more than 1 hour, various topics were discussed, including debt in the case of the listed company.
However, the interview was not well received by the community, which believes The New York Times continues to play down SBF’s role in the exchange’s collapse.
What everyone wants to know: What happened to FTX?
The interview, conducted by Andrew R. Sorkin of The New York Times, first justified his own motive. With Sorkin saying that many people have contacted him saying the event should not take place, but as a journalist this is a necessary interview.
After his vindication, Sorkin asked the main question, citing that the public has two perceptions: either that Bankman made terrible mistakes, or that he committed massive fraud and that FTX was a pyramid scheme. So what really happened?
“Ultimately I was the CEO of FTX and that means whatever happened, when it happened I had a duty, a duty to all our shareholders, all our customers, our creditors, I had a duty to our employees and investors, to regulators around the world”said bankman-fried.
SBF stated that he did indeed make many mistakes, but he never intended to commit any kind of fraud or deceive his investors. And that what happened to FTX was a “massive shock”, stating that if only he could have done things differently.
Bankman-Fried makes a mea culpa of the situation and took responsibility for what happened, but not really. He just assumed that as manager of FTX he should have been more careful and that was it. When in fact much more blame lies with the FTX board, the issuance of the FTT and the decisions made by all entities.
Before its bankruptcy, FTX traded with fractional reserves and “invested” the value of its clients coverage errors by Alameda Research and even using FTT, its native currency, as collateral for loans, which is extremely risky to say the least.
SBF blames the girlfriend
Immediately after the first question, Sorkin read a letter from an investor who lost everything in FTX, demanding an explanation from the SBF about FTX’s relationship with Alameda, which ended being the trigger for the collapse of the entire brokerage system.
“Andrew, please ask SBF why he decided to steal all my savings and his clients’ $10 billion to give to his hedge fund Alameda. Why the hedge fund was gambling on shitcoins”said the interviewer.
The investor question is asked by many (perhaps all) investors who have lost money with the brokerage. Accusing Alameda (owned by FTX) of making decisions so appalling they appear intentional, and FTX of defrauding its customers to cover for Alameda’s breach.
And it’s exactly the Alameda that Bankman-Fried threw under the bus during the interview, directly blaming the FTX arm for the problems that befell the entire company.
FTX founder Caroline Ellison’s girlfriend was CEO of cryptocurrency trading company Alameda Research.
Initially, SBF differentiated between the American version of Alameda and Internacional, who did all the nonsense. In fact, he claims that for US clients, the platform is still fully solvent and that he could resume withdrawals without a hitch.
He explained that Alameda (international) was a derivatives platform and all clients invested in some way as collateral for the amount that would go into a position held by the company. “Basically, a year ago, Alameda had, I think, leverage of about 10%, about 10 times the number of assets it was positioned on.”
However, Alameda’s fault isn’t really with her, but with the market (of course).
“Over the course of the past year there has been a series of market crashes that have caused asset prices to plummet and leverage to rise (…) I believe over $10 billion has been wiped out of the market and realistically it lacked FTX the ability to liquidate all positions and generate all that was due”he explained.
With that, the blame was entirely on the shoulders of Alameda, controlled by his girlfriend, and FTX just didn’t have what to do in light of the whole situation. However, it is worth remembering that the relationship between Sam and Caroline Ellison seemed much stranger than many initially thought.
Adding to this is the fact that Alameda used a “loan” from FTX to cover the shortfall, a loan many see as theft of the exchange’s clients’ money.
SBF blames customers for not reading the terms of service
One of the most important parts of this whole story is FTX’s “loan” to Alameda, which ended up directly impacting customers, as the wisely read letter pointed out during the interview. To that end, SBF said it did not deliberately mix the finances of the two companies.
The interviewer pointed out that the letter made it clear that part of FTX’s terms of service made it “clear” that the brokerage would not practice fractional bookings or use clients’ funds.
The term says so “…none of the digital assets in your account are owned or owed to or can be loaned to FTX Trading. FTX Trading has not represented or treated digital assets and user accounts as belonging to FTX Trading.”
If so, how is it possible that Alameda could have gotten such a large loan from FTX with just the money the brokerage had in its reserves, money that also counts towards clients’ investment.
The first answer to SBF’s question was precisely to blame clients for not reading the terms of service correctly, where the brokerage states that it was possible to use their reserves, other people’s money, as collateral in various situations.
“But there were several other parts of the terms, as there are several other parts of the platform, there’s the borrower loan mechanism, where users lend each other billions of dollars in assets, you know, backed by assets on the exchange (… )”
Fortunately, the interviewer was not as on Bankman-Fried’s side as many thought he would be. He then directly asks: Let’s get one thing straight. Was there a mix of funds?
Mix of Funds or Mix, in English, is when companies mix up and complicate their reservations. And SBF’s response?
“I did not deliberately mix funds.”
In between, “I did not deliberately mix funds” and “I didn’t know how strong Alameda was”, we have the image of an incompetent CEO. That he may not have even committed fraud, but lost thousands, perhaps millions, of money due to a total lack of observation and responsibility.
Applause for a scammer
BSF’s appearance at an event for The New York Times was significant because the audience got to see him directly answer questions about the case. But that doesn’t mean everyone liked the idea.
Some even thought this participation was in bad taste.
“How did this man steal billions of dollars and now he’s interviewing on a forum like a free man?”
How did this guy steal billions of dollars and now speak at a summit like a free man?
Make it logical.
— Chairman (@WSBChairman) November 23, 2022
“SBF must be accurate! The New York Times: The best I can do is a paid call.”
“SBF needs to go to jail!”
The New York Times: pic.twitter.com/ynSzdFdl0Q
—Dr. Parik Patel, BA, CFA, ACCA Esq. (@ParikPatelCFA) November 23, 2022
But something that seems to have bothered many is the applause at the end of the presentation, which, let’s face it, is at least something common, but certainly tasteless, especially for those harmed by SBF.
LET’S GIVE AN APPLAUSE TO SAM BANKMAN-FRIED pic.twitter.com/HIVB3nTX2V
— De_Real_Fly (@The_Real_Fly) November 30, 2022
That’s how it is.
The interview with Bankman-Fried has much more to say, with more than 1h10 of content. The most important part is the beginning we’ve covered in this article, but in case you want to see it in full, the video is complete on The New York Times channel:
Source: Live Coins
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
