Andrew Ross Sorkin of the New York Times interviewed former FTX CEO Sam Bankman-Fried on Nov. 30 at the DealBook Summit. What follows is a transcript of that conversation.
Read CoinDesk's coverage of the interview here.
Andrew Ross Sorkin (ARS): In the span of about one week, Sam Bankman-Fried went from a billionaire, the white knight of the crypto world and running one of the largest exchanges, to what some people think has become a wanted man. FTX was once valued at $32 billion. It's now effectively worthless in bankruptcy. We're going to talk about that and whether investors will ever get money back. There are multiple billions owed to creditors and big questions. In the wake of the collapse bitcoin fell to its lowest price in two years, and on Monday, BlockFi, which had been bailed out by FTX, filed for bankruptcy. The rapid fall of this empire has left so many questions about crypto, about the future of it and whether it can be trusted again. Sam Bankman-Fried joins us right now, live from the Bahamas.
Sam, I want to thank you for joining us this afternoon. I appreciate your willingness to have this conversation. As I said at the outset of today, there are a lot of questions that need to be asked and also need to be answered.
As you know, a lot of people have been hurt, genuinely hurt. And my hope is that over the time we have together, that we can have a candid conversation about what happened, how it happened. There are people who are angry and they are seeking answers. I just want everybody in the audience to know that I received thousands of letters and emails, even the past couple days, from a lot of these people who feel like they're victims, and some of them have questioned whether we should have this conversation, whether we should have this interview. There are people who don't believe that this conversation should happen. And I just want to say that I think our job as journalists is to have those conversations, is to ask those questions and seek those answers on behalf of the public. And that is especially true right now.
Sam, here's where I want to start this conversation, if we could. I think at this point, there are two ways to view what has happened at FTX. And I know we'll get into all of the details in a moment. But I'm just gonna go very basic. There's a generous view. And the generous view is that you are a young man who made a series of terrible, terrible very, very bad decisions. The less generous view is that you have committed a massive fraud, that this is a Ponzi scheme, a manipulation of the system. And I want to start there because I think that there's so many people who have that question, which is what is this and what did happen?
Sam Bankman-Fried (SBF): Yeah, look, thanks for having me. And at the end of the day, I was CEO 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, to make sure the right things happened to the company and clearly I didn't do a good job with that. Clearly, I – I made a lot of mistakes or things I would give anything to be able to do over again. I didn't ever try to commit fraud on anyone. I, 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, you know, reconstructing it, were there things I wish I had done differently.
ARS: Well, let's talk about some of the things you, you would want to have done differently. But I don't want this to be an abstraction for folks because it's a lot of big numbers, and often doesn't feel human. One of the letters I got I want to read to you, Sam, because it's from a gentleman who said that he lost his life savings. And the subject line is, "Sam Bankman-Fried stole $2 million from me." It says, "Andrew, can you please ask SBF 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 gonna 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. What do you tell this man?
SBF: Yeah, I mean, I'm deeply sorry about what happened. You know, for the long and short of what happened – and I'll start by saying just to make a distinction here – you look at the U.S. platform, you look at the international platform, U.S. platform is a U.S.-regulated platform with American users. To my knowledge that's fully solvent, that's fully funded and, you know, I believe that withdrawals could be opened up today and everyone could be made whole from that, that none of these problems plagued the U.S. platform.
Then you look at the international platform, for their non-U.S. users. And, I mean, as the letter says, Alameda Research did have a long position. And, you know, the international platform, it's a margin-trading platform. It's a derivatives platform. It's a platform where all the clients were, you know, 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 is storing was the collateral from all of those positions. Alameda Research was one of those that put on positions there. And as I try and reconstruct this, you know, over the last month, I have limited access to data, but my, my, my, my view of it, from what I have been able to see is roughly that, you know, basically, look, a year ago Alameda had, I think, something like 10% 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, you know, as of a month ago. You look at what happened this month and, you know, in a few days an all-out. I mean, PR 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 the matter of days, and, realistically speaking, no ability for FTX to be able to, to liquidate that position and generate everything that was owed from it.
ARS: But I think the bigger question is where Alameda got the loan from, which is to say that there is a view that this is about commingling of funds. And in that letter that I just read you, this gentleman actually copied and pasted the terms of service for FTX into the email and I just want to read you this. It says, "None of the digital assets in your account are the property of, or shall or may be loaned to, FTX Trading. FTX Trading does not represent or treat digital assets and users' accounts as belonging to FTX Trading." So how is it possible that Alameda had this loan of such a large size?
SBF: So, there's that piece from the terms of service. But there were a number of other parts of the terms of service and there's a number of other parts of the platform on top of that. There is the borrower lending facility where users were lending billions of dollars of assets to each other, you know, collateralized by assets on the exchange. You had, obviously, futures contracts where they are leveraged positions on. Now, 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 of those, all of those shorts, all of those liabilities. Obviously, that wasn't the case here. And that's a massive failure of oversight of risk management, and of a huge diffusion of responsibility from, from myself running FTX.
ARS: But just make this very straight, was there commingling of funds? That's what it appears like. It appears like there's a genuine commingling of the funds that are of FTX customers' that were not supposed to be commingled with your separate firm.
SBF: 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 a failure to appoint someone to be chiefly in charge of that. But I wasn't trying to commingle funds.
ARS: Well, let me ask you this: The Wall Street Journal reported that [Alameda Research CEO] Caroline Ellison told Alameda staffers that Alameda used FTX client funds to cover loans that were being recalled because of the LUNA-triggered credit crunch. Caroline says that she, Sam, Gary were aware of this. How do you square that with what you originally said over Twitter, that this was an $8 billion accounting mistake?
SBF: So, I'll point to two things. And first of all, obviously, I don't know what anyone else is thinking here. You know, I can only talk about it from what I know, from what I knew. And a lot of this is reconstructing it over the last month. I have limited access to data, but, you know, what it seems like happened is in the middle of the year, a lot of – most of the borrow-lending desks in this space blew out or closed down. And it seems like Alameda had, you know, margin positions opened with them, and that it likely moved a bunch of that over to FTX this year when they shut down. And that means, you know, I think it was over-collateralized positions, but positions that involve substantial size and substantial U.S. dollar size on the borrow side.
In terms of the accounting mistake, again, looking through what happened, I think that there is a substantial discrepancy between what the financials were – what the audited financials were – the true financials – what the exchange understood. All of that was, was, was consistent. Versus what the dashboards that we had displayed for, for Alameda's account there, which substantially under-displayed the size of that position. And, so, that's one of the reasons I was surprised when we dug into everything at, at how big that position had become.
ARS: But you would agree that there is a much more closely connected version of FTX international and Alameda than previously understood. Fair to say?
SBF: Yeah, I mean, given the size of the position, I think it was, if not in intention, it was in effect tied together substantially more than I would have ever wanted it to be.
ARS: So, you did an interview earlier this summer with Bloomberg, and you were asked about the connection between Alameda and FTX, and you said that "obviously came from the, the same place because it started that way and the same original people, but most of the remaining nexuses," you said, "have dropped off."
ARS: "I know the people from Alameda decently well," almost as if you don't know what's happening there. "And there isn't, like, a large amount, you know, of ways remain that we are actively working together, anything like that. Alameda is a wholly separate entity. They're different offices, like, different principal offices, we don't have any shared personnel. We're also not the same company. We not all are under the same corporate umbrella or anything like that." And yet it seems like Alameda people were living in the same penthouse, where you may very well be right now, all together.
SBF: Most of Alameda was not, was not there. I don't live there now. But – or, you know, not there now – I have not lived there for most of the time. But, you know, I did live with, with, with one or two members of Alameda for a little while. And also I'll say that, you know, as I was, earlier this summer, looking at the relationship – and this is a pretty big mistake in oversight of mine – I was viewing it primarily from the trading volume perspective, because that's what drives our revenue. And so when I was looking at how intertwined are FTX and Alameda, you know, I was looking at, well, what what fraction of trading volume, what fraction of liquidity on the platform does Alameda represent. That had fallen off from something like 45% in 2019 to something like 2% 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.
ARS: But, Sam, I think the question is whether you were supposed to have access to these accounts to begin with, you know? If, if I worked at a bank and was a bank teller, and I decided to leave the bank at the end of the evening and take the cash that I ostensibly had access to, even if I intended to bring it back to the bank later even with more money to give them back, I still stole the money.
SBF: I mean, look, I wasn't running Alameda. 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 on Nov. 6, Nov. 7, Nov. 8. And, and, obviously, that, that's a pretty big mistake [unintelligible]. That's a pretty big oversight that I wasn't more aware. I think I was, you know, scared of – I was nervous because of the conflict of interest about being too involved. And, obviously, that shouldn't have meant that I didn't have real oversight, or that really shouldn't have meant that I failed to appoint anyone to be in charge of that oversight, that relationship. But I, I haven't been running Alameda, I haven't been thinking about its finances. I haven't been, you know, making those decisions. But, you know, as CEO of FTX it was still my duty to make sure I was doing diligence.
ARS: But you owned it.
SBF: I was, I was a large owner of it. That is true. And I, I had a lot of exposure on that side.
ARS: So why haven't you been focused on it, if, in fact, that's actually where the profits were?
SBF: Well, I don't know that that's where – I mean, I think Alameda had made trading profits over the last few years, but FTX had made profits as well. FTX had been a profitable, growing business. And I was – that was more than a full-time job. I didn't have the bandwidth to run two companies at once. I didn't have the, you know, attention for it. And, again, I was nervous about a conflict of interest between those two, and so was pretty intentional about not being very involved in what was happening at Alameda.
ARS: When did the commingling of assets begin?
SBF: So, and, again, you know, lots of traders had open margin positions on FTX, where they would have borrows of assets where they would be short some asset against, you know, against other assets as collateral. That being said, I, again, looking through this now, I think that that position size for Alameda got substantially larger over the course of 2022. And that it was, I think, substantially larger by October 2022 – probably by July of '22 – than it had been in April.
ARS: But it sounds like it's fair to say that there was always a connection between Alameda and FTX and almost – I mean, not almost, but from the very, very beginning – and then it never really stopped.
SBF: Well, I think it had been, in some ways, reducing. I mean, when you scroll back to 2019, Alameda and FTX were very connected in a number of ways. You know, one of these was that Alameda was the primary liquidity provider on FTX. It was, you know, 40-something percent of volume. It was the backstop liquidity provider. And, you know, you scroll forward to 2022, it was down to 2% of volume. We had a lot of backstop liquidity providers. But it still had a big margin position on, and I, 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 – and a lot of these are – but I substantially underestimated what the scale of a market crash could look like, and what the speed of it could look like. And how correlated it would be.
ARS: But that just suggests that you were just hoping, perhaps hoping against hope, that this would all work out and that nobody, therefore, would realize what this commingling was all about?
SBF: So, it's not how I viewed it. And, in particular, again, most of the firms had margin positions. Most of the firms had borrows on FTX. The problem here, this one was, this was too big. It was – I was surprised by that size of what it was.
ARS: But it's not just too big. It's, it's, it's assets that, look, it sounds like there were assets that, that may have been allowable to be loaned. But then there were assets that weren't allowable to be loaned, no?
SBF: So, I'm still looking into the details of some pieces of this. But I do think that in addition to what I had seen as sort of lot of the standard borrows here, that we scroll back to 2018 or to 2019, I guess, FTX didn't have bank accounts. It didn't have any bank accounts globally. We were trying to get them. It took us a while, it took us a few years, and, you know, there are customers who wanted to wire money to FTX. And so I think in the meantime, some of them were wiring money to Alameda Research to get credited on FTX, and I think that was a substantial sum. And I think that the FTX's internal accounting did correctly, effectively try to debit Alameda for those funds, but it didn't happen in the primary account and so it didn't happen. It created a discrepancy between the display of the account and what was really going on there. And I'm still looking into exactly how that, how that worked mechanically. But I – that, that did make that position size substantially larger than, than I thought and I think than what you would have gotten from, from most normal avenues.
ARS: What do you make of the argument that Alameda was used to effectively wash money into FTX. That American investors, who, by the way, were not technically allowed to even invest on FTX, were doing so and FTX was doing it knowingly because the, the know-your-customer rules were being flouted by using this separate vehicle.
SBF: How would that allow customers to flout the know-your-customer rules? Are you talking about people who are trading on FTX US or are you talking about customers of FTX international?
ARS: International. You just said that there was money being sent to Alameda, and that Alameda was then providing credits onto FTX.
SBF: Right. But those users still had to go through the know-your-customer policy on FTX in order to do that. In order to use that ramp, customers still had to go through FTX's normal KYC onboarding.
ARS: So, when do you think you knew there was a problem?
SBF: So, 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. And by late on Nov. 6, we were putting together all of the data, putting together all the information that obviously should have put together way earlier – that obviously should have been part of the dashboards I was always looking at. And I, you know, when we looked at that, there was a potential serious problem there. And, you know, 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. And we're seeing a run on the bank start and that was leading to $4 billion a day of client withdrawals. At that point, you know, we started calling prospective, you know, sources of financing, because I was, I was nervous about what was going to happen there. You know, if you rewind even a few days, I was, I was a little bit nervous, but not on nearly the same scale and I, I was thinking about, you know, risks that were substantially less.
ARS: When you say you were nervous, you were nervous the company was gonna go under? You were nervous you were gonna get caught? What were you nervous about?
SBF: On, like, on Nov. 6 or before then?
SBF: So, 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 leak of the Alameda balance sheet through CoinDesk. And when I started to think a bit more about this, you know, I was nervous that that would lead to substantial losses for Alameda and that, you know, 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 gonna to be really tight on funds and that, you know, maybe it would end up having some small impact on FTX, but not, not a significant one, not one that hurt customers at all. When you're talking about Nov. 6 – late Nov. 6 – then and, and especially as we bleed into Nov. 7 and 8, I start to become nervous that FTX is not going to be able to fulfill customer withdrawals. And, you know, by late Nov. 6, I am very nervous about that. And I'm starting to think about, like, emergency scenarios and I'm starting to think about, like, things might, things might end quite badly here. And, and, and the core metric that I'm thinking of there is will we be able to make sure all customers are whole. And, you know, on Nov. 5, I was feeling quite good about that. On Nov. 7, I was feeling quite uneasy about that.
ARS: I want to go back in time for a moment. This summer you were described oftentimes as the J.P. Morgan of crypto, referencing the 1907 panic that he helped prevent. And you had purchased BlockFi, were making investments in Voyager and all sorts of other things. When you were doing that, at that time, how much of that was an effort to prop up the value of things like FTT, which was the token of FTX, knowing that if a company like BlockFi, which owed a ton of it, that if it collapsed FTT would collapse and in large part, the "collateral" that you had for Alameda would collapse.
SBF: So, I don't think any of the borrow-lending desks, to my knowledge, owned a lot of FTT. I think a lot of them, you know, may have been using it as collateral – or, you know, taking it as collateral. I don't think they owned it though or were gonna sell it. And I think that most of them ended up closing down effectively all of their lines with Alameda one way or another. And so at that point, I think that that was close to a sunk cost and so I wasn't viewing it as having any impact on FTT in particular. I did view it as important for the industry's health. I did view it as a thing where I wanted to try to keep the industry stable, but I don't think it had any, you know, really large FTT-specific impact.
ARS: And did it have – you didn't think it had any impact – it would have no impact on Alameda or FTX if, for example, BlockFi were to have failed.
SBF: I don't think it would have had a large direct impact and the reason I say that is that I believe that Alameda ended up returning the vast majority of its open, you know, borrows of its margin positions with the borrow-lending desks in the middle of this year anyway. And so at that point, there wasn't that much left to save from that. You know, the – at that point, I think the bigger thing was just not wanting the industry to implode.
ARS: Let's talk about collateral. Because I think this is – this entire experience has been a revelation for a lot of people about what might be collateral. And clearly you were using FTT and Solana and other tokens as collateral, and part of that required you to mark them in a specific way – a value to them.
ARS: Do you think that you were marking them properly?
SBF: In Alameda's case, I don't think I was marking them the way I wish I had from a risk perspective. And I want to sort of differentiate your, like, expected value or, or sort of, like, worth or something like that from security. And, you know, I think that I don't have any strong statements to make about, you know, what value they're assigned from sort of, like, an upside perspective or even a median case perspective. But clearly, I was, I was not nearly cautious enough from a downside perspective – from the extreme downside perspective. And, you know, I can tell you, in my head, I was looking at a 30% down move over a few-day period as a sort of, like, extreme tail-case event that, you know, we had seen once before, and, and then, you know, what happened here was, I mean, a 95% down move over the course of a year, and a, you know, 60% down move over a few-day period with very little liquidity and all happening at once in all of these coins in a correlated fashion in which hedges didn't mean as much also because this was a specific crash on assets associated with Alameda Research, rather than all assets. And so even correlated hedges had limited use there, and a run on the bank at the same time. And all that are things, in retrospect, I should have expected might happen in an extreme scenario, because that's how markets work. And, you know, we've seen other examples of that in history where, when things get really bad, they get really bad for all the relevant things at once, in a very direct and correlated and quick way.
ARS: I want to go to the BlockFi acquisition for a moment. How much money do you think Alameda – I'd say that they had a lot of FTT but – that Alameda had borrowed from BlockFi at the time of the bailout?
SBF: I honestly don't know, but I, I would have guessed, like, $100 million, maybe couple hundred million, but I, I, I honestly don't know the answer – I wasn't, I wasn't, like, paying detailed attention. That's my guess.
ARS: And were you using FTT and Serum and other things to collateralize the loans at BlockFi, do you think? I mean, this goes to the whole idea of both the value of these things and also whether you were trying to buy BlockFi, in fact, to continue to support effectively Alameda over FTX.
SBF: Right, you know, it might be, I would guess it was but, but, you know, to your point, my guess is that, like, the amount paid for, for BlockFi is probably bigger than the amount that Alameda had opened with it. I mean, I don't know that for sure, again, I – but I wasn't even looking at what that number was really. But I think that's, that's about right.
ARS: I want to go back to the Alameda piece of it for just another moment, if you'd stick with me here. You had told investors and regulators that you were not involved in Alameda decision-making. And yet, in the case – Alameda invested $1.15 billion in Genesis Digital Assets without your consultation or approval – that's the question. And my understanding is you also served on the board of Genesis Digital Assets. And so I'm trying to understand how you wouldn't have been involved with Alameda?
SBF: So, I was somewhat involved with venture investing and that was done out of a separate entity than, you know, any of Alameda's proprietary trading, than its activity on FTX or other crypto exchanges. But I was consulted on, on some of its, its VC investments, including with GDA.
ARS: What are your lawyers telling you right now? Are they suggesting this is a good idea for you to be speaking?
SBF: No, they're very much not. And, I mean, you know, the classic advice, right? Don't say anything. You know, recede into a hole. And it's not who I am. I mean, it's not who I want to be. I don't have – I, I have a duty to talk to people. I have a duty to explain what happened. And I think I have a duty to do everything I can to try and do what's right if there anything I can do to try and help customers out here, and I don't see what good is accomplished by me just sitting locked, you know, in a room pretending the outside world doesn't exist.
ARS: You're in the Bahamas right now. Are you in the Bahamas because you think you can't leave?
SBF: No. I'm in the Bahamas. I mean, I have been in the Bahamas for the last year and, you know, I've been running FTX from the Bahamas. You know, I've been running FTX Digital Market, our, you know, primary operating entity down here, you know, with the Bahamian regulators and, and others in, in, in contact and I, you know, right now, I'm, you know, looking to be helpful anywhere I can with any of the global entities that, you know, that would want my help.
ARS: Do you think you could come to the United States or go elsewhere?
SBF: To my knowledge I could.
ARS: Have you thought about doing that?
SBF: I've thought about it and, you know, I mean, I've seen a lot of the, obviously, a lot of the hearings that have been happening. I would, you know, not be surprised if, you know, sometime I am, you know, up there talking about what happened to our representatives or, you know, wherever else is, is most appropriate.
ARS: How concerned are you about criminal liability at this point?
SBF: So, I don't think that, I mean, obviously, I don't, I don't personally think that I have, you know – but I, I think the real answer is that it's not – sounds weird to say but, but – I think the real answer is that's not what I'm focusing on. It's – there's gonna be a time and a place for me to sort of think about myself and my own future, but I don't think this is it, like, right now. I mean, look, I've had a bad month. [Audience laughs.] This has not been a fun month for me. But that's not what matters here. Like, what matters here is the millions of customers. What matters here is all the stakeholders in FTX who, who got hurt, and, and trying to do everything I can to help them out. And, you know, as long as that's the case, like, I don't think that, I don't think that, you know, 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.
ARS: Sam, help me with this. On Nov. 7, you tweeted, and then deleted, a tweet that said, "FTX has enough to cover all client holdings. We don't invest client assets, even treasuries. We've been processing all withdrawals and will continue to be." You then deleted that tweet and literally just moments ago, you told me it was on Nov. 7 that things took a turn.
ARS: You're telling the truth?
SBF: So, things were changing fast. And, you know, 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, you know, assets way larger than liabilities and, yeah, there's 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 the Bitcoin node was overloaded, but, you know, their assets were continuing to process. By Nov. 8, I did not think the odds were that high that we were gonna be able to meet all client demand and, and I was worried that there was going to be a substantial liquidity shortfall. Nov. 7, that was sort of the transition day and, you know, even just the start versus the end of Nov. 7, I felt fairly different, you know. And I can't remember exactly what I was thinking or, or, or, or when I sent that but, you know, I remember trying to think about feeling conflicted about what to say and trying to think about what I could say that I believed and, you know, by, 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, 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, that shouldn't be there.
ARS: Let me ask a different question, because this is all around the same time. The New York Times reported that $515 million was "suspiciously" transferred from FTX wallets after – after ...
ARS: ... the bankruptcy filing.
ARS: And there have been accusations that this is the assistance, effectively, of theft. Where did that money go?
SBF: So, I will caveat this by saying at that point, I was being cut off from systems. And so I'll give you the answer to the extent that I know it, which is that I believe that a few different things happened within a short period 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 the – it has been announced that, you know, the Bahamian regulators took some of the assets into safekeeping as well around that same time. And I think there is, in addition to both of those, there's also been some actually improper access of assets on the exchange. And 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.
ARS: I want to go back to one thing about the Bahamas. The Bahamian authorities have now admitted, effectively, that they ordered the transfer, it sounds like, of certain FTX assets to wallets under its control, after the U.S. bankruptcy was filed. Did you help them with that? Did you discuss that with them?
SBF: So, I, I can't discuss specifics, but I will note that prior to Chapter 11 having been filed, the Bahamian authorities had placed FTX Digital Markets, the Bahamian entity, which is the primary operating entity of FTX international, under supervision of a JPL system in the Bahamas with oversight from the Securities Commission of the Bahamas. And, you know, were, to my knowledge, taking actions to protect FDM's clients and, and customers there.
ARS: Can we just go back for just one second, and I apologize for belaboring this point, but we're talking about FTX and the derivative piece of it earlier. And I had made a note earlier about this, because you had told the Senate – you were sitting in the Senate at the time on Feb. 9, 2022, during a hearing – and you said, "On FTX US Derivatives, all of these contracts are fully collateralized." Was that true?
SBF: Yes. And, again, FTX US, to my knowledge, totally solvent. FTX US Derivatives, totally solvent, and, in fact, I believe FTX US Derivatives, LedgerX, may even be up and running right now. I'm confused why FTX US is not processing customer withdrawals right now. I would think it should be because I believe, to my knowledge, that it could be and could make all Americans 100% whole from this. So, and FTX US Derivatives, as I said there, doesn't even allow leverage of any sort. It was, you know, close to a spot trading platform. And so, yeah, to my knowledge, all American customers and all American-regulated businesses and exchanges here are, I think, at least in terms of client assets, are, are, are OK. Obviously, I don't know what's happened with, you know – you can make your own judgments about the enterprise value of those businesses, but ...
ARS: Over the summer you paid a $2.5 billion loan to Barry Silbert's Genesis [Editor's note: Genesis Global Trading is owned by Silbert's Digital Currency Group, which also owns CoinDesk]. This was in August. And I was just trying to think through the dynamics of what might have been happening at your firm and was wondering where did the money come from?
SBF: So, when you say "you" did that, I presume that that's Alameda Research that did that, is that right?
ARS: Yes, that's the case.
SBF: So, I don't have all of the details there, but my understanding is that – and I don't know exactly what was going on on Genesis' side then, and I don't know now – but my understanding is I believe Genesis tried to call in a large number of loans from Alameda. I believe that that happened, and that that closed down a lot of positions that Alameda had opened with Genesis and other trading desks. And, you know, that was what I was thinking at the time. And that's what I think happened there. I also think that may have led to an increase of position size of Alameda on FTX, in retrospect.
ARS: You did an interview, I think, perhaps, inadvertently, over Twitter DMs ...
SBF: Oh, boy.
ARS: ... with a reporter at Vox and had spoken about ESG, but also about what you described as the shibboleths of what it meant to look good in corporate America today and that a lot of the things that you were doing were not necessarily things you actually believed or believed in. Can you speak to that?
SBF: Yeah, absolutely. And I was a – a frustrating experience. It was not meant to be a, a public interview. It was a longtime friend of mine who I stupidly forgot was also a reporter. I thought I was speaking in a personal capacity. I'm not sure what they thought the capacity was at the time, but it certainly ended up being reported on. And, you know, I think what I would say is, look, there are a lot of things that I think have really massive impact on the world. And, ultimately, that's what I care about the most. And, I mean, I think that, I think frankly, that, that, you know, the blockchain industry could, could have substantial positive impact, but, you know, I, I was thinking a lot about, you know, bed nets and malaria, about, you know, saving people from diseases no one should die from, the animal welfare, about pandemic prevention. And, you know, what could be done on a large scale to help mitigate those. Those things I think matter and, and, and there's, you know, among the most important things to me. Separately from that, there is a bunch of bullshit that regulated companies do to try and look good. And these are things that everyone who does them basically knows they're kind of dumb, that these are not things that are making large impact on the world. These are not looking at saving thousands of lives. You know, these are the kinds of, like, you know – if it's like three different quarterbacks throw a touchdown in the same game for the same team, we'll donate two used cars to charity-type campaigns where it's not gonna happen. It's never happened. There's no expectation of a car getting donated. It's just a PR campaign sort of masquerading as do-gooderism. And, you know, things like greenwashing are, are things which, I think, end up in a similar area.
ARS: Fair to say you participated in this?
SBF: Yeah, we all did. And, and I, I, I and, you know, FTX did as well. And there are things I felt like we needed to do for the business. There are things that I felt like were, were crucial for us being able – I mean – I wish the world didn't work this way. I wish that these weren't relevant to your ability to get regulated, to your ability to get bank accounts, but they they, they were and I – yeah, you know, we had promotional campaigns, we had, you know, marketing slogans and, you know, we thought about what we could do to – and, you know, we thought of ourselves as legitimately trying to do good, but we also thought about what we could do to make sure that our image reflected that, and there's a lot, a lot of just unimpactful things there that, ultimately, I, I think, in some circles got more attention than actually impactful things. And, you know, I think that on the more tasteful end of the spectrum, you can see, you know, things like a small scale but real charitable initiatives. And on, I think, the less tasteful end of the spectrum, you know, frankly speaking, I mean, I think even things like making sure that all materials have perfect English grammar is a thing where that was important to me.
ARS: Sam, let me ask you about this, though, because the other piece of it is using, using your money and influence – and I think there's a question about whose money you were using, but – to donate, for example, to the Democratic Party, in large part, to influence regulation. And I think as people have looked through now, some of the regulation you were pushing for at [the U.S. Commodity Futures Trading Commission], for example, some of that regulation would have allowed you, frankly, to "self-certify" a lot of what was going on at FTX, and there are people who look at that and say it was all part of a scheme.
SBF: So, unpacking pieces of that, when you look at like this, the CFTC regulation there, ultimately, there may have been an ability to self-certify contracts. But prior to that, we went through a congressional hearing, a public comment period, a public roundtable, a year of inquiries, and tens of thousands of hours, you know, thousands of pages of submitted documents. And still had not gotten to the point of having a license to offer emerging futures in the United States. And so it was an extraordinarily long and hard process that we were going through with the CFTC. And I, you know – it was by far the most intensive regulatory process that I've ever seen.
ARS: Can you speak to the lobbying piece of it, though ...
ARS: ... and the donations piece of it? Because I think that's become part of the story ...
ARS: ... as to whether you effectively were influencing lawmakers to do your bidding, and given the state of your current company, questions about whether that should be the case.
SBF: So, I mean, lawmakers were not ruling on FTX. FTX didn't have an application before Congress for anything. You know, my donations were mostly for pandemic prevention. And they were looking at primary elections where there were candidates who are outspoken in favor of doing things now to prevent the next pandemic. That was the primary thing that I was supporting with those contributions. And, you know, it was on both sides of, of the aisle primarily operating both primaries because it wasn't – I wasn't viewing it as a partisan exercise. There is not, you know – most of this was not looking at donating to one party to beat the other one in the general elections here. You know, not only was it on both sides, but even within each side, it was between two candidates in the same party and it was looking at pandemic policy.
ARS: Where did the money come from for those donations?
SBF: So, I, you know, basically profits. I mean, you know, it was substantially smaller than the, you know, amount of trading profits that Alameda had made over the prior few years.
ARS: Related to this, you had a meeting with [U.S. Securities and Exchange Commission Chair] Gary Gensler. You also met with the folks at [the CFTC]. Do you think you needed to buy your way into those meetings?
SBF: I mean, I don't think I needed to buy my way into them. I do think it was harder than I would have thought it would be to get to the point of being even able to have meetings with some regulators. And, I mean, I spent hundreds of hours, probably thousands of hours in [Washington, D.C.] trying to get to the point where I could even have meetings with, with, you know, some of the relevant regulators. But that was not a – that wasn't a money thing. And, I mean, there's no donations to Gary Gensler. He doesn't even have a campaign to donate to in the first place. That was, like, elbow grease. I mean, that was just asking again and again and again to have meetings with relevant regulators and, you know, submitting hundreds and thousands of pages of documents.
ARS: You also made big investments in a number of media companies. And I think that's raised a lot of questions about whether you were trying to buy influence. Can you speak to that?
SBF: I mean, I think media matters a lot, and I want support good media ventures. That was the whole thesis there. And I, you know, I don't have, like, governance over any of these. I wasn't looking for governance over them. I was looking to support journalists doing great work because I think what they do is really important and I think that there needs to be a critical eye on stories. I'm certainly seeing, you know, being on the, the – getting the brunt of a lot of that right now. And, you know, frankly, I think it's healthy for the world that there is real investigative journalism.
ARS: Your parents are law professors. What did you tell them when all of this happened?
SBF: I mean, I don't remember exactly when I reached out to them, but, you know, I think I, I called them up and said, "Hey, guys, I think there might be a problem, like, things – looks like Alameda's position might be imploding here, and there might be liquidity issues. And I'll tell you more when I know more." That, that is – that's my guess about roughly, roughly what I said, but honestly that, that week so much happened. It's a little bit of a blur to me exactly what was said.
ARS: And what are they telling you now?
SBF: And look, it's been – it's been a hard period for anyone who was close to me, and none of them deserved that. And I feel really – I mean, look, a lot of, obviously – the largest number of people who are hurt here were customers, and I feel incredibly bad about that. But anyone who is close to me, you know, including my parents, including employees, co-workers who, you know, fought with the company to, to push forward, were hurt by this and bore no responsibility for that. I feel really bad about that. And, I mean, I feel really grateful for the support my parents are still giving me, you know, throughout all of this.
ARS: Can you explain the real estate piece of this to us? I think there's been a number of headlines ...
ARS: ... as you know, about FTX the company buying a lot of real estate up in the Bahamas ...
ARS: ... where you lived, at least at the time, was owned by the company. But then there's also reports that your parents signed and were effectively provided with what seemed like a vacation home.
SBF: So, I don't know the details of that house for, for my parents, but I knew that it was not intended to be their long-term property. I know it was intended to be the company's property. I don't know how that was papered in and I think that was where it was, was – and will – end up. I think they may have stayed there while working, you know, with the company sometime over the last year. When you look at the rest of it, there were a lot of property purchases in the Bahamas. You know, the reason for that is we had, you know, 100, you know, basically 100 Silicon Valley, you know, top Silicon Valley employees come down here to work for FTX. And, you know, we were trying to incentivize that and to, you know, make sure that they had an easy way to find a comfortable life so that they'd be willing to move and, and help build out the product. And so, you know, those 100 people put together here did end up, you know, buying a substantial amount of property. And I feel kind of – I feel bad about some of how those investments may turn out for them.
ARS: Can you just speak to the idea of this company that, at least from the public perspective, seemed like a regulated company or ...
ARS: ... something that was very focused on compliance. You would go to Washington, you'd talk about compliance, you'd talk about trust.
ARS: Crypto, ultimately, is actually about trust.
ARS: It's about not having to trust others. Frankly, it's supposed to be a trustless system.
ARS: That's why you trust every – trust it so much supposedly.
ARS: But it seems like when you read the stories, it sounds like a bunch of kids who are on Adderall having a sleepover party. [Audience laughs.]
SBF: I mean, look, I screwed up. Like, I was CEO, I was the CEO of FTX. And, I mean, I say this again and again, that that means I had a responsibility, that means that I was responsible ultimately for us doing the right things and, I mean, we didn't. Like, we, we messed up big.
ARS: But there were people, though, that were telling you that you needed more compliance, no?
SBF: There were, but I, I think that compliance – we were spending an enormous amount of our energy on compliance. We were spending an enormous amount of our energy on regulation on licensure. We were getting licensed in dozens of jurisdictions. I think, frankly, we were spending probably too much of our energy getting licensed, in retrospect, and, you know, there were some places where I think that the reporting and transparency obligations from that licensure actually did help. I think when you look at, I mean, FTX US Derivatives, I think when you look at FTX Japan, which I think is fully solvent, which I think could make all customers whole tomorrow if it were – if, you know, the sort of relevant teams were to allow it to. I'm confused why it hasn't. But I, but, you know, I think that a lot of what we ended up doing and focusing on was a distraction to some extent from one unbelievably important area that we completely failed on, and that was risk. That was risk management. That was, you know, customer position risk. And, you know, frankly, conflict of interest risk. And, you know, there was no person who was chiefly in charge of positional risk of customers on FTX. And that feels pretty embarrassing in retrospect, because that was – you go back to 2019, even 2018, and ask me, why am I starting to build out FTX? What's the point of it? And what I would have said was, look, the existing crypto derivatives exchanges have large risk management failures that every day there are millions of dollars that are being lost by customers because of risk management failures that these contracts are paying out 75 cents on the dollar week after week after week because of risk management blowouts. And that, that needs to be overhauled. And that was what I was focused on for the beginning of FTX. I was not focused on that for the last year or two. I got less grounded from that and I started focusing on the bigger picture, on, you know, future business avenues on, on licensure, on a lot of things. And, I mean, we lost track of a really important part of the business and of the product. And, so, there absolutely were management failures, huge management failures. I bear responsibility for that. There were oversight failures, transparency failures, reporting, like, so many things we should have had in place. I think that a lot of it was on the risk management side, rather ...
ARS: Let me ask you about that. Which is, we had [BlackRock CEO] Larry Fink here today, and he had a stake ...
ARS: ... in FTX. And Sequoia and Paradigm and some very big venture capital firms had, had, had given you money, and I'm curious if they ever asked you questions about this risk management and whether they bear any responsibility for what clearly now appears that you're saying was at minimum a lack of oversight, if not something much worse.
SBF: I don't think that they bear responsible. I mean, like, when you look at – when you put your eyes – you put yourself in the eyes of an investor, of a venture capital firm. What you're thinking about primarily is upside. Right? What you're thinking about primarily is investing in a private company, and thinking might this 3x, might this 5x, might this even 10x on the upside cases, and, yeah, there's some chance that will go down, there's some chance that maybe it will go down to zero. But that's counterbalanced by the upside propositions here. And so most of what they were focused on was, you know, I think, like, what might FTX become, what's the pathway to get from here to there, you know, what would it take? What are the missing pieces? You know, rather than, you know, at the point where you're dwelling on all of the various precise downside scenarios and risks for a prospective venture investment, that means you're not investing. Like, if that's where your head's at, you know, if you think the odds are that that's where things are going to end up, why, why would you do that investment?
ARS: Can I ask you about the drugs?
ARS: You, you have tweeted about it. Caroline has tweeted about it, others have tweeted about uppers and downers ...
ARS: ... and all sorts of things. There have been pictures taken of something called Emsam ...
ARS: ... which apparently increases levels of dopamine to the brain to – actually for Parkinson's. Were you taking that? It's a patch.
SBF: So, I, it's, it's funny hearing this. I, I had my first sip of alcohol after my 21st birthday, and I think I, I have maybe half a glass of, of alcohol a year, roughly speaking. There were no wild parties here. When we had parties, we played board games and, you know, 20% of people would have three-quarters of a beer each or something like that. And, you know, the rest of us would not drink anything. I didn't see any illegal drug use around me, you know, at the office, at, at these parties. Like, and, and, and, and when I say parties here, I mean, like, you know, having people over for dinner is what that meant. And, look, I can't talk about anyone else, like, you know, what they're prescribed is between themselves and their, their, their doctors or psychiatrists. I can say for me, I don't know, like, I, I have been prescribed various things at various times to help with focus and concentration. I, and, I think they have done that. I haven't felt any of, you know, the sort of impacts that I think people have been theorizing here from it. And it's not a huge impact, you know, in the first place, anyway. I think, you know, these have all just been totally on, on-label use of, of medications. And, you know, I think things that have on the margin helped me focus a little bit. I wish I had been a lot more focused over the last year.
ARS: I may have been unfocused in this last moment because I actually wanted to follow up on the question when we're talking about venture capitalists.
ARS: Sequoia and Paradigm invested in you. But there have now been questions about the fact that you invested in them, and whether these were what some people describe in the business, round-trip deals. Can you speak to that?
SBF: I mean, I think well after they had invested in FTX, and I don't know the details, but I think there may have been a small investment into some of their funds. I think, you know, it was something that we did because – and I would believe in what they're doing, it seemed like a, a good opportunity. And didn't think too much about it.
ARS: I'm curious just on a very personal level, because we are close to ending this conversation, to the degree that there's been a lesson in this and that what you see as your future at this point. I know you're taking it day to day, obviously.
ARS: And I know you're an optimist as well. We've talked about that.
ARS: But what do you think realistically is your future?
SBF: So, what is my future? I don't know what my far future is. And, you know, when you fast forward, I have no idea what I'm gonna be doing, you know, a long time from now. I think when I look at, you know, the near- and medium-term, what am I thinking? What I'm thinking is – and, again, I don't know what's going to happen. And a lot of it's not my hands at this point. But I want to be helpful wherever I can to regulators, administrators, you know, internationally, who are working to, you know, 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. And, you know, I don't know where that will lead. I can say that prior to filing, there had been a lot of interest in, in financing. A lot of fairly strong interest, you know, many billions of dollars' worth. I don't – I can't make any promises about anything, but I, I would have thought that there would be a chance for a pathway forward here that would bring more value to customers than what would happen if you just sort of sold everything off for, you know, scraps, and I don't have confidence. I, I can't promise you – I can't promise anyone anything there, and it's not really in my hands to a large extent. But, but I would think that it would make sense to be exploring that, because I, I think there's 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.
ARS: How would that happen?
SBF: So, you know, there have been examples of this before in crypto history where that happened. Obviously, you can look at what happened with Bitfinex back a number of years ago where it got hacked and then ended up making, over a few-year period, customers whole. There are a lot of assets that are on hand here, although many of them are not liquid. They were worth quite a bit more than the, you know, liabilities a month ago, even, a lot of them a year ago. You know, there's – at least a month ago, there were, you know, or, I guess, you know, three weeks ago, billions of dollars of potential funding opportunities. You know, I don't know that it would have been great for my stake as a shareholder of FTX. But that's not what matters here. And I think it would have brought more financing to customers. You saw, obviously, you know, the TRON facility which was open for a little while on FTX, which allowed some customers to get liquidity. And, you know, you put some of these together. You know, there's obviously, you know, equity in the business. Where's that lead? I don't know exactly. And, again, it's not going to be my decision to make at the end of the day, but I, but I think there's a shot for a real value.
ARS: Sam, we're gonna have to wrap up, and a couple of just quick other questions.
ARS: One is, given what you know about compliance, or the lack of it in this business
ARS: ... in this industry ...
ARS: ... I think there are a lot of people who are holding crypto today, perhaps on exchanges like Binance and other places.
ARS: What should they think, given what you do know and to the extent that you can tell us the truth about what you know?
SBF: What should they think? And, and, I, I presume you're asking, what should they think about the safety of their assets going forward?
SBF: Yeah. So, look, I don't – I obviously don't know exactly what's going on at other exchanges. I can tell you what I would think as a customer, you know, if I were a customer here, which is: Look for the things that I wish FTX had been able to supply, things like proof of reserves is helpful. Look for as rigorous of that as you can. Look for regulatory reporting, right. You look at what the [Financial Services Agency] had in place in Japan. You look at what FTX US Derivatives had with, you know, sort of frequent reporting to regulators of exactly what, you know, customer assets, balances, liabilities, distributions are. And ...
ARS: What about the governance piece?
ARS: What about the governance piece, because one of the things we have not talked about, is you had no board and you had no CFO. And that should have been a red flag, frankly, for all of us.
SBF: So, interestingly, in some ways, we had too many boards, we had ...
[Sam Bankman-Fried's video cuts out, but is then restored within a minute.]
ARS: Sam, thank you for coming back. We were in the middle of the conversation about no board, no CFO, and you said something which I think raised a lot of eyebrows here. You said you thought you had too many boards.
SBF: Yeah. And can you hear me here?
ARS: Yep, we can all hear you.
SBF: Cool. So, we didn't talk about it much but there's a board of FTX Japan, there's a board of FTX US Derivatives, FTX Australia, FTX Singapore, FTX Europe. You know, we had, I think, more than a dozen boards, when you look at all of the entities put together. And, you know, many of these boards had regulatory functions. I think the problem to some extent was, OK, sure, you have all these boards. But at the end of the day, when push comes to shove, who's the person who's in charge of global – or the board or, or, or the function that's in charge of, you know, global site, customer risk management. Like, you know, there's a diffusion of responsibility to some extent on that front. And, you know, there needed to be, I think, a single or a small set of entities, whether – of boards, people, of responsible parties that were sitting there saying, "I feel responsible for what happens on FTX." And, you know, we had, we had actually audited financials. From the FTX finances perspective, we had infrastructure, but from the customer risk and finances perspective, much less.
ARS: Sam, how much money do you have left at this point?
SBF: I mean, to my knowledge, like, close to nothing.
ARS: What does that mean?
SBF: I mean, everything was just in the companies. I mean, it's ...
ARS: You didn't put away some money?
SBF: No, no, I, I don't have any, you know, hidden funds here. Everything I have, I'm disclosing and, you know, I'm, I'm down to – I think I have one working credit card left. I think it, I think it might be $100,000 or something like that in, in that bank account. And, I mean, I, you know, everything that I had, even all the loans I had were, those, you know, those were all things that I was reinvesting in, in the businesses that – I had put everything I had into FTX.
ARS: I want to ask you two final questions. Were you truthful with us today?
SBF: I, I was as truthful as, as I, as, you know, I'm knowledgeable to be. There's, there's some things I wish I knew about more. But, yes, I was.
ARS: So let me ask you this. Do you agree that over time you also lied?
SBF: Do I believe – do I agree that I lied? I don't know of times when I lied. I think, look, there are certainly times when I was acting as a, as a representative, as a marketer for FTX and when I was looking for how can I, you know, in a way which is truthful, but, you know, paint FTX as, you know, compelling a way as possible, as exciting and optimistic a way as possible. And, you know, I wasn't thinking about – I wasn't talking about what are the risks involved with FTX, you know, there. I obviously wished that I had spent more time dwelling on the downsides and less time thinking about the upsides.
ARS: Sam Bankman-Fried, I want to thank you for this interview. I hope that some of the answers have been helpful as we've tried to understand and untangle what is a still-tangled story. Sam, I know that this has been a difficult conversation and a tough conversation. And on behalf of everybody here and on behalf of the public, I want to thank you for engaging in it at a time, in truth, when I know you've been advised not to, so thank you so very, very much. Thank you.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.