SBF Interview on NYTimes: What we learnt so far?
Ever since the collapse of FTX, the crypto exchange platform that was on its way to becoming the largest exchange globally, the industry has seen a turbulent time. The people have been looking for answers, and looking for the answers specifically from Sam Bankman-Fried, the CEO of FTX and Alameda Research. On the 1st of December 2022, the New York Times released their live interview with Sam Bankman Fried. Conducted by journalist, author, and financial columnist Andrew Ross-Sorkin, this interview was the first by SBF post the downfall of his empire. Through the more than an hour long interview, Sam Bankman addressed various questions, issues and allegations. In this article, we will summarise for you everything that was said in the interview and the key takeaways.
What we are going to learn?
SBI Interview on New York Times: The Consequences Discussed
Andrew Ross-Sorkin started the interview by highlighting for the audience the ripple effects caused by the debacle that was seen in association with FTX this November. He described how SBF went from being a billionaire to having a net worth of almost nothing. The 32 billion dollars worth company FTX, has declared bankruptcy. Bitcoin saw the effects of this fall and it saw its lowest price in two years. BlockFi, the cryptocurrency firm that was very closely associated with FTX, also filed for bankruptcy.
As SBF joined the interview virtually from the Bahamas, he was posed with the question that asked whether what happened was the result of consecutive terrible mistakes on his part or that the entire empire was a Ponzi scheme and SBF had in fact committed fraud. SBF answered by taking accountability. He said that being the CEO of FTX it was his duty to execute a lot of responsibility and care for the stakeholders as well as the customers, investors and employees, but he failed at doing so.
SBF clarified that the intentions of fraud were absolutely untrue. A month ago he was “excited about the prospects of FTX” and saw it “as a thriving growing business”. The happenings of the last month were unexpected and shocking for him and he looked back at the things he could have changed and done differently.
What were the Details on FTX US?
Sam claimed that to his knowledge US platform of FTX was still fully solvent and funded and was of the opinion that withdrawal on FTX US could open extremely soon. When it came to the international platform, he agreed to Alameda Research having a long position and said that a year ago it had only approximately 10% leverage. Through the course of last year, in the face of multiple market crashes, which contributed to plummeting the value of the asset and took up the leverage. He said that the happenings of the last month in addition to the “ all-out PR assault”, cause a quick and complete market collapse which didn’t leave FTX with the capability to “ liquidate either position”.
When asked about his statement “On FTX US Derivatives, all of these contracts are fully collateralized”, made to the Senate in February 2022, SBF said that it was true and even now FTX US is completely solvent in his opinion. In fact, he said that he was unsure why the FTX US platform was not issuing withdrawals.
What was the Interconnection between Alameda and FTX?
Andrew went ahead and asked the main question which was where did Alameda in fact get the loan and whether was there any co-mingling of funds. Since a clause in FTX’s terms and service prohibited the platform from considering the users’ assets as their property, it didn’t seem possible that Alameda could have such a huge loan. SBF clarified this by implying that apart from that clause, there were many parts in the terms and service, the borrow lending facility, the futures positions etc that allowed FTX to “Margin Call” the positions as and when required to cover any liabilities. That’s where SBF failed in terms of risk management and oversight.
He said that he didn’t knowingly co-mingle any funds that belong to FTX customers and that he was surprised at seeing how big Alameda’s position actually was. Alameda’s account dashboards apparently underrepresented the size of the position and that the firm was substantially tied to FTX more than he wanted it to be. He used the words “in effect if not in intention” when describing the alarming proximity of his two firms.
When did SBF Recognize there was Any Problem?
SBF said that it was on November 6th that he realised that there some a problem, and that too was when a tweet about FTT came up and that’s when they started putting up the data together. Sam Bankman Fried was nervous about potential losses for Alameda when the CoinDesk report came out on November 2nd and didn’t think it would affect FTX substantially. By November 6th his concern grew regarding whether or not FTX will be able to fill customer withdrawals.
Another question posed was regarding his tweet on November 7th. The tweet went as follows, “FTX has enough to cover all client holdings. We don’t invest in client assets, even treasuries. We’ve been processing all withdrawals and will continue to be.” To this SBF said that at the time things were moving incredibly fast and new updates were coming in every minute. On November 6th he was hopeful that there would be a possible fix to the situation, but by November 8th he had a feeling that the odds of meeting client demands were bleak and was worried about an impending liquidity shortfall. He said that he can’t remember what he was thinking at the moment but nevertheless November 7th was a transition day, and he remembered feeling conflicted about the situation.
Further questioning led Sam Bankman Fried to let people know that FTT, Solana and other tokens were being used as collateral, but for Alameda, these tokens were not being marked as they should have been for risk prevention. In his exact words, he said, “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”
What was the Connection with BlockFi?
Earlier this year FTX bought BlockFi and made investments in Voyager. Due to this many individuals do wonder whether he was doing this in order to pump the value of FTT tokens, because if firms like BlockFi would cease, then FTT would collapse and so would the “collateral” for Alameda Research. SBF said that from what he knows, none of these borrow-lending desks like BlockFi had ownership of a lot of BlockFi. He believes that the forms were using FTT as collateral and eventually did end up closing their lines with Alameda Research. And so he didn’t view these companies and their downfalls to have any impact on FTT at all. Hence his investments and purchases were primarily t make sure that the industry stayed stable.
What was SBF’s involvement in Alameda and Genesis deal?
SBF had told regulators as well as investors that he had no say or co-relation in the decision-making process at Alameda, and yet when Alameda invested $1.15 billion in Genesis Digital Assets, he was on the board of Genesis Digital Assets. When asked about this SBF responded that he was involved with venture investing which was taking place as a separate entity and was consulted on some of Alameda’s VC investments.
He believed that in August Genesis called in for many loans from Alameda Research which led to the closing of the firm’s open positions with Genesis which could have potentially increased position size of Alameda on FTX.
SBF also informed upon asking that after Venture capitalists Sequoia and Paradigm invested in FTX, there could possibly be some small investment made into their funds.
What Legal Aspects are SBF’s concerns?
Sam Bankman also has said that his lawyers have advised him to not give any interviews and stay silent, however, he believes he has a responsibility and owes answers to the people.
When it comes to the criminal standpoint, SBF did remark that in his opinion there is no criminal liability. However, he is not really focused on that right now. He says he is focused more on the millions of customers and the stakeholder at this point.
He also refused to have consumed any illegal drugs as alleged by many rumours and any medication that was prescribed to him has not had the kind of impact people are assuming.
What were SBF’s Donations and Alleged buying of influence?
Sam Bankman Freid had in the past made several donations to the Democratic Party and was also accused of lobbying against other members of the industry to push for regulation. SBF clarified that there were no applications before the congress put up by FTX, and the donations were made for pandemic prevention. He said “I wasn’t viewing it as a partisan exercise.” and that the money for these donations was coming from the profits which were “substantially smaller than the number of trading profits that Alameda had made”.
SBF had also invested in a lot of media companies which begged the question that whether this was done to buy some influencing power. Sam cleared that he had made these investments as support to good media ventures. He wasn’t looking at the investments as governance opportunities but in fact, a way to back good journalists.
What is SBF’s future According to him?
Sam said that he cannot say what holds in the future for himself. There is not a lot that is in his hand at the moment but does wish to be helpful to regulators, administrators, and FTX customers in whatever way possible. He also said that currently his monetary situation is close to nothing and has hidden funds here. SBF claimed that he has only one working credit card left and around 100,000 in that bank account.
Public Reactions and Key Takeaways
Throughout the interview, one thing that remained constant and repetitive was SBF mentioning how he doesn’t have access to such data. Also, his primary and sole justification was the lack of foresight and a lapse in judgment on his part. Post the Interview, Sam Blackman Fried received some backlash on Twitter. Many people called the entire interview to be “tone-deaf” and a “train wreck”. Many people considered his justification of “ underestimating the risk” as very irresponsible and a sheer cop out.