FTX founder Sam Bankman-Fried spoke to reporter Andrew Ross Sorkin today from an undisclosed location in the Bahamas ahead of a DealBook event, a discussion his legal team “very much disapproved of,” he told Sorkin with a boyish grin.
Now that we’ve seen the live-streamed interview, we’re still wondering if he’s believable.
Throughout the back and forth conversation, Bankman-Fried sounded almost studiously amateurish, insisting he was not knowingly mixing money between FTX and the trading firm he controlled, Alameda Research, where the exchange has since been discovered to have been funneled. $10 billion in client assets to Alameda for use in trading, lending and investing activities.
While between $1 billion and $2 billion appears to be missing, and while corporate executives reportedly set up an accounting “back door” to avoid red flags, Bankman-Fried said when Sorkin asked about the outfits’ dependence on each other, he said ” frankly surprised by how great Alameda’s position was, pointing to another failure of oversight on my part, and failure to put someone in charge of it.
Bankman-Fried even used “oversight” nine times, while appearing to blame others. When asked if he should have taken money from FTX’s user accounts at all, he pointed the finger at Alameda and said, “I wasn’t running [it], I wasn’t quite sure what was going on. I did not know the size of their position. A lot of these are things I’ve learned over the last month and learned while digging frantically into this. Obviously, he added, ‘that’s a pretty big mistake. I mark that as a pretty big mistake that I was no longer aware of.
At many times during his back and forth with Sorkin, Bankman also came across as delusional. He said that before FTX filed for bankruptcy – a move he reluctantly approved four days after it was first proposed – “There was a lot of interest in financing [FTX]. A lot of pretty strong interest, you know, worth many billions of dollars.
It really didn’t look like it on the outside(!). There was no interest from Binance, as was well documented. There was no interest from his scorched backers, whom Bankman-Fried, by the way, spared in today’s interview. (When asked by Sorkin if “Sequoia Capital, Paradigm and some of the very large venture capital firms” that financed FTX ever asked Bankman-Fried how much risk he was taking and “if they bear any responsibility,” he replied, “I don’t know. I don’t think not that they are responsible…the most they were focused on was…what could FTX become…’)
Indeed, in many ways today Bankman-Fried acted very much like someone who doesn’t understand that his future has changed dramatically and instead believes he can still steer the outcome of FTX despite being forced to resign . (The new CEO of FTX, a specialist in corporate turnarounds, has given Bankman-Fried’s stewardship a “complete failure of the company’s control.”)
He talked about “a lot of assets that are at hand [still at FTX], although many of them are not liquid. They were worth much more than the new obligations of a month ago, even much of a year ago. Bankman-Fried relatedly suggested that he has not accepted that his clients will lose everything.
Towards the end of the interview, he said, “I can’t promise you anything and I can’t promise anyone anything, and it’s not really in my hands to any great extent.” But I would think it would make sense to explore [a pathway forward] because I think there’s a chance that customers would become much more complete — I don’t know, maybe even completely complete — if there was a really strong, concerted effort.
It was such an odd display that we wondered why some of the most sophisticated investors in the world – assuming they bet on Bankman-Fried in the absence of hard statistics – put him on a pedestal in the first place.
Sure, he’s “had a bad month”, as he himself put it, to the laughter of the audience. Yet it is equally likely that Bankman-Fried and his circle argued that he was simply incompetent, head over heels, and never deliberately engaged in artifice.
It makes a big difference. U.S. prosecutors can bring a civil suit against someone accused of incompetence or negligence, and that person could face significant financial consequences. But if it is proven that a person has been scheming to deceive others, then fraud crimes are on the table, which also means imprisonment is on the table. It’s a much bleaker picture.
The US law firm in Manhattan has reportedly already launched an investigation; the SEC and the Justice Department are, of course, too snooping around and trying to determine whether Bankman-Fried’s maneuvers were intended to deceive or were instead an astonishing series of blunders.
It is tempting to conclude the former, that Bankman-Fried made his decisions knowingly. But it was quite an achievement today if so.