WHAT HAPPENED? Sam Bankman-Fried on FTX In His Own Words

At this point, you have probably absorbed, directly and indirectly, more than enough information on Web3’s disgraced hero, Sam Bankman-Fried (SBF) and his currently insolvent businesses, FTX FTT/USD and its sister company, quantitative trading firm Alameda Research. Yet the story continues to unfold well beyond the investigations underway by the US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ).

The new FTX CEO John J. Ray III, who was hired last week after Bankman-Fried stepped down and FTX declared bankruptcy, wrote in a statement, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” 

Stories like FTX/SBF are discussed on Benzinga’s Crypto: Open Mic panel discussion series on Twitter spaces. Spaces have featured industry leaders and experts who will appear at the Future of Crypto Summit on December 7th in NYC.

Unfortunately, this debacle has been painful for the greater crypto world. In the week since the FTX revelations began, Gemini has had $682 million in net outflows. Crypto.com released a snapshot of its reserve, and instead of admiring its transparency, users questioned the transfer of $400 million in Ethereum ETH/USD to what seemed to be a mistaken address.

Solana SOL/USD has suffered quite a bit since the FTX revelations. The SOL token lost 95% of its value, from $259.96 to under $13, at the time of writing. Binance BNB/USD, the largest cryptocurrency exchange in the world, temporarily suspended USDT and USDC deposits on Solana, though trading resumed after a few hours. 

Binance formed a crypto industry recovery fund to help other blockchain projects weather the storm. Binance founder and CEO Changpeng Zhao tweeted, “To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis. More details to come soon.”

Benzinga has been covering the latest developments since the SBF story broke, and given the depth of coverage already given to the events, here's a look at SBF’s perspective through the many direct comments he has made during the FTX meltdown. All of these have appeared on social media, whether SBF intended them to or not. He is very clearly aware that the Web3 world is listening, so let’s look at some collected comments from the man behind the disaster. 

November 10, 2022

Cobie, the co-host of podcast Uponlytv posted the first leaked slack posts from FTX. At this point, we can see Bankman-Fried is relatively relaxed. He apologizes to his staff and announces their intent to do a new round of fundraising. This is the pointedly “nice” version of SBF the public has seen during his rise to prominence. 

The customer is said to be #1 here, but no time is spared to spell out what is at stake for their clients and the extent of the damage. It seems in some ways a rehearsal for his public statements made the same day, which were also preceded by apologies but steered away from substantive plans. 

November 15, 2022 - SBF Trolls On Twitter, Breaks “Mob Mentality”

This week, over the course of 24 hours, SBF tweeted a series of single letters that put side by side spell out, “What Happened.”

A provocative question considering there are over one million account holders owed money by FTX, which has filed for bankruptcy protection. 

If a bit of Twitter trolling seems tone-deaf for someone suspected of misconduct with so much of other peoples’ money, an undisclosed employee on FTX Slack felt the same way and said so shortly after the tweets above.

In two screengrabs, purportedly from the FTX Slack, and provided to Twitter account @AutismCapital, an unnamed employee asked in apparent frustration: “Why is Sam trolling on Twitter as though this isn’t a serious situation?!?”

Bankman-Fried responded: “I’m sorry! Maybe it’s wrong. I took that approach because something needed to break through the mob mentality, but I’ll likely be more straightforward going forward.”

It’s questionable what “mob mentality” SBF was referring to – perhaps the reaction from people who have been financially hurt by FTX. Another FTX employee also had opinions about SBF’s attitude. 

“Sam, respectfully, this is not helping. Nothing broke through the mob mentality. In fact, your tweets just made people more mad that you had the audacity to tweet something cryptic when people’s lives have been destroyed.”

“You tweeting ‘what happened’ in 10 tweets spread out over 24h is just peaking everyone’s anxiety in addition to the money that they have lost.”

November 16

It's not clear who SBF has around him on payroll, but it appears no one in his inner circle stopped him from recently doing an interview with Vox which put him in a less-than-favorable light.

Excerpts include SBF’s candid feelings on ethics:

The Vox journalist, Kelsey Piper, asked SBF:

 “So, that ethics stuff - mostly a front? People will like you if you win and hate you if you lose and that’s how it all really works?”

SBF: “Yeah. I mean that’s not ‘all’ of it but it’s a lot. The worst quadrant is ‘sketchy + lose’. The best is ‘win + ???.’ ‘Clean + lose’ is bad, but not terrible.”

An article that appeared in The New Yorker less than 3 months ago, establishes SBF’s relationship with the Center for Effective Altruism. SBF discusses with the reporter how he’d like to give all his money away, at least at a rate of $1 billion/year, if he can find the right charity. 

Perhaps SBF will now have time to find the right charity to support – most likely through volunteerism.

SBF’s recent support for a clear regulatory framework for crypto also seems to have been less than sincere.

SBF stated simply: “F**k regulators. They make everything worse. They don’t protect customers at all.”

In December 2021 and February 2022, Bankman-Fried’s testified to Congressional committees and met with regulators. In his February testimony, SBF said: “FTX is committed to improving the lives not just of our customers through superior products, but also the lives of those in the broader global community.”

SBF will likely be invited again to speak before Congress. The House Committee on Financial Services recently announced a December hearing to investigate the FTX collapse. 

The official FTX account stated: “Mr. Bankman-Fried has no ongoing role at @FTX_Official, FTX US, or Alameda Research Ltd. and does not speak on their behalf.”

Conclusion
Bankman-Fried is an avowed consequentialist - a system of beliefs that suggests you should judge whether an action is right based on its consequences. A more common way to put that is, “the ends justify the means.”

In what has been criticized as a whitewashed interview with the New York Times just a few days ago, he was reconciliatory and still “on-message” playing the same distractible, charmingly eccentric, youthful, brooding, genius, man-boy he’s played through his rise to stardom. But even in the NYT interview, SBF wasn't completely on key.

It appears Bankman-Fried has entered the quadrant he mentioned in his Vox interview was the least desirable – “sketchy + loser.” It should be noted that in his NYT interview, the FTX founder said he sleeps just fine.

*Cover modified from image by Gerd Altmann from Pixabay.