In the wake of the cryptocurrency exchange FTX’s spectacular implosion, a lot of unseemly details about co-founder Sam Bankman-Fried have been revealed—ones that never appeared in the many, many examples of adoring coverage of the onetime crypto boy wonder in recent years. It’s all fallen in tandem with reports on how his business was just a tad sketchier than it seemed: reporting essentially valueless coins as actual assets, using billions of dollars in FTX customer deposits to prop up his other crypto business, and neglecting proper financial disclosures.
From the rubbles of his crypto empire, SBF has repeatedly admitted that he “fucked up.” While we don’t yet know what the actual legal implications of this mess are, or who exactly bears the most blame, it’s clear that confession is a bit of an understatement.
It’s a hard fall for a once beloved titan. You don’t have to look back far to observe how far we’ve come from the way Bankman-Fried used to be perceived: as a wealth-generating wunderkind, a political force, a “phenom” who’d earned “the respect of a lot of investors,” and a solid dude whose professed goal to raise billions of dollars for good causes was “for real.” The slightly disheveled, perma-casual figure he cut was appealing: raised by an academic family, earnestly dedicated to “effective altruism,” interested in working with government to regulate crypto and prevent future pandemics, liked video games. As his industry hit the mainstream, garnering both intense mass interest and widespread skepticism, SBF presented himself as the one bro you could trust. If crypto was going to change the world, this shorts-wearing, hoodie-donning philanthropist was the guy who very well could determine how.
Well, he certainly did do that, though not in the way he or any of his fans expected. In the weeks since his artificially valued crypto empire began to crumble, Bankman-Fried has been telling on himself in some rather, well, interesting ways. When the crypto outlet CoinDesk got ahold of a balance sheet from his trading firm, Alameda Research, on Nov. 2, he dismissed the eye-opening findings as a misleading depiction of his business; when the CEO of a rival crypto exchange also undermined his position, Bankman-Fried insisted that his “assets are fine” before retracting that statement the next day. Then, when he finally admitted FTX’s international operations were not fine, he insisted its U.S. outpost was still functional—before filing for bankruptcy for even that business, along with Alameda and FTX’s international operations. (Notably, he also tried to dismiss concerns that Alameda, his hedge fund–style crypto trading company, had improper ties to FTX, the crypto monetary exchange he built and led. That’s proved not to be the case in the slightest.) The self-contradictions, doublespeak, cagey tweets, and blame games haven’t ended, and they’re painting quite a different picture of SBF as businessman, ethicist, and even gaming enthusiast.
So, what’s the story of Sam Bankman-Fried now, as he and others have told it over the past month? Let’s look at what he’s now saying, what else has been revealed about his empire, and what we should really make of this dude.
The Ineffective Altruist
The big selling point for SBF as sensible crypto magnate was his supposedly generous intentions. “I wanted to get rich, not because I like money but because I wanted to give that money to charity,” he said in a January 2021 YouTube video. As an effective altruist, he wanted to raise as much money as possible through FTX so he could direct it to specific causes like pandemic preparedness, to “forward-looking” political candidates, and to the “world’s most effective charities.” Crypto just happened to be the most efficient available tool at his disposal, as he told Forbes in a glowing October 2021 profile (though even that piece noted that SBF’s actual donation-to-wealth ratio at the time made him one of “the least charitable members of the Forbes 400”).
You don’t have to be a hater to doubt the effectiveness of such a life motto. As Osita Nwanevu once summarized it, “The whole project is to channel unequally distributed wealth through individuals kind and intelligent enough to use it properly,” creating, in essence, “a class of middlemen with more wisdom and sobriety than the rest of us.” Still, it was perhaps understandable to give SBF the benefit of the doubt there—at least, until now. In DMs with Vox reporter Kelsey Piper that the news site published on Wednesday, he appeared to dismiss his own altruism, writing that “in the future, I’m going to care less about the dumb, contentless, ‘good actor’ framework. What matters is what you do—is *actually* doing good or bad, not just *talking* about doing good.” When asked whether his ethical evangelism was “mostly a front,” he responded: “yeah. I mean that’s not *all* of it. but it’s a lot.”
Even if we are to set aside the public presence and take his monetary actions into account, it doesn’t seem like there was that much good. Yes, SBF channeled plenty of money into a philanthropic foundation that reports total donations of up to $190 million. But, as revealed Thursday in FTX bankruptcy filings, SBF channeled way, way more money—we’re talking billions—of his proceedings to himself, to his fellow FTX execs and employees, from one of his crypto businesses to the other and vice versa, and to housing in the Bahamas. So much for finding it “hard to spend more than millions a year in an effective way on yourself,” as he told Yahoo in April.
Some of his much-vaunted political donations were a little weird as well, considering that he broke the record for spending in a political primary to back a fellow “effective altruist” and “biosecurity expert” who lost that race. Not to mention, some of the very politicians he donated to seemed to talk quite a bit more about crypto than they did pandemics. The recipients who did speak on the pandemic included a former adviser to the Trump administration, which didn’t exactly have a stellar pandemic response. Contagion preparedness, which has been undermined by government austerity, is certainly a noble and necessary mission. But even pandemic experts had their doubts of SBF and his brother, a former congressional aide and current head of a pandemic-prevention nonprofit, when witnessing them in action. As one of them told the Washington Post, “I didn’t get the sense they were that sophisticated or had a clear vision of what they wanted to do.”
The Business, Man
“I got involved in crypto without any idea what crypto was. It just seemed like there was a lot of good trading to do,” SBF told Forbes. In hindsight, that inexperience certainly seems to show.
For one, some anonymous FTX workers told CoinDesk last week, “the whole operation was run by a gang of kids in the Bahamas,” some of whom lived together in fancy digs. The report further noted that “many are former co-workers from quantitative trading firm Jane Street, others [whom SBF] met at the Massachusetts Institute of Technology, his alma mater.” Bankman-Fried’s latest justification for this was that “Realistically speaking, I don’t think anyone can maintain close contact and close communication with more than 15 people.” One of Bankman-Fried’s fellow Bahamians was an ex-girlfrend and former Jane Street Capital colleague named Caroline Ellison—who became CEO of Alameda and, true to form, was dismissing CoinDesk’s balance-sheet report not too long ago. (SBF now appears to be blaming her for how the implosion went down.)
Maybe not the kind of group you’d want overseeing your investments—that is, if they were watching them with any sort of care. Per the New York Times, two investors who’d met with Bankman-Fried before the fall said that the crypto boss had told them he’d “planned to run [FTX] with little oversight,” even though he considered it “his company.” Other investors told the Times that “they had properly researched the company’s financials, which showed a healthy, growing business.” In fairness to those anonymous money-givers, we only now know the extent of SBF’s deceit, thanks to the leaked Alameda balance sheet as well as the recent bankruptcy proceedings, in which FTX’s bankruptcy CEO declared that the company’s books demonstrate a “complete absence of trustworthy financial information.” (Notably, the guy who said this is the same executive who cleaned up the whole Enron mess.) Such financial impropriety includes the failure to: designate outward loans as loans, properly measure customer liabilities, or make clear to outsiders the links between Alameda and FTX.
It turns out, when you do some proper accounting on this cash, you may find that FTX’s actual value is far closer to the hundreds of thousands than to the much-celebrated billions.
The new reports are quite shocking, but an intrepid follower of SBF may have noticed several red flags over the years. The aforementioned Times report includes stories about how SBF presented careless pitch decks, gave investors no means of insight into FTX operations, shunned outside advice to appoint a more experienced exec to run the show, and limited control of the company strictly to himself, a colleague, and an unnamed lawyer. If the interested parties had more say, they may have noticed that SBF was transferring assets between Alameda and FTX in an improper way, without letting either investors or consumers know about the backdoor ties he’d set up. As recently as this week, SBF was meeting with investors to beg for a bailout, but remained maddeningly unclear about the size of his companies’ financial holes. It was the same case with a New York Times interviewer who asked about the financial codependecy of Alameda and FTX.
So, there was oversight—just not the type that would “protect consumers,” as SBF continues to say is his goal. That he might not be looking after their interests was obvious in April, when SBF went on Bloomberg’s Odd Lots podcast and proceeded to discuss a practice called “yield farming” with Matt Levine and Joe Weisenthal. Levine responded, “You’re just like, well, I’m in the Ponzi business and it’s pretty good.” What did SBF say? “I think that’s a pretty reasonable response. … That’s one framing of this, and I think there’s like a sort of depressing amount of validity.” Oh?
The Benevolent Savior
For someone who professed not to be a crypto devotee, who swore he was just earning to give, SBF had quite the interest in trying to preserve the crypto economy. When crashes began hitting the industry this year, SBF wanted his FTX exchange to act as a lender of last resort, establishing deals to acquire flailing crypto companies like Bitvo and BlockFi, and employing both Alameda and FTX (hmm!) to bail out the troubled crypto firm Voyager. He stated publicly that this was just a “responsibility” on his part.
But this was always a less generous story than he made it seem. Let’s go back to June of this year, when the crypto lender Celsius Network buckled under the pressure of plummeting cryptocurrency prices and helped set off shockwaves throughout the rest of the industry. The Dirty Bubble Media newsletter reported a month later that Celsius was receiving “unsecured loans” from Alameda as well as from a separate offshore trading company whose CEO formerly presided over the Centre for Effective Altruism—where Bankman-Fried previously worked—and claimed to have co-founded Alameda. Meanwhile, Alameda was also providing millions of dollars to Celsius. Last month, Dirty Bubble noted even more weird links between SBF’s biz and Celsius: It turns out that Celsius was artificially propping up the values of its own in-house tokens and stablecoins through trades on FTX, and the two companies continually swapped assets before Celsius imploded. Alameda, of course, was providing that Celsius a credit line throughout. Shades of the other weirdness that was going on within FTX, certainly.
Politics as Usual
The FTX collapse has brought a lot of government scrutiny upon SBF: legal tangles between Delaware, New York state, and the Bahamas; a stateside congressional hearing and possible summons; several probes from the Securities and Exchange Commission, the Justice Department, and the Commodity Futures Trading Commission; intervention by financial authorities in the Bahamas, Cyprus, Japan, and Indonesia; and a state-level investigation in California that adds to ongoing regulatory actions by the crypto-friendly region of Texas.
So, now that SBF is actually dealing with the feds, is he actually “working constructively” with them as claimed? A lot of accounts imply otherwise.
In his DMs with Vox’s Piper, he appeared to admit that his rhetoric about “want[ing] to make regulations, just good ones” was all bunk: “yeah just PR. fuck regulators. they make everything worse.” He further stated that his “single biggest fuckup” wasn’t how he conducted business at FTX and Alameda—it was actually filing both companies for Chapter 11 bankruptcy. “everything would be ~70% fixed right now if I hadn’t,” he wrote. “if I hadn’t done that, withdrawals would be opening up in a month with customers fully whole. but instead I filed, and the people in charge of it are trying to burn it all to the ground out of shame.” He also claimed he could fix things if “we can win a jurisdictional battle vs Delaware,” alluding to the federal government’s efforts to take him to court on U.S. soil instead of his Bahamian home.
In a series of tweets he posted after the Vox report, SBF seemed to back off a touch from his hostility toward government.
Venting in the DMs out of frustration is an all-too-relatable impulse. But, in contrast with what he tweeted, his continuing actions demonstrate an apparent disregard for the regulatory process. In Thursday’s court filing, FTX lawyers claimed SBF was actively undermining their attempts to restructure his former company through “incessant and disruptive tweeting,” similar to the current FTX CEO’s characterization of said tweets as “erratic and misleading public statements.” Several legal experts told CoinDesk that it’s likely any of these statements—from his early reassurances as to FTX liquidity through his asset measurements—could “show up in litigation,” and that he probably did not vet them through a lawyer.
The Games We Play
Though this is hardly the worst of his sins, something worth noting is the continuous appeal of SBF’s casual persona—he never dressed fancy, he played it cool while pitching ideas, and he played League of Legends during important meetings. Cool multitasking, sure. The funny thing about this, as the Financial Times reported, is that SBF doesn’t seem to have been all that skilled of a gamer, having played more than 1,000 matches of LoL without ever surpassing the second-lowest skill tier, and scoring a below-average win ratio. Many gamers were quick to point out that Rep. Alexandria Ocasio-Cortez had a far better rank in the game, despite presumably spending much less time with it than SBF did. Maybe the VCs who were so wowed by his in-meeting gaming should have taken a closer look at … well … the actual numbers.