A severe lack of oversight led to the downfall of FTX - Sam Bankman-Fried
(Kitco News) - Former FTX CEO Sam Bankman-Fried (SBF) admitted that he was acting against his lawyer’s advice during his interview yesterday with Andrew Ross Sorkin at the New York Times DealBook Summit, but said sitting on the sidelines is just not who he is.
The reactions to the interview have been varied, with the majority of commenters on crypto Twitter scratching their heads as to why SBF would provide incriminating statements for prosecutors. Meanwhile, some of the most prominent figures in the investing world, including Bill Ackman and Kevin O’Leary, said that they believed SBF was “telling the truth.”
Throughout the interview, SBF reiterated that he is deeply sorry about what happened and that the blame for FTXs’ collapse lay at his feet, but he had the best of intentions all along and the situation amounted to an extreme lapse in oversight.
When asked about what happened to cause the downfall, SBF said that "What it seems like happened: It seems like Alameda had margin positions opened with them (FTX)." Despite that reality, SBF said that he “didn’t knowingly co-mingle funds” and "wasn't trying to co-mingle funds."
Sorkin pushed further on the topic, asking how the funds got co-mingled without him being aware, to which Sam replied "I was failing to pay nearly enough attention." He elaborated further, saying "I was nervous about a conflict of interest," and intentionally tried to not be “too involved.”
At this point SBF really tried to distance himself from Alameda, the investment firm he founded, saying that he wasn't running it, didn't know exactly what was going on, and “didn’t know the size of their position.”
Sorkin asked SBF when he first started to realize that there was a problem, to which SBF replied, "November 6, that was the date that the tweet about FTT came out." He went on to explain that his team at FTX started to put together all the information at that time, and he started to get “nervous that that would lead to substantial losses for Alameda and that it would be a bit messy."
“By late November 6 ... I'm starting to think about emergency scenarios,” he said. "On November 7, I was feeling quite uneasy about that."
At this point, Sorkin asked SBF if he had thought about the possibility of facing criminal liability for what has transpired, to which SBF said "I don't personally think that I have ... the real answer. It sounds weird to say. That's not what I'm focusing on. There's going to be a time and place for me to think about myself and my future."
He did go on to say that he “wouldn’t be surprised if some time I am up there talking about what happened to our representatives,” referring to the possibility of having to testify before Congress.
When asked why he was out giving these interviews and not staying hidden away, he said "I don't see what good is accomplished by me, just sitting locked in a room, pretending that the outside world doesn't exist. It's not who I am. It's not who I want to be. I have a duty to explain what happened."
PR tactics and political contributions
Sorkin went on to ask SBF if he participated in deceptive PR tactics like greenwashing, to which Bankman-Fried replied "Yeah, we all did. And you know I’ve texted as well, and there are things I felt like we needed to do for the business. There are things I felt were crucial for us being able… I wish the world didn’t work this way.”
When asked about his comments about regulators and how he behaved around them, SBF said "There's a bunch of bullshit that regulated companies do to trend good. Everyone who does them basically knows that they're kind of dumb."
Elaborating further, he said that "My donations were mostly for pandemic prevention. That was the primary thing that I was supporting with those contributions." SBF used this line of questioning to push back, saying “lawmakers were not ruling on FTX. FTX didn't have an application before Congress for anything."
When pressed on where the money for those donations came from, he said “Basically, profits.”
A lack of risk management and oversight
As Sorkin pressed deeper into the cause of all the calamity, SBF admitted that there were serious oversights on his part in terms of risk management.
"So many things we should have had in place ... a lot of it was on the risk management side," he said. "We lost track of a really important part of the business and of the product."
“So there absolutely were management failures, huge management failures, and I take responsibility for that. There were oversight, failures, transparency, failures, reporting… so many things we should have had in place.”
When asked if companies like Sequoia Capital or BlackRock bear any responsibility for the lack of oversight, since they invested in and promoted FTX, SBF said that he didn’t think they bear any responsibility.
Drug use and the current state of SBFs finances
On the topic of drug use at the company, which stems from multiple tweets from Bankman-Fried and Alameda CEO Caroline Ellison discussing the use of stimulants to help get work done, Sorkin asked SBF his thoughts on the idea that FTX was "a bunch of kids on Adderall having a sleepover."
“This has been totally on-label use of medication,” he said "There were no wild parties here. When we had parties we'd play board games and, you know, 20% of people would have three-quarters of beer each or something like that. I didn't see any illegal drug use around me."
When Sorkin probed to see if SBF had squirreled away some money for a rainy day, Sam said that he "didn't put away money anywhere," and has one working credit card. "Everything was in the companies,” he said. When asked about how much money he has left, the former FTX CEO said, "To my knowledge, close to nothing."
As the conversation began to wrap up, Sorkin asked Sam about what he sees in his future, to which SBF replied "I don't know what my far future is. When I look at the near, medium term, what am I thinking? I don't know what's going to happen. A lot is not in my hands at this point ... I want to be helpful wherever I can. I don't know where that will lead."
When Sorkin asked if he was being truthful during the interview, SBF said “I was as truthful as I’m knowledgeable to be. There are some things I wish I knew more about.”
The journalist followed up by asking, “do you agree that over time you also lied?”
“I don't know of times when I lied,” SBF replied. “There are certainly times when I was acting as a representative, as a marketer for FTX, and when I was looking for how I could truthfully paint FTX in the most compelling way possible, as exciting and optimistic a way as possible. And I wasn't thinking about what are the risks involved with FTX. I obviously wish that I spent more time dwelling on the downsides and less time thinking about the upsides.”
The main point that SBF seemed to convey in this interview and previous ones can be summed up with this statement: "Look, I screwed up. We messed up big."