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(Kitco News) -
Anthony Scaramucci, the founder of SkyBridge Capital, has pulled back the curtain on the frantic final days of the FTX cryptocurrency exchange, including what Sam Bankman-Fried (SBF) and his father Joseph Fried were telling him, the role of Binance CEO Changpeng Zhao (CZ), and the state of the exchange’s Bahamas ‘war room’ as SBF’s crypto empire teetered on the brink of bankruptcy.
Scaramucci, who was also the White House Director of Communications under Trump for ten days in 2017, shared the story during a panel discussion at Consensus 2023 entitled ‘FTX: What Happened?’, saying he wanted to provide context to the events that led up to the implosion of the second-largest crypto exchange last November.
“I've had some time to talk with CZ about the situation,” he said. “I think ultimately some people are of the belief that CZ put Sam out of business. That is not the case, and so I just want to state that explicitly.”
Scaramucci said he doesn’t believe CZ even tried to sink FTX, but was reacting to disclosures that were becoming public and to statements Sam was making in meetings with industry insiders. “Weirdly, the trip that we took to the Middle East sort of catalyzed all of this,” he said, referring to a fundraising tour with SBF to Riyadh, Dubai and Abu Dhabi in late October 2022. “Sam was saying some things in some meetings [..] in Dubai that were derogatory of CZ.”
Scaramucci said that when CZ heard the comments, he wasn’t happy; he was “very upfront on Twitter that there was obviously a problem,” and he decided to put his FTT tokens up for sale. “But if Sam was running the business appropriately, and he wasn't participating in the nefarious ways that he was in the business, the business would have been fine.”
“Some people have got on a stage like this and said ‘well, CZ put Sam out of business.’ No, Sam put Sam out of business, by the way he ran that business.”
Scaramucci said he was in Sarasota, Florida, on Nov. 7 when he heard “rumblings” that something was wrong at FTX. The exchange had recently purchased a 30% stake in SkyBridge, so Scaramucci was effectively partnered with Sam, giving him a vested interest in the performance of FTX as well as direct access to the highest levels of the company.
“I got back to New York and I spoke to Sam's dad about the problem,” he said. “It was intimated to me that it was an asset-liability mismatch, that they were meeting redemptions and there were assets available, but they weren't necessarily liquid and they needed time to get the liquidity, and they were looking for some rescue finance.”
He said he asked Joseph Bankman how much they needed. “They were talking about a billion dollars, which seemed a lot of money, but certainly would be manageable in the context of the size of the business.”
“But later in the evening, that number went from $1 billion to $4.5 billion.”
Scaramucci said he recognized at that time that there was clearly a problem, “and it's a bigger problem than they want to admit to.” He decided to book a flight that evening to the Bahamas to see what was happening for himself. “I put my name and reputation at stake,” he said. “I introduced Sam to a lot of people. I organized a dinner for the likes of Tony Blair and Bill Clinton and a whole host of luminaries one short year ago.”
Scaramucci said that when he got to FTX’s Albany compound, he saw desperation and despair. “I would say that the war room was despondent,” he said. “It was clear to a few people that there was a very small group of people that had done some things that they didn't let the other group of people into.”
“Sam was there, he looked disassociated, he was apologizing to me for what happened, he was claiming that it was mislabeling,” he said. “Remember, this is now Tuesday [Nov. 8], and there was some discussion in the early morning about CZ buying the business. But I think once CZ got to look at the business, that non-binding letter that they signed, he realized that it was not possible to really buy that business.” Just three days later, FTX and all its subsidiaries filed for bankruptcy.
Scaramucci also said that when the full story comes out, he believes it will end up being a very small number of wrongdoers at FTX. “If you look at the Madoff situation, three or four people in a closed loop,” he said. “I think as this story unfolds, if it eventually gets to trial, you'll see that it was three or four people in a closed loop that perpetrated the crime. And obviously, it's in the paper and the Department of Justice has announced this, three of those four people have already pled guilty.”
“It'll be very interesting to see how Sam makes the decision on his own plea. He's saying he's innocent for now… we'll have to see if it gets to trial.”
The next status conference for Bankman-Fried’s case is set for June 15 at 3:30 p.m. EDT. The criminal trial is scheduled to begin on October 2, 2023.
