Myth of Money: SBF Interview - Key Takeaways
Welcome to this week’s edition of Myth of Money, a weekly newsletter on the digital asset markets read by 12,000+ investors.
Disclaimer: The following is not intended as investment advice. Do your research.
Greetings this week from Art Basel Miami. Given the current state of the crypto markets, I was concerned that Web3 and NFT activations would once again take a back seat to the “art” at Art Basel. But the vibes are still strong. It seems culture and happiness prevail as NFT Now, MoonPay, and Coinbase through some of the top parties of the week. My personal highlight of the week, however, was seeing Chaka Khan do a private set at the Edition last night to celebrate Kehinde Wiley’s new art. Vibes were strong.
SBF Dealbook Interview
The New York Times' DealBook newsletter hosted its annual conference in New York on Wednesday, culminating in a dramatic interview with fallen crypto billionaire Sam Bankman-Fried.
This was SBF’s first public appearance since the demise of his cryptocurrency enterprise, which included the crypto exchange FTX and its trading arm, Alamada Research. Andrew Ross Sorkin of The New York Times led the interview which lasted for an hour.
The full interview is available here:
TL;DR: Key Takeaways
SBF answered many questions (and skirted many more) about how his company went bankrupt last month, a multibillion-dollar disaster that might take years to sort out in bankruptcy courts. His own wealth has also been depleted as a result of the struggle. As he spoke, it became evident that the lost fortunes would not be restored. Finally, he said, he just plainly acknowledge that he "screwed up."
He stated that he "didn't deliberately commingle" FTX customer funds with those of Alameda Research, the exchange's trading arm, which operated as a market maker on FTX, facilitating customer transactions as well as making its own high-risk leveraged bets.
He denied deliberately committing fraud. "I never attempted to defraud anyone," he stated.
He claimed that he was unaware of the firms' perilous situation until it was too late.
He admits to making major mistakes, such as inadequate, if not nonexistent, risk management and a lack of control to secure customer accounts.
He claimed that he was telling the truth — or that he was unaware that he was twisting it. "I don't recall ever lying," he told The Times, adding that he "was as truthful as I'm knowledgeable to be."
He claimed that his political contributions, which totaled $40 million according to records, were not intended to buy access to MPs.
He appears to have defied legal advice to remain silent as various countries continue to investigate his firms' demise.
He denied deliberately committing fraud. "I never attempted to defraud anyone," he stated.
SBF’S KEY ANSWERS TO THE ROUND TABLE PODCAST
In another interview on a live Twitter podcast with the Crypto Roundtable’s Mario Nawfal, SBF made additional key statements:
Sam Bankman-Fried appeared to be concerned with transparency — or, at the very least, the appearance of honesty.
Perhaps this is why, on Nov. 30, he followed up a half-hour interview with The New York Times DealBook Summit with a 1.5-hour interview with The Crypto Roundtable Show with Mario Nawfal.
Bankman-Fried accepted to be questioned by a number of co-hosts on Nawfal's popular Twitter Spaces show, with different degrees of civility.
When Nawfal inquired how he was, Bankman-Fried replied ruefully, "Oh, you know, it's been quite a month."
Despite allegedly misappropriating more than $3 billion in client funds, SBF wants re-iterating that there was no malicious intent and that he is doing his best to rectify the situation.
Sam conducted these interviews because we deserved to have some transparency.
"I feel like y'all need to hear from me about what occurred," SBF says. I feel terrible about it. And I believe that's the least I can do."
Sam believed that whatever happened was his fault. Most likely.
"At the end of the day," SBF says, "I was the CEO of FTX." That means that whatever occurs is entirely my responsibility. I wasn't paying attention to some of the most critical things I should have been. That's all on me."
"I don't believe anyone was on top of foreign position risk management…Many individuals may have been, but I was the one who should have been in charge of ensuring that someone was."
Caroline Ellison, the previous CEO of Alameda, was not under SBF's control.
"I don't have control over her," SBF says. Never did I. I wasn't particularly involved in Alameda. I wasn't involved in trading at all and hadn't been for years. I purposefully avoided becoming engaged because I was concerned about a conflict of interest."
It was unclear whether there was one-to-one backing of assets on FTX.
"The client balances were equivalent to the assets, if you count the negatives as well as the positives," SBF says. “If you total up all of the client balances, positive and negative, they equaled FTX's assets."
This will undoubtedly be a topic of continued debate.
SBF lacked access to FTX systems and accurate data.
"Unfortunately, I don't have access to most of the data right now," SBF says. “I've lost access to several systems. As a result, this is all being pieced together from my memories and the data I've been able to uncover from the study I completed in the days following the disaster. I apologize in advance for any inaccuracies in my answers. I don't have the exact ones."
The reinvestment of customer monies appears to be covered by FTX's TOS.
Users may have read the FTX Terms of Service (TOS), but they needed to be studied carefully, according to Bankman-Fried, because some TOS restrictions may cancel out other rules.
"As a result, the terms sections of the Terms of Service are superseded by other sections of the Terms of Service." That was just one section of the Terms of Service. "However, there are several aspects to the Terms of Service concerning or other parts of the trade," he explained.
This Week By the Numbers 📈
Top Stories 🗞️
Crypto exchange Kraken said Wednesday it is laying off 30% of its global staff – around 1,100 people – in response to the crypto market downturn. "Since the start of this year, macroeconomic and geopolitical factors have weighed on financial markets. This resulted in significantly lower trading volumes and fewer client sign-ups," Kraken said in a blog post. "We responded by slowing hiring efforts and avoiding large marketing commitments. Unfortunately, negative influences on the financial markets have continued and we have exhausted preferable options for bringing costs in line with demand."
Indonesia’s Central Bank launched a white paper on digital currency for Rupiah on Wednesday. The white paper for the digital Rupiah comes at a time when Indonesia saw exponential growth in digital transactions since 2020. Bank Indonesia’s (BI) move follows that of many Federal Banks around the world that are planning to launch their own central bank digital currencies (CBDC). The upcoming digital Rupiah will remain under the sole authority of BI to issue the legal online tender. BI’s Governor Perry Warjiyo laid out the Central Bank’s policy guidelines for 2023 at a press in Jakarta.
Right-wing conspiracy theorist Alex Jones filed for personal Chapter 11 bankruptcy protection in a Texas court on Friday, according to court documents. In the documents, Jones estimates his assets to be worth between $1 to 10 million, and his liabilities to be between $1 to $10 billion. The Infowars host’s primary company, Free Speech Systems, also filed for bankruptcy protection in July. Jones’ personal filing comes after he lost a bid in Texas to reduce the nearly $50 million damages award handed down by a jury earlier this year over his false claims about the Sandy Hook Elementary School massacre. After the 2012 mass shooting, in which 26 people were killed, Jones baselessly repeated that the incident was staged and that the families and first responders were “crisis actors.” A Connecticut attorney representing the families of Sandy Hook victims told CNN that Jones’ personal bankruptcy filing “will not work.”
Coinbase Global Inc said on Thursday customers using Apple Inc's iOS will not be able to send non-fungible tokens (NFTs) on the cryptocurrency exchange's wallet anymore. "Apple's claim is that the gas fees required to send NFTs need to be paid through their In-App Purchase system, so that they can collect 30% of the gas fee," Coinbase Wallet added in a tweet. Coinbase said it would not be able to comply with the requirement even if it tried as the iPhone maker's proprietary in-app purchase system does not support crypto.
Russia’s largest bank Sber — formerly known as Sberbank — continues developing its blockchain platform by integrating it with the Ethereum blockchain. On Nov. 30, Sber officially announced new opportunities for its proprietary blockchain platform, including compatibility with smart contracts and applications on the Ethereum network. This would allow developers to move smart contracts and entire projects between Sber’s blockchain and public blockchain networks, the bank said. Sber’s latest additions also bring an integration with major software cryptocurrency wallet MetaMask, which is used to interact with the Ethereum blockchain. The integration allows users to make operations with tokens and smart contracts placed on Sber’s blockchain platform, the announcement notes. “Sber Blockchain Lab works closely with external developers and partner companies, and I am glad that our community will be able to run DeFi applications on Sber's infrastructure,” head of blockchain lab Alexander Nam said. He noted that the newly integrated features will help Sber to unite developers, corporations and financial institutions to explore practical business applications of blockchain, Web3 and decentralized finance.
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics, and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital, and Cryptocurrencies. I believe in empowerment closing the financial education gap and creating equal opportunity for the next generation. I have invested in 20+ companies and funds. Check out my portfolio here.
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