Sam Bankman-Fried tries to clarify himself

Sam Bankman-Fried. | Lam Yik/Bloomberg through Getty Pictures

The fallen crypto CEO on what went mistaken, why he did what he did, and what lies he informed alongside the best way.

Final evening, Sam Bankman-Fried DMed me on Twitter.

That was shocking. I’d spoken to Bankman-Fried through Zoom earlier in the summertime once I was engaged on a profile of him, so I reached out to him through DM on November 13, after information broke that his cryptocurrency trade had collapsed, with billions in buyer deposits apparently gone. I didn’t anticipate him to reply — usually, individuals below investigation by each the Securities and Trade Fee and the Division of Justice don’t return requests for remark.

Bankman-Fried, although, apparently wished to speak. About how FTX and his hedge fund Alameda Analysis had gambled with buyer cash with out, he claims, realizing that’s what they have been doing. About who will get lauded as a hero and who’s the autumn man. About regulators. (“Fuck regulators.”) About what he regrets (“Chapter 11,” the choice to declare chapter) and about what he would have accomplished otherwise with FTX and Alameda (“extra cautious accounting + offboard Alameda from FTX as soon as FTX might stay by itself”).

It was previous midnight Bahamas time, the place Bankman-Fried is reportedly nonetheless situated, and we went forwards and backwards on Twitter for greater than an hour. He was, he mentioned, nonetheless working to attempt to elevate the funding wanted to pay again all his depositors.

As we messaged, I used to be attempting to make sense of what, behind the PR and the charitable donations and the lobbying, Bankman-Fried really believes about what’s proper and what’s mistaken — and particularly the ethics of what he did and the business he labored in. Looming over our entire dialog was the truth that individuals who trusted him have misplaced their financial savings, and that he’s accomplished incalculable injury to all the pieces he proclaimed only some weeks in the past to care about. The grief and ache he has triggered is immense, and I got here away from our dialog appalled by a lot of what he mentioned. But when these errors haunted him, he largely didn’t present it.

(Disclosure: This August, Bankman-Fried’s philanthropic household basis, Constructing a Stronger Future, awarded Vox’s Future Good a grant for a 2023 reporting challenge. That challenge is now on pause.)

On regulators

Earlier than his empire collapsed, Bankman-Fried was actively engaged in lobbying in Washington for a regulatory framework for cryptocurrency. Whereas many crypto CEOs — like Bankman-Fried’s nemesis Binance CEO Changpeng “CZ” Zhao — are brazenly skeptical of presidency regulation, Bankman-Fried has largely averted criticizing regulators. However in our dialog, he dismissed their function. He characterised his previous conciliatory statements — like when he mentioned simply final month that some quantity of crypto regulation could be “definitively good” — as little greater than “PR.” In doing so, he all however confirmed the view of critics who’ve argued that his overtures to Washington have been way more about picture than substance.

Kelsey Piper: you said a lot of stuff about how you wanted to make regulations, just good ones - was that pretty much just PR too? Sam Bankman-Fried: there’s no one really out there making sure good things happen and bad things don’t; usually there’s only one toggle—do more or do less. yeah just PR; fuck regulators; they make everything worse; they don’t protect customers at all.

Kelsey Piper: does seem like some kind of consumer protection would be good tho? like maybe regulators can’t deliver it, but sure does look like consumers lose their shirts a bunch Sam Bankman-Fried: agreed on both; it would be good. but regulators can’t do it
Kelsey Piper: and you couldn’t do it, and CZ sure isn’t doing it, so...who? Sam Bankman-Fried: they can’t actually distinguish between good and bad; just ‘do more business’ vs ‘do less business’ and ‘put up more moats’ vs ‘put up fewer moats’; no one will but you want to know the truth? no one’s doing it in the rest of finance, either
Sam Bankman-Fried: or, for that matter, other areas that are regulated; the FDA isn’t helping the giant Crackdown on Big Tech has no point or goal or philosophy behind it; OFAC is slowly undermining US interests globally and is the single biggest threat to the US being a suprepower ESG has been perverted beyond recognition Kelsey Piper: I’m sort of putting together a picture where - you don’t believe anyone is doing anything for good reasons, you don’t believe the “good guys” are good
Sam Bankman-Fried: what we’re left with, at the end of the day, is: “only the rich can inest; only they can make or lose money.” eh there’s *some* truth to it—but it’s *also* true that I didn’t want to do sketchy stuff, there are huge negative effects from it. and I didn’t mean to. each individual decision seemed fine and I didn’t realize how big their sum was until the end.

On being keen to behave unethically

One query on which I’ve seen widespread hypothesis is whether or not Bankman-Fried thought it was okay to do unethical issues “for the higher good” — a place that hardcore utilitarians, which Bankman-Fried has recognized as prior to now, would possibly maintain.

That query occurs to be one I had requested him within the interview this summer time, which I had simply relistened to the evening earlier than our Twitter dialog. On the time, after all, I believed the moral dilemma the place Bankman-Fried had maybe crossed a line was whether or not it was acceptable to run a cryptocurrency trade within the first place — and whether or not the nice he claimed he meant to do made it okay.

Lots of people, I mentioned to Bankman-Fried in that earlier interview, would consider “beginning a crypto firm to make billions of {dollars} the best way I might consider beginning a tobacco firm to make billions of {dollars}: deeply immoral. Presumably, there’s some line the place you shouldn’t do one thing that unhealthy even for good causes. I’m curious whether or not you suppose there’s some line? And in that case, the place would you draw that line?”

“There’s some line,” he informed me then. “The reply can’t be there isn’t a line. Or else, you already know, you can find yourself doing massively extra injury than good. And I feel extra typically, you can say, okay, high-quality, however simply, like, subtract that out. However I don’t suppose it’s that straightforward, both. As a result of there are a whole lot of sophisticated however necessary second-order harms that come in case your core enterprise is unhealthy for the world, by way of your means to work with companions and your means to work with companions in your philanthropic efforts.

“You could possibly think about that if the Philip Morris Basis had actually good concepts about tips on how to enhance the world, they in all probability would nonetheless have a very onerous time working with the Gates Basis. So I do suppose it’s extra sophisticated than that. And it’s a must to significantly deal with what the impression is of your direct work.”

I returned to these questions in our Twitter dialog. These well-considered concepts about balancing moral imperatives? “It’s not true, probably not,” he mentioned now.

Kelsey Piper: I was just relistening to that conversation we had this summer about whether you should do unethical shit for the greater good Sam Bankman-Fried: what did I say Kelsey Piper: you were like, nah don’t do unethical shit, like if you’re running Philip Morris no one’s going to want to work with you on philanthropy Sam Bankman-Fried: heh Kelsey Piper: and there’s a risk of doing more harm than good, but even if you subtract that out, pretty not worth it Sam Bankman-Fried: yeah
Kelsey Piper: I was trying to figure out like - if that was kind of the PR off the cuff answer Sam Bankman-Fried: man all the dumb shit I said it’s not true, not really Kelsey Piper: yeah I thought it might not be Sam Bankman-Fried: everyone goes around pretending that perception reflects reality. it doesn’t. some of this decade’s greatest heroes will never be known, and some of its most beloved people are basically shams.

Kelsey Piper: so you kinda don’t believe in, like, ‘doing unethical shit’, as anything other than a judgment we bestow upon the losers? Sam Bankman-Fried: a month ago CZ was a walking example of “don’t do unethical shit or your money is worthless.” now he’s a hero. is it because he’s virtuous? or because he had the bigger balance sheet, and so he won Kelsey Piper: well I can see why you didn’t give that answer in interviews Sam Bankman-Fried: heh

Kelsey Piper: so the 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? Sam Bankman-Fried: yeah. I mean that’s not *all* of it. but it’s a lot. the worst quandrant is “sketchy + lose.” the best is “win + ???.” “clean + lose” is bad but not terribel

Kelsey Piper: you were really good at talking about ethics, for someone who kind of saw it all as a game with winners and losers Sam Bankman-Fried: ya. Hehe. I had to be. it’s what reputations are made of, to some extent. I feel bad for those who get fucked by it, by this dumb game we woke westerners play where we say all the right shiboleths and so everyone likes us.

On bending the reality

Bankman-Fried has maintained that FTX has by no means invested the deposits of crypto account holders on the trade. I pressed him on that time through Twitter, and whereas he continued to insist that FTX didn’t straight use account cash on this manner, he mentioned that Alameda — which he additionally owns — had borrowed far more cash from FTX’s stability sheet for investments than he had realized, which finally left FTX weak to the crypto equal of a financial institution run.

Why didn’t Bankman-Fried notice what was taking place till it was too late? “Generally life creeps up on you,” he mentioned.

Kelsey Piper: you tweeted out some stuff like - we never invest your deposits. that was bs, right? Sam Bankman-Fried: it was factually accurate Kelsey Piper: huh!!! but like - their deposits were totally not there? or do you just mean, technically it was Alameda Sam Bankman-Fried: FTX. correct

Kelsey Piper: so....FTX technically wasn’t gambling with their money, FTX had just loaned their money to Alameda, who had gambled with their money, and lost it? and you didn’t realize it was a big deal because you didn’t realize how much money it was? SBF: and also thought Alameda had enough collateral to reasonable cover it KP: I get how you could have gotten away with it but I guessthat seems sketchy even if you get away with it SBF: It was never the intention Sometimes life creeps up on you

On what occurred

One concept is that the seeds of FTX’s downfall have been sown earlier this 12 months, when Alameda reportedly took large losses after the crypto firm Terra’s LUNA stablecoin collapsed. Bankman-Fried mentioned he didn’t notice the extent of the issue due to “messy accounting” — albeit messy accounting to the tune of billions of {dollars}.

Kelsey Piper: was the Alameda thing when LUNA crashed the first time customer deposits got lent out (that’s what people are saying) or was it more like, the accounting was such that a lot of the stuff you were doing was implicitly backed by customer deposits? Sam Bankman-Fried: messy accounting + margin exchange —> position built up over time, though in retrospect LUNA crash was when a lot of it did. but messy accounting —> I didn’t realize full size of it until a few weeks ago

KP: if you could do it all over again, would you just take more careful accounting? never touch customer funds? never go into crypto? SBF: more careful accounting + offboard Alameda from FTX once FTX could live on its own KP: are there people who told you to be more careful? are there people you would’ve listened to? SBF: it’s odd. I mean, maybe? but not really, and those who did—they did on other things, not that. it’s odd.
SBF: everyone was so worried and concerned about dumb shit we definitely wouldn’t do and that made no sense KP: but not about whether you were lending out customer funds? seems like such an obvious thing for them to worry about! SBF: ya but it’s complicated: it wasn’t quite lending them out—it was messier and more organic than that; each step was in isolation rational and reasonable, and then when I finally added it all up last week it wasn’t b) most exchanges did some variant on what we did
Kelsey Piper: if you could do it all over again, would you just take more careful accounting? never touch customer funds? never go into crypto? Sam Bankman-Fried: more careful accounting + offboard Alameda from FTX once FTX could live on its own. Kelsey Piper: are there people who told you to be more careful? are there people you would’ve listened to? Sam Bankman-Fried: it’s odd. I mean, maybe? but not really, and those who did—they did on other things, not that. it’s odd

On what he regrets

Bankman-Fried acknowledged that he “fucked up. Huge. A number of occasions.” However he additionally insisted that a lot of the difficulty might have been averted if FTX had not declared chapter, which has largely taken monetary issues out of his management. (Throughout the course of, Bankman-Fried was changed as CEO of FTX by John J. Ray III, a lawyer who helped collectors recuperate billions of {dollars} after the chapter of the power buying and selling agency Enron.) “The individuals accountable for [the company] try to burn all of it to the bottom out of disgrace,” he informed me.

Bankman-Fried argues he ought to as an alternative have stored attempting to boost more cash, and insisted that if he’d simply accomplished that, “withdrawals could be opening up in a month with prospects absolutely entire.” The Wall Avenue Journal reported earlier this week on Bankman-Fried’s efforts to seek out funding and located no indication any buyers have been committing. Even when contemporary funding have been obtained, the paper continued, it will require negotiations with FTX collectors and the approval of the chapter courtroom.

Whereas he mentioned that a few of his colleagues — co-founder Gary Wang and director of engineering Nishad Singh — have been “scared,” and, within the case of Singh, “ashamed and responsible,” Bankman-Fried appears to take care of some emotional distance from the collapse: “The world is rarely so black and white.”

SBF: I fucked up big multiple times you know what was maybe my biggest single fuckup? KP: oh? SBF: the one thing *everyone* told me to do everthing would be ~70% fixed right now if I hand’t KP: I’m trying to guess but I have no idea 9SBF: chapter 11
KP: like, should’ve just rode it out and kept trying to make the $8billion back? SBF: 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 I might still get there 1 but after way more collateral damange and only 50/50 KP: I’d take the under on that

SBF: basically we get there if both: a) EITHER Gary OR Nishad comes back b) we can win a jurisdictional battle vs Delaware KP: Gary and Nishad are gone? SBF: yea, scared or gary is scared, nishad is ashamed and guilty KP: ashamed and guilty because all the customer deposits are gone? SBF: yea

Kelsey Piper: people I’ve talked to have said Nishad was much more into the ethics/not being sketchy stuff than you were Sam Bankman-Fried: yeah. it hit him hard. I mean it hit all of us hard but it hit him HARD. Kelsey Piper: it seems like you have more of a - sense of yourself to fall back on, more of a sense that you are only wrong if you lose and he was more like “wow we stole money from people who trusted us” Sam Bankman-Fried: the world is never so black and white

On the hack of FTX

Shortly after FTX filed for chapter, watchers of blockchain transactions observed somebody had transferred a whole bunch of tens of millions of {dollars} out of the corporate. I requested Bankman-Fried what was up.

Kelsey Piper: do you know what’s actually up with the money that got mysteriously moved out of FTX after the bankruptcy? that’s the other thing a lot of people are speculating about SBF: hack — either ex-employee, or malware on an ex-employee’s computer; a few hundred M

On what’s subsequent

Bankman-Fried says his No. 1 precedence now could be to attempt to elevate $eight billion to make account holders entire. “That,” he informed me, is “principally all that issues for the remainder of my life.” However whereas he mentioned that “a month in the past I used to be one of many world’s best fundraisers,” that $eight billion dwarfs what FTX was in a position to elevate thus far, there’s no indication any buyers would chunk, and even when he might safe funding, it will probably require each collectors and the chapter courtroom to get on board.

Kelsey Piper: what’s next, what’s your plan? SBF: I have 2 weeks to raise $8B. that’s basically all that matters for the rest of my life KP: well, I really hope that the depositors get the money back, but I gotta say, I have no idea how anyone could possibly pull that off from this starting point SBF: well a month ago I was one of the world’s greatest fundraisers now I’m the fallen wreckage of one but there’s a thing about being fallen— there are people who know what that’s like

This morning, I emailed Bankman-Fried to substantiate he had entry to his Twitter account and this dialog had been with him. “Nonetheless me, not hacked! We talked final evening,” he answered.

His legal professionals didn’t return a request for remark.

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