Sam Bankman-Fried Speaks To The New York Sun From Prison
My name is AR Hoffman, and I am the associate editor of the New York Sun. What follows are 45 minutes of interviews with the fallen crypto billionaire Sam Bankman-Fried. At one point, his cryptocurrency exchange FTX seemed poised to make Bankman-Fried the richest human being on the planet. Then it all came crashing down when FTX and another firm of his, Alam, made a research implosion. Bankman-Fried was convicted of fraud and other crimes and sentenced to 25 years in prison without the possibility of parole. He has appealed that sentence, believes that he was presumed guilty, and maintains that his businesses were always solvent and that FTX’s bankruptcy was mishandled.
Here from the Manhattan Detention Center is Sam Bankman-Fried in his own voice. These three interviews, combined with only light editing, were conducted on the evening of Tuesday, February 18th. Per prison guidelines, each interview could only be 15 minutes long and required to be spaced an hour apart. The conversations cover Bankman-Fried’s thoughts on the political scene, his hopes for a pardon from President Trump, his reflections on the judge who sentenced him, and his thoughts on the prosecutor who secured that conviction, Danielle Sasso, who recently resigned rather than moved to dismiss the case against Mayor Adams.
Bankman-Fried also shares more personal reflections on what it’s like to have all the money in the world and to lose it. You may begin speaking now.
“Hi Sam, it’s Ari.”
“Hey, great to talk. Let me start. I know you’re eager to talk, or you have thoughts on sort of the current political environment. Obviously, there have been discussions of a pardon. Your prosecutor, Danielle Sasso, has been very much in the news. So why don’t you, I know we have a limited amount of time, start by sharing some of your thoughts about what’s happening?”
“Obviously, lots been going on, and as you said, my, well, my prosecutor has been in the news recently for tussles with, you know, Trump’s DOJ. My judge as well, Judge Kaplan, who is one of Trump’s judges in New York, which is sort of part of a larger fight going on between the incoming Trump DOJ and, you know, what they see from Biden’s DOJ that’s been left behind. There are pretty big changes on a lot of fronts given what the president has seen of the Department of Justice, and given what I think a number of people in his camp have seen in terms of, you know, bias judges and prosecutorial abuse, and in terms of sort of the politicization of the DOJ over the last decades, and I would say speeding up recently. Do you think your case is part of that story?”
“I think that’s a piece of the picture. Obviously, there’s a lot going on; there always is. And a piece of it is something that happens frequently in high-profile trials where you have, you know, careers on the line for all the officials involved. I don’t think there was a very fair and balanced view or approach that was taken. A lot of that had to do with judicial rulings coming into my trial. I know President Trump had a lot of frustrations with Judge Kaplan; I certainly did as well. And, you know, one example is he allowed the prosecution to tell the jury that, you know, everyone had lost all of their money. He, in a separate ruling, disallowed the defense from addressing the exact same topic. The fact that the story the jury was told was false obviously made that a pretty critical point of the trial.”
“And sort of, you know, that’s just one point. In many of those judicial sides, what do you make of some of the tumult at the DOJ, especially the Southern District? Do you see your story linking up to part of a broader story about prosecutorial misconduct?”
“I mean, I certainly think there are pieces in common, you know, with my case more generally. One place you can look is the sentencing of everyone who pled guilty, where you had one Republican who pled guilty to really small sets of the charges. I don’t think anyone was guilty. I certainly don’t think he was. He got a seven-and-a-half-year prison sentence for that. It’s, you know, it’s four times as long as the other three combined. All of you were sort of on the other side of the aisle, and there was a lot of explicitness to the politicization of that, including, I mean, threats made to his wife that she would be indicted as a Republican Congressional candidate if he didn’t toe the party line of Biden’s DOJ.”
“You know, I think that was one of the more explicit angles of it. But, you know, at the same time when it came to my piece of it, there are a lot of things going on. You know, one piece of it certainly is that it was starting to come out that I’d been working with Republicans a lot more than had been, you know, previously thought—that I’d been giving to Republicans, conservative causes a lot more than had been public.”
“Do you think that that’s a piece of this story too? I mean, you know, it’s sometimes framed in the press that, you know, you were giving an extraordinary amount to Democrats and then the Republicans was sort of maybe perfunctory or just covering a base. I mean, do you think this sort of public or the administration whoever kind of got your politics wrong or got your sort of orientation wrong?”
“I think it’s a little bit of each of those. I think it’s a little bit of each of those, you know. When I first gave a, you know, non-trial amounts, or when I first gave a significant amount in 2020, you know, I gave to Biden. Part of that was not wanting the Democratic Party to become the party of Bernie Sanders but I would, you know, say that I viewed myself at the time as sort of center-left. And that’s not how I view myself anymore. And it’s not how I had come to view myself by 2022. You know, I’d spent a bunch of time over the next years in Washington DC, working with legislators, regulators, and the executive branch on a bunch of issues but a lot of my time was spent on crypto policy. I became really frustrated and disappointed with what I saw of, you know, Biden’s administration and the Democratic Party. I don’t know how much I had been, you know, I don’t know how much I’d been before versus how much the party had shifted but, you know, on the issues that I knew best, on the ones that I’d spent the most time with, particularly on crypto policy, the administration was just incredibly destructive and difficult to work with. Frankly, the Republican Party was far more reasonable.”
“I spent a lot of my time in DC trying, as best I could, to hope that even though it was at that point sort of a Democratic trifecta, that could work across the aisle to stop draconian measures from being taken by the administration against the industry. Let me ask you something. You know I don’t know if you got to see, but you know, it’s been much discussed; it’s kind of the vibe shift among, you know, leaders of tech, and you know, Zuckerberg and Bezos. You know, all these are people I’m sure your path has crossed with. Do you think if the trial hadn’t happened to you, do you think you would have been up on that stage at the inauguration? Or let me ask it differently, do you see what’s going on and do you get it? How do you see it, and is your story maybe connected to some of what we’re seeing in that culture more broadly?”
“I obviously can’t speak for them, but I would imagine that they saw some of the same things that I saw over the last four years. I think you saw Zuckerberg express some of that in terms of what I’m guessing he had hoped would be sort of like a reasonable, constructive, anti-misinformation stance of the administration that ended up being, you know, misinformation disguised as anti-misinformation that ended up being something a lot more just like political censorship. I think they’ve had some similar frustrations trying to work with the Biden administration as what many in the crypto industry had found on anything related to business and ultimately free speech as well.”
“What do you think of politicians issuing meme coins? Have you heard about the Trump coin that came out just before his inauguration?”
“You know, I’ve heard of it. I don’t know that as much as I would like to about it because, you know, my information take is of course somewhat limited in prison, unsurprisingly. But I’m not surprised to see politicians starting to dip their toes into the digital space, and I expect that over time we’re going to see more and more avenues of life start to dip their toes in. In part, because it is a much more flexible medium to work in than traditional finance. There’s a reason that there’s been so much growth in the industry and so much innovation coming out of it, which are a number of reasons. But one of them is that it’s just much easier to build in it. The infrastructure is newer, it’s more open. You don’t have to worry about, you know, not building in entire regions without crossing, you know, patents or regulatorily mandated monopolies or other hallmarks of traditional finance.”
“Let me ask you, you know, I’ve spoken to a bunch of people in the crypto space and in the bankruptcy space, and many of them have expressed severe concerns about how your case was handled, about how the bankruptcy was handled. I mean, this is in court filings. But you know, from your perspective, I mean, there’s the political angle here; there’s the legal angle here. I mean, what gives you hope? What frustrates you?”
“Obviously, something like, you know, the pardon is at the intersection of the political and the legal. I’m just sort of curious about where, you know, as you survey the landscape from prison, where are the avenues that seem promising? I think by far the most frustrating angle, which has recently in some cases become a hopeful one as well, is coming out of the bankruptcy estate. From the very beginning, it’s been absolutely infuriating to see how they’ve handled the estate thinking of the perspective of customers, the millions of customers of FTX. You know, there were enough assets to get all customers paid in kind, in full in November 2022. That’s how it should have been resolved. It would have been resolved if the debtors hadn’t gotten involved. Instead, customers have had to wait, what, two and a half years at this point while, you know, you start out with year pronouncements from the estate saying that it’s hopelessly insolvent, that it’s completely bankrupt, a dumpster fire, you know, releasing estimates of 1 billion of total assets and 10 billion of liabilities. Now, I mean now that 1 billion, I guess it’s become 15 billion.”
“Is it frustrating to you that you had invested so much in the political sphere? Does that feel like money not well spent, but is there frustration there that somehow some of these public figures didn’t step up? You know, part of it was just on both sides trying to identify people I thought would be good legislators. A bunch of the Republican and conservative contributions were private, but you know, have since started to come out. To the extent that that’s the goal, then, you know, the metric isn’t how they treat me. The metric is what they do for the world. I’m optimistic that obviously not all of them, but that some of them will end up doing good things for the world and being great, responsible representatives.”
“What would you tell, whether it’s President Trump or whether it’s an appeals court, you know, a regular guy on the street, sort of what has been gotten wrong about your case, about your story, about your work?”
“Um, yeah, as a kind of matter of first principle, yeah, obviously, there are a lot of small things and a few very big ones. Putting aside the small things, you know, misleading statements about apartment complexes and things like that, I think the single biggest thing is that FTX was never insolvent. It was never bankrupt; neither was Alam. They always had enough to make good on all their liabilities. You know, what happened was a liquidity crisis, a run on the bank. What that means basically is if you buy a $20,000 car and you know you buy it on credit from a bank, you’re paying it off; you’ve got 10,000 left to go, and then all of a sudden, the bank calls you up and says, ‘Hey, you know, you’ve got one week and you’ve got to make good on the entire rest of your payments,’ you know, so the remaining 10,000 where you, you know, normally when you’re not bankrupt, all of a sudden, you’re not underwater, but you also don’t have the 10,000 in your bank account.”
“What you can do there is sell off the car. You know, you spend that week, you sell off the car, raise the 20,000, and you know, use that to pay off the loan from the bank. That’s what a liquidity crisis is. When you know you’ve got more in assets than in debt, but all of a sudden, there’s a big demand for cash delivery immediately.”
“Banks face the same thing; I mean, the scale is obviously much bigger. You know, millions of customers, trillions of dollars, and sometimes all of a sudden a bunch of customers withdraw over the same period, and billions of dollars are demanded, and then it doesn’t have all of its value sitting there in cash. It has treasuries; it has mortgages. So it does the same thing you do, just on a bigger scale.”
That’s what a run on the bank is.
They happen, they’re you know certainly tense for the bank, but um, they don’t result in people losing money, it’s just a question of you know how much equity basically does the bank need to to give up to to incentivize the process to go quickly enough.
That’s the same thing that happened to FTX. We had I mean going into the crisis in November 2022, you know something like 10 billion uh of positive net value plus an additional 20 billion of equity value sitting around, and all of a sudden there’s a run on the bank. You know, on FDX, customers started withdrawing billions of dollars a day from the platform. And so we started doing the same thing that that you know bank would do and the same thing you do with your car which is you know selling off Al started selling off all of its investments uh is access to generate cash and you know that’s a process which was going to take a few days to a few weeks, but we had offers in already. They started delivering to speed it up, and it was you know a big production, but the kind of thing that happens and that doesn’t result in in you know customers getting hurt um, except instead of that process playing out a law firm took over the company and you know spent the next two years sort of toiling its thumbs and pretending there is no money left.
Do you believe that you’re innocent?
Sam I do absolutely. Obviously, there are things that I do differently and you know lots of things I you know had a lot of decisions to make as CEO but by far the single biggest was um I backed down from from a fight in November 2022 and you know I uh I should not have let Sone and crumble take control of FTX. I I should have stood up to them and I didn’t and I you know after that there were excruciating years waiting, not just me waiting but and millions of customers waiting being falsely told that there was no money left and and not getting any payments until you know recently yeah. And let me let me ask you, you know, a lot of the sort of prosecutorial story and this goes back to Danielle SNY is of of kind of this fraud and this sort of sense of greed and and and and all that and I guess for most people you know the amount of money you had and handled is is almost unfathomable.
I mean let me start I mean what is your relationship to money I mean you know there’s been a lot written about you’re interested in effective altruism other sorts of things but you know kind of on one leg I mean what is it like having that much money is and you know and what does it feel like um and and and and what was that experience like and and maybe as a way of getting kind of prison what was your intent here. I mean it was a phenomenal amount of money that sort of came all of a sudden um you know over a few year period more than I certainly ever thought I’d see in my life and you know so the way I thought about it basically was I sort of split into two different categories. One was in terms of my own what say it’s like sort of personal consumption my own livelihood, and you know from that perspective my life didn’t change that much. I I you know lived on a you know I on on my salaries, I mean it was a significant salary, 200,000 a year, but you know not not billions. Um, I didn’t change my lifestyle that much, and I honestly feel all that tempted to I don’t I never really understood the the point of yacht exactly. Um, it was never something that really appealed to me or felt like a good use of resources. Instead, what I thought about for the sort of much larger scale of money that was coming in was you know impact on the world and you know I look at it through an effective altruist lens basically which was well you know I’ve got money to donate um what’s the place I think I can do the most good with it and you know some of that went to I you know health uh causes across the world people you know dying of diseases no one should be dying of anymore malaria just osmosis um some of it to animal welfare causes and some of it to uh pandemic prevention causes and you know a variety of others and uh and obviously some of in politics as well and and that’s where I thought on a much larger scale because frankly you know there are billions of people in the world and you know there are millions of people who die of neglected tropical diseases every year and that’s an area where you can actually you know it makes sense to think in in in sort of ludicrously large terms in terms of you know sums of money where billions of dollars can actually be put to effective use in a way that never would have made sense on you know my life personally.
How have you experienced the kind of twists and turns of the last couple of years?
Yeah, you know, from the personal living perspective, like I mean there are a lot of things I don’t like about my personal situation right now you know money isn’t the important one and I that’s not what I miss freedom is, but the place where it is frustrating is just that you know it was I mean it’s a way that I was hopefully I’d be able to have positive impact on the world and you know something I can’t do anymore and there are a lot of really great causes and charities that hoped that they were going to be getting significant amounts over the next decade for me and and now aren’t. Not only are they not getting that, but they’ve been T by association um you know with me and that’s that’s really sad to watch and I I feel really bad about it yeah.
And you you were kind of at the frontier of sort of this Wild West moment in crypto and whether it was kind of throwing elbows or rubbing shoulders with you know some questionable characters or or kind of you know characters on this this frontier of this new industry that was still in the still finding its footing is is it frustrating to you that you know some of these other people are are out and about and without your kind of sense of you know altruism or I don’t know I mean I guess a religious person would say kind of why me is is there any of that or is there any of that sense of I don’t know like where’s the justice here or anger at that you know I I obviously feel really frustrated with what happened with me but I try not to think about it in terms that are negative towards others. I think it it just isn’t sort of the constructive or or sort of fair and just to them way of thinking about it at the end of the day like my misfortune is not their fault and they don’t you know deserve to suffer um you know just because things haven’t gone well with me and and so you know the the way I I try to look at it is a lot of them have done really impressive things with their lives and um obviously we had our agreements, we had our disagreements, but yeah my my misfortune doesn’t mean that their success isn’t earned.
If you find yourself you know free again by any means I mean do you have a sense of what you might like to do Sam do you have a a do you want to be back in the in the in the crypto fray um is there is has there been any kind of you know saw on the road to Damascus moment um or is that seem too far off to kind of imagine it’s obviously it’s far far off and I would think hard about what I wanted to do with with my future if it even when it came to that point, but I try not to think about it too much right now because there’s nothing I can do.
I mean right now I’ve got you know 20 something years left on my sentence and when you look at I mean frankly how the the I prosecution and judge talked about the intention was for it to be one that I couldn’t have a productive life after and so you know thinking about what I would do um you know if that were a change you’d be sort of putting the cart before the horse.
Is there is there sort of one thing, one thing you miss most is it is it taking a walk and getting coffee is it you know late night conversations with friends it’s you know the the physical aspects have never been the most they’ve never been the most important to me um you know obviously there’s the conversations with friends, but I think even more than that it’s you know it’s the freedom of of information of being able to access information about the world. I mean just being able to Google things like you know is something I really sorely miss and um and then on the side being able to try and work on something meaningful that uh you know those are the two big things that I I feel more sorely you know missing than anything else.
What is sort of next for you um immediately do you have any sense of what the next sort of weeks months look like does it feel undifferentiated does it feel like there’s a kind of narrative arc to it you know the the days go by in a pretty undifferentiated um there isn’t there isn’t a whole lot to do in prison and um it’s you know I’m used to trying to dedicate myself to work and there isn’t that much to work on here. But you know from a high level perspective one thing which is certainly on the horizon is the uh sort of resolution of my appeal um we have oral arguments coming up you know sometime in the next you know probably 3 to six months for that um and you know I feel cautiously optimistic, but the odds are always against anything working in the Federal Criminal Justice System so you know cautiously optimistic just means that I think you know that there’s a shot and you know hopeful that that you know get judges who are are open to giving sort of a careful and critical look at what happened outside of that you know it’s not a situation where I’m you know inmates aren’t really in control of their lives so a lot of things happen you know sort of to me rather than than by me and I mean right now you know the thing that I’m I that sort of has has you know all of a sudden popped up is that I might be shipped across country for the next you know days or weeks or months and that and that obviously would be a you know disruption in your routine and such as it is um I’m I’m interested in that you know that question of of being in control. You know you’re someone who you know I I see as you know I mean it’s an Hackney term but you know a disruptor someone who’s I think fair to say always felt more comfortable building his own you know kingdom than living in someone else’s you know whether it’s you know universities or you know corporate world or any of that and here you’re you know thrown into kind of the most institution of all institutions you know and I um I don’t really have anything really insightful to say about it but just to say that the law is itself just an enormous institution.
Yeah, it’s um I mean incredibly frustrating and I mean it’s really frustrating seeing what a lot of people around me are going through as well you know there’s so many different stories here obviously you know everything that you could imagine but you know one commonality is it’s exactly what you said you’re thrown in into the system so to speak and it’s dehumanizing and a place without without choice and without sort of agency this call is from a federal prison you know for a lot of people um especially people who you know don’t have enough even to hire a lawyer and you know end up with the public defender and sometimes they get a great one but often not like you know they end up not even in not even in charge of their own cases their own defense not even really involved even if they try to be and so even their defense is just something that comes and goes without them having a whole lot of input to it and I don’t think it’s always in their interest that is the case.
I think sometimes they just get swept the way the system wants to sweep them so truth be damned how have you thought about it I imagine you’re someone who tries to think in and correct me if I’m wrong in a sort of logical way um or you know just kind of a Shand a mathematical way a logical way you know you’re kind of confronting sort of the legal way of thinking you know and and has that has that felt frustrating um to feel like there are these kind of just different paradigms or different world views or kind of Alice you know Alice through the looking glass or whatever metaphor you want to use yeah.
You know I think there are two parts that one part is that the law itself can be bizarre and infuriating and and nonsensical you know everything from like this obviously has nothing to do with my case but you know I’ve seen a lot of people’s what a lot of people are going through and like you know can you kidnap someone for six seconds there’s sort of like a question it turns out that in half the country the answer is yes that’s how the law works and it’s a 25 year prison sentence you that that’s s of one piece of this but another piece of it at the same time is that you have these sort of like mini dictatorships these little thorns in the criminal justice system that are just I mean they’re run by you know the judges and or or by the prosecutors depending on which your stage you’re at and if the rulings don’t make sense they don’t make sense that there’s no recourse really to it there’s no competition there’s know I you know it’s a monopolistic system so to speak and if if the party empowered just I have no interest in in sort of like you know justice on an issue that she how it is you know you can appeal if that takes three years you know it’s three years before you even get a second opinion.
Let me ask you you know you I think you were sort of starting to or or um in the work of imagining how sort of enormous resources um could be leveraged for you know social impact and effect.
Do you think you’ve worked out a kind of model for how wealth can be effectively used to make the world a better place?
You know I have some thoughts on it. I certainly don’t have the Holy Grail um I don’t think anyone does uh but and and I think there’s a lot more that I have to learn than what I know on it, but there’s certainly something that at least started to seem clear to me um and you know some of them are just common sense some of them are are like just paying attention to the details you know to the numbers to the ultimate impact of different causes; I think another piece of it is just that scaling things is really hard. You can often find really effective, you know, sort of interventions at one scale of resources, but you multiply those by 10, and they just end up wasting the other 90% of the money because you know either the opportunities are only so big, or you know the constraint isn’t money sometimes. Sometimes the constraint is having a really effective team, and that was just an incredibly consistent pattern we found that like, you know, the best movements, causes, charities, institutions are ones that have a really well-oiled team with a clear goal that works well together and has like strong but thoughtful leadership.
But that’s pretty rare, and anytime you don’t have that, the efficiency on any possible sort of met just goes out the window, and I mean frankly I think that’s you see the same thing in government, and we’re seeing that now in real time. I mean you know this, I don’t know how much you’ve seen of Doge and what this, I mean you know it’s a really alive debate about oh yeah, you know the reform versus Revolution; you know the scalpel versus the chainsaw.
Yeah, yeah, you know I’ve grown I think over time more sympathetic to the chainsaw approach in some cases that like you know some things actually do need more than a 10% cut; they need a 30, 50, 70%. But kind of course you have they have to be rebuilt in the right way. Like right, like you can’t just replace them with the vacuum. You know we dealt with the perit and dealing with the SEC was completely impossible for the crypto industry. It wasn’t like it needed to be a little bit more efficient; it was that its entire purpose was to stay innovation seemingly.
Yeah, and somehow it had an absolutely massive employee base to get nothing done. Sam, you know, you’re obviously you know your story is exceptional, and but as you said, I’m both appeal and you know let’s say a pardon, you know an exception with you know exception would have to be made for you in some way. You know even if just with the odds, and I’m just curious, I mean, what do you do you think you you’re an exception? Is your case kind of, so generous, or is there something here that you know could stand for something larger?
I think what I’d say is all the patterns that I see in my case, it’s not the only one that has them. There are a lot of other cases that have the same problems. I do think it’s a case that when media gets involved, when you have a lot of interest in a case, and when politics get involved, both of partisan political sense, but also in the workplace politics sense and the career advancement for law enforcement sense, it blows everything out of proportion.
And a lot of patterns that exist in a lot of places just sort of reverberate on themselves and grow in sort of metastasized in an unconstrained way. And so, you know, it was I think in some ways particularly of whack example of some of these, but you know mine’s not the only.
This call is from Sam Bankman-Fried.
Hey hey Sam, sorry Miss 3M. I got caught up with an inmate’s legal work. No worries. It seems to me that your argument that FTX was always solving, that there were enough assets to pay everybody back, that it was a liquidity crisis ultimately is sort of central to, you know, your argument and appeal, and just how you understand your case and how you understand what went wrong in the handling and prosecution of it.
So if you could just lay that out, you know, I was looking at financials, at balance statements periodically and then, you know, during the crisis we made sure to figure out exactly what every entity held. I still have many of those financial statements, those balance sheets. We gave all of them to the debtors in case they wanted them; they had no interest in them though. And you know I’ve been following along post-bankruptcy at what happened to them, and every single one of them from before, during, and after the bankruptcy showed solvency, showed more assets than liabilities.
That was always true, and you know, we all knew it was always true. That was sort of the most fundamental metric that we’ve been looking at, and you know if that’s not true then all of a sudden you’re looking at potentially being underwater, potentially having a very difficult to solve crisis on your hands. But you know, in fact, you can sort of grapple over time, you know, what happens you know in just citing together FTX and Al for simplicity’s sake, you know looking at assets versus liabilities, and you know in sort of the boom of 2021, you know, gross net asset value of you know 40 to 50 billion plus another 20 to 30 billion of equity in FTX.
There’s you know the crash of the first half of 2022, but even after that, you know you’re looking at something like 20 billion of assets against 10 billion of liabilities, you know, so about 2x leverage, which meant that if there did come a run on the bank, you know if all of a sudden all of FTX’s customers were to withdraw everything that they could from the exchange, we’d have to sell off those 20 billion of assets in order to get cash to pay out effectively.
And I should say that 20 billion facets, and then another 20 or so billion of equity in FTX on top of that, you know, it remained true through the crisis, and it remains true today. And so you know, one way that I look at it is what we could have done and would have done and we’re working on was back in November 2022, paying back all customers in kind with exactly what they requested in full, even if it got to 100% run on the bank and we were selling off the investments to do and we had liquidity offers billions of you know worth that would let us expedite that process and get it done in a matter of days and weeks.
They started delivering already. Looking at today, you know a lot of customers are frustrated that, well, it’s now been two and a half years, so they didn’t get anything back for the first two years, and what they’re getting back now is sort of the old dollar value of their assets rather than, you know, the crypto themselves. I understand their frustration with that. It was frankly a bit of a weird decision of the estate of the debtors when they chose early on they weren’t going to give people back the assets they asked for; they’re giving back just dollars.
But it was a decision of theirs; it wasn’t a decision they had to have made. And you know if they hadn’t made it, if they had done literally nothing, that they just sat there toying their thumbs for the last two years, then today the state would have, you know, around depending on whether you want to include, you know, equity value and what they would have done with the company, you know, 40 to 60 billion dollars of excess value.
This call is from a federal prison, allent three or four times over, and that is delivering all assets in kind to customers, so not giving them back the $177,000 per Bitcoin from you know the petition day prices, giving them back their Bitcoin. And so there’d be no problem making either having, you know, make good on everything in November 2022 or today giving people back their in-kind assets. In fact, with plenty of interest with all the price appreciation since then, if if only there hadn’t been a dissipation of assets between now and then.
So what went wrong? I mean, was it that people just didn’t know how to read the books? Was it, do you think it was malice? Was it, I mean, what was sort of lost in translation? So you know what could have happened was just spending the next you know days and weeks in November 2022 liquidating assets. Same thing you always do in a run on the bank; you know you liquidate investments and assets in order to meet the withdrawal demands, and that that would have worked.
It would have worked shortly. That’s what we had been doing; that was one pathway forward. The other pathway forward was what Svin Cromwell proposed, which was they get the company and file some parts of it in bankruptcy protection in chapter 11. And you know, got sort of hay from there out about what exactly their plan would be, but we’ve now seen it, you know, we now know what it was.
And obviously, I can’t know for sure what was going through other people’s minds, but just inferring it from their actions, you know, you ask like did they just like misread the balance sheets? Well the, they just didn’t read them straight up. They refused to seriously consider any documents that the company had created on sort of general grounds of not trusting them.
But they also, while not trusting any of the documentation, immediately came out with confident statements about you know the company being hopelessly insolvent, being a dumpster fire, which well they can’t possibly have had real competent bases for not using the existing material. And it’s also not what the existing material showed. My best guess just looking at their history of statements where they start out saying you know 1 billion of assets in late 2022, early 2023.
A few months later they say, oh there we found five billion of assets. Then a bit later seven billion of assets, then 13 billion by early 2024, and you know 15 billion in 2025. It’s just this ever-growing number as they sort of ignore fewer and fewer of the assets that were always there, you know their balance sheets with the larger number as of petition time.
You try to draw the line for me but between the allegation about sort of using customer funds and the way FTX and Alam were handled and this argument about it ultimately being profitable. How is this all kind of related? It’s a really good question and a question which, infuriatingly, we weren’t allowed to communicate at trial and which the states had no interest in either.
But you know there are two ways you can think about this. The first is was there borrowing to begin with? Were customers borrowing assets deposited originally by other customers? Or do you have a situation where someone’s account balances, they have three Bitcoins and two Ethereum, and then you have in a wallet exactly three Bitcoins and two Ethereum matching that?
And as to that question, well that that’s what FTX US looks like. Basically, you had lots of purely spot customers that just had balances of assets in their account, no margin lending, borrowing, no negative numbers, and the sum of those was what you found in FTX US’s wallets.
FTX International though, 80% of the assets there were margined assets, which means these weren’t accounts that had you know a tenth of a Bitcoin and $13 in it; they were accounts that had say, you know, $500 of Bitcoin and $400 of Ethereum as the account balance that had leverage on and were themselves borrowing.
And so when you have, you know, a user that deposits $100 and then, you know, buys $500 worth of assets with that on leverage, borrowing the other $400, the exchange isn’t going to have $500 of assets representing that account; it’s going to have $100. And that was most of the activity, you know, by assets and by volume on FTX International. So you know, the answer is of course there was borrowing; that was sort of the whole point of the platform, was that users could margin their accounts, they could crossmargin them, they could deposit whatever they wanted, send it to FTX as collateral, and then, you know, buy on margin or sell on margin whatever, you know, tokens or futures they wanted.
So your argument is not exactly a moral luck argument where, well because everybody sort of, there was enough at the end, that means everything else was retroactively right; that’s what the nature of the platform itself was all along the way. That’s right; it was the core nature of the platform the whole time.
And of course, while you’re doing that, there is a second consideration, which is sort of an overriding consideration which is solvency because even if people expect there’s be borrowing and lending, they also expect that the platform has a reasonable expectation that it will be able to make good on its st— you know if you deposit collateral to a platform, and you do some trading, you later close down your positions, that the platform should have a reasonable expectation of being able to deliver to you what you withdraw.
And if it’s totally underwater, if it’s insolvent, it’s not going to be able to, and so that ends up being, you know, the biggest consideration. And if that fails, then sort of everything falls apart. But most of the activity on FTX was assuming that there was rehypothecation, that there was borrowing; that was the nature of the platform. And you know for what it’s worth, like FTX did always have more assets on hand than the purely spot accounts.
The other, you know, 20% of assets on the platform that were customers that didn’t, you know, enable margin that didn’t have futures positions, there are a lot of details off; this is just sort of the broad strokes answer. Yeah, and you know you could do a deep dive into the terms of service and the different sections of it and how they apply to different, you know types of assets on the platform, but that’s the high-level answer.
Yeah, and do you think you know this question of the solvency, do you think that goes to intent, or do you see that as linked to the question of intent and you know the mens rea requirement for fraud? I think it does at least to some extent, and maybe to put this another way, there’s a platform; it has borrowing, it has lending on it, and at the end of the day, someone takes and spends so many assets from the platform that it’s left completely insolvent, that it’s left, you know, owing 10 times as much as it has in assets and value, not just mismatched assets but like there’s nothing to sell left.
Then you’re taking actions that you know are going to lose money right for others, whereas if that’s not the case, that doesn’t answer all the questions, but it does answer the question of whether fundamentally there was a theft or whether fundamentally there’s like a contractual question of what the… 2814.36 - 3.839: [Music]