The first exclusive interview with SBF after the collapse of the FTX crypto empire

Original Title: 《How Sam Bankman-Fried's Crypto Empire Collapsed》

Original Author: David Yaffe-Bellany, The New York Times

Translation: 比得潘 @BlockBeats

The Collapse of the FTX Crypto Empire

In less than a week, cryptocurrency billionaire Sam Bankman-Fried went from industry leader to industry villain, losing most of his fortune as he watched his $32 billion company plunge into bankruptcy and become the subject of investigations by the SEC and the Justice Department.

Previously, this once-mighty crypto mogul was compared to financial titans like J.P. Morgan and Warren Buffett for building a vast crypto empire, but ultimately, an $8 billion hole caused by a bank run forced his cryptocurrency exchange FTX to file for bankruptcy. This damage rippled through the entire industry, shaking the stability of other cryptocurrency companies and generating widespread distrust in the technology.

Aside from a few Twitter posts, messages to employees, and occasional texts to reporters, the 30-year-old SBF has made almost no public statements in the past week.

However, in an interview shortly after midnight on Sunday, SBF sounded surprisingly calm: "You might think I can't sleep right now, but I actually slept for a bit; otherwise, it could be worse," SBF said.

The Failure Stemmed from Rapid Expansion

At the same time, SBF expressed countless regrets about the collapse of FTX, but he provided only limited details to explain the issues surrounding him and FTX. The Justice Department and SEC are reviewing whether FTX improperly used billions of dollars of customer funds to support his quantitative trading firm, Alameda Research.

SBF stated, "Alameda accumulated a large margin position on FTX, which is much larger than I imagined, reaching billions of dollars, but in fact, the downside risk is also very high." This essentially means it borrowed funds from the trading platform, but SBF declined to provide more details.

However, SBF did agree with critics in the crypto community that he expanded his business too quickly across the industry and noted that some of his other commitments prevented him from noticing the signs that FTX was already in trouble.

"If I could have focused more on what I was doing, I could have done it more thoroughly, which would have made me aware of the risks," SBF added.

SBF's Relocation

Currently, SBF resides in the Bahamas, where he declined to comment on his current location citing security concerns, and FTX's lawyers did not respond to the request.

The collapse of FTX shocked the crypto world. But in recent months, based on interviews with nine of his colleagues and business partners, as well as internal information obtained by The New York Times, signs indicated that his business empire was in danger, and his ambitions had exceeded his control.

The relationship between Alameda and FTX is at the root of SBF's downfall. He founded the quantitative trading firm in 2017 and rented an office in Berkeley, California, not far from where he grew up in Stanford. Soon, the company made millions through arbitrage in the Bitcoin market.

In 2019, SBF moved the company to Hong Kong, a more regulatory-friendly environment. He relocated with a group of traders—including former Jane Street colleagues like Caroline Ellison—and continued to establish FTX, a platform for cryptocurrency investors to buy, sell, and store digital assets.

In 2021, attracted by regulatory agencies, SBF moved FTX to the Bahamas, where regulators allowed him to offer risk trading options that were illegal in the U.S. At FTX, investors could borrow money to bet on the future value of cryptocurrencies.

Moreover, FTX and Alameda had close ties, with the latter trading heavily on the FTX platform, meaning it sometimes benefited when other customers on FTX incurred losses. In the past, SBF defended this operation, claiming that Alameda provided crucial liquidity by injecting capital that enabled other customers to complete trades on the platform.

The Core Group of 15 at FTX

According to a person familiar with the company's internal operations, Alameda was managed by Caroline Ellison, with SBF also involved in making decisions for large trades, but at times there seemed to be little firewall between the two businesses. Alameda was supposed to operate in a separate office, but in recent months, a client visiting the FTX building saw Caroline Ellison sitting in front of a computer displaying trading data from the platform.

On the other hand, despite venture capital firms pouring billions into the company, there were no external investors on FTX's board. Besides SBF and Ellison, the executive circle in the Bahamas included engineering director Nishad Singh, chief technology officer Gary Wang, and product head Ramnik Arora.

In the Bahamas, SBF sometimes lived in isolation with a small group of colleagues, residing in a five-bedroom penthouse in the Orchid building of the Albany resort, a 600-acre beachfront resort on New Providence Island in the Bahamas, with Caroline Ellison, Nishad Singh, Gary Wang, and six others. Two people indicated that SBF and Caroline Ellison sometimes dated.

However, SBF stated that he and Ms. Ellison are no longer in a romantic relationship but declined to comment further, and Ellison did not respond to this.

When asked if he relied too much on that small group of people, SBF stated that his close circle of colleagues was about 15 people. "To be precise, I don't think anyone can maintain close contact and communication with more than 15 people," he explained.

"Altruism" and "Autocracy"

All along, SBF and his circle of colleagues claimed to be committed to effective "altruism," a charitable movement urging followers to donate their wealth in effective and logical ways. However, a knowledgeable source said that it was sometimes difficult for colleagues outside the group to find time to talk to SBF, who took pride in having only about 300 employees at FTX, much smaller than its main competitors Binance and Coinbase.

While SBF was continuously laying off employees, he also invested in dozens of other cryptocurrency companies, bought shares in brokerage firm Robinhood, donated to political campaigns, gave media interviews, and sought to provide billions in funding to help Elon Musk finance his Twitter acquisition.

When he began a frenzied acquisition spree this year, investing in struggling crypto companies, he did not share this information with key employees. When he was told he was overextending and encouraged to hire more staff, he rejected those suggestions.

Meanwhile, in Washington, SBF was pushing an ambitious regulatory agenda while criticizing Binance CEO Changpeng Zhao, but Zhao ultimately mobilized his extensive Twitter following, triggering a mass exodus from the FTX platform.

Later, SBF stated, "Given the issues this raised, venture capital may not really be worth it, specifically investments in other companies."

The "Love-Hate" Relationship with Changpeng Zhao

Perhaps SBF's most ambitious goal was to shape crypto regulation in Washington, where he testified before Congress and met with regulators. Insiders said he also leveraged his growing influence in Washington to privately criticize his biggest competitor, Changpeng Zhao.

SBF attended a Senate committee meeting in February, image source: AFP/Getty Images

Recently, SBF stated, "Criticizing Zhao is not a good strategic move for me; I feel very frustrated about it, and I should have understood that expressing this was not a good decision of mine."

As a former investor in FTX, Zhao still held a significant amount of FTT, a cryptocurrency launched by FTX to facilitate trading on its platform. On November 6, Zhao announced on Twitter that he was selling FTT, prompting many FTX platform customers to rush to withdraw their deposits.

At the same time, Zhao wrote on Twitter, "After the 'divorce,' we won't pretend to stay close, and we won't support those who lobby against other industry participants behind the scenes."

Additionally, when FTX collapsed, Zhao initially agreed to acquire the trading platform, effectively bailing it out. But soon, after Binance discovered financial issues at FTX, the deal fell through.

In a Signal group chat that included SBF and other FTX representatives, Zhao posted a brief comment: "Sam, I'm sorry, we can't proceed with this deal; there are too many problems with FTX."

Afterward, SBF hurriedly prepared new financing and mentioned in an internal letter to employees, "I shouldn't have mocked them; they might have never really planned to complete this deal."

Meanwhile, according to a knowledgeable source, during a meeting with Alameda employees on Wednesday, Ms. Ellison explained the reasons for the collapse, her voice trembling as she apologized for disappointing everyone.

Caroline Ellison stated, "In recent months, Alameda has taken out loans, but at the same time used that money for venture investments and other expenses. However, around the time the crypto market crashed this spring, lenders began to call back those loans. And the funds Alameda spent were no longer easily obtainable, so the company used FTX customer funds to make payments." Besides her and SBF, only two others knew about this arrangement: Nishad Singh and Gary Wang.

The Wall Street Journal previously reported on this meeting, but Singh did not respond to it, and Wang could not be reached. According to those familiar with FTX's financial situation, the trading platform provided Alameda with loans of up to $10 billion.

Improvisation

With the collapse of FTX, SBF stated on Sunday that he had been working constructively with regulators, bankruptcy officials, and the company to do the best for consumers.

But he is now under investigation by federal prosecutors in New York, who have begun contacting potential witnesses. Several people familiar with the matter indicated that others associated with FTX have also started contacting lawyers for possible representation, with Sullivan & Cromwell law firm representing FTX in the bankruptcy investigation, while Paul Weiss's lawyers represent SBF.

Meanwhile, in the interview, SBF declined to discuss the possibility of imprisonment.

"People can say all the nasty things they want about me online, but what matters to me is what I did and what I can do," SBF stated.

Additionally, in recent days he has found other ways to pass the time, such as playing the video game Storybook Brawl, although he has played less than usual. "But it helps me relax a bit; it keeps my mind clear," SBF explained.

Regarding a series of mysterious tweets he recently posted: "1) What, 2) H …," SBF said, "I don't know; I was just improvising; I thought it was time. The next step will be to post the letter A, then P; it's not just a word; I'm filling it in as I go."