SBF talks to The New York Times: Why did the funds of FTX and Alameda get mixed?

Author: Nikhilesh De, CoinDesk
Compiled by: 0x214, 0x911, BlockBeats

After the FTX collapse, SBF spoke publicly for the first time. On November 30, he had a conversation with New York Times columnist Andrew Ross Sorkin at the DealBook Summit. CoinDesk reporter Nikhilesh De recorded their dialogue, which BlockBeats has summarized and translated as follows:

Andrew: "People think this kind of conversation shouldn't happen. I just want to say that as journalists, our job is to have these conversations on behalf of the public, to ask questions, and to seek answers."

There are two perspectives on the FTX-related events. One more lenient view is that you are a young person who made a series of quite terrible, bad decisions; the other, less lenient view is that you committed large-scale fraud."

SBF: "At the end of the day, I am the CEO of FTX, which means that no matter what happens… I am responsible to all stakeholders and customers… I have to treat them right to ensure the company is doing the right thing… Obviously, I made a lot of mistakes."

On Fund Mixing

In response to the first audience question, SBF stated that FTX US and FTX International are two platforms, "I believe the current FTX US platform is open for withdrawals." SBF mentioned that his access to data is limited, but "from what I have seen… basically a year ago, Alameda's leverage was about 10%."

Andrew: "I think a more important question is where Alameda got its loans? There is a view that this is related to fund mixing," Andrew quoted from FTX's terms of service, which state that FTX does not own user funds. SBF said there are many other contents in the FTX terms of service.

Andrew directly asked if there was fund mixing. SBF replied: "I did not intentionally mix funds… I never tried to mix funds."

Andrew pressed SBF to explain whether what he said on Twitter about the "8 billion dollar accounting error" was related to a report from The Wall Street Journal. The Wall Street Journal stated that Alameda Research head Caroline Ellison told employees that Alameda used FTX customer funds to pay off loans.

Andrew relentlessly pursued the claim that there was no connection between Alameda and FTX (which clearly there was): "I think the point is, should you have had access to those accounts in the first place?"

SBF: "I did not manage Alameda's operations; I did not know what was happening at the time, I did not know the scale of their positions; many things I only learned in the last month." SBF repeatedly stated that this was a mistake he made. He indicated that if he had run Alameda himself, he would have been concerned about the conflicts of interest.

Andrew: "When did the fund mixing start?"

SBF: "They did not… many traders held open margin positions on FTX, and they may have borrowed assets; they may have also shorted some assets using other assets as collateral."

Andrew: "There has always been a connection between FTX and Alameda, which sounds reasonable." Then, Andrew asked SBF if he "hoped that everything would be resolved without anyone wanting to figure out what the purpose of the fund mixing was?" SBF then explained that everyone was "sending money to Alameda to get credit on the FTX platform."

Andrew: "How do you view the claim that Alameda was effectively used for money laundering?" SBF asked whether it was about FTX US or FTX International, and Andrew said it was FTX International.

SBF: "These users still had to go through FTX's KYC policy."

Andrew: "So when did you realize there was a problem?" SBF stated it was on November 6. "I think it started around November 2, when Alameda's balance sheet leaked to CoinDesk…" (This sentence was provided by CoinDesk reporter Ian Allison.) SBF expressed concern that this would lead to "huge losses for Alameda."

On Collateral and Venture Capital

Andrew asked SBF about the efforts to save other companies: "When you did that, how much effort was made to support the value of assets like FTT?"

SBF: "To my knowledge, no lending companies held a lot of FTT; I think many of them may have been using it as collateral. I don't think that counts as them owning FTT."

Andrew: "Clearly, you used FTT, SOL, and other tokens as collateral, some of which required you to value them in a special way. Do you think your valuations were accurate?"

SBF: "From a risk perspective, I think I did not value them the way I would have liked."

Andrew: "You told investors and regulators that you were not involved in Alameda's decision-making, but Alameda invested $1.15 billion in Bitcoin mining company Genesis Digital Assets."

SBF: "I was involved in venture capital to some extent, but that was done in an entity independent of Alameda's proprietary trading."

On Criminal Liability

Andrew: "What are your lawyers telling you now? Are they suggesting that speaking out is beneficial for you?"

SBF: "They are not; I am not that kind of person. I have a responsibility to speak to the public and explain what happened."

Andrew: "Are you worried about criminal liability now?"

SBF: "I don't think I am; I mean, obviously, I personally think I am not, you know. But I think the real answer is that it is not… it may sound a bit strange, but I think the real answer is that this is not what I am currently concerned about."

SBF: "I mean, I have had a really bad month."

Andrew: "On November 7, you tweeted and then deleted a tweet. The deleted tweet said, 'FTX has enough funds to cover all customer deposits; we do not invest customer assets'… And just a few minutes ago, you told me the situation started to improve on November 7. Are you telling the truth?"

SBF: "The situation is unpredictable."

When asked about the hacking after bankruptcy, SBF said he had already lost access to the system at that time. He believed that the U.S. team took action to "seize some assets and put them into custody."

On Genesis

Andrew: "All summer, you paid $2.5 billion in loans to Barry Silbert's Genesis; I just want to clarify the potential dynamics… where did the money come from?"

SBF: "My understanding is that I believe Genesis was trying to recover a large amount of loans from Alameda."

Regarding the Vox interview, SBF reiterated that he thought he was talking to "an old friend of mine" (I don't think that reporter felt the same way) and added that he was thinking about malaria, animal welfare, and epidemic prevention at that time.

On Political Donations

When discussing SBF's political donations and lobbying in Washington, Andrew repeatedly pressed on the source of the funds. SBF stated that all came from trading profits.

Andrew asked SBF if he felt he "needed to spend money to buy a way in" to meet legislators and regulators. SBF said it took a lot of time, "it was not a matter of money."

When Andrew asked about the vacation home "effectively provided" to SBF's parents, SBF stated he did not know the details of his parents' house.

Andrew: "Reading these stories feels like a bunch of hyperactive kids throwing an overnight party!"

SBF: "I am the CEO, I am the CEO, I mean I keep saying I am responsible for this."

SBF: "I think we may have spent too much energy trying to gain regulation."

Andrew: "Can I ask what medication you are on?"

SBF: "I only had my first drink after I turned 21."

On the Future

Andrew asked SBF about his future, and SBF said he did not know what his future was, but in the near/mid-term, "I hope to help regulators, management, and customers as much as I can."

SBF: "People are showing a strong interest in financing." Although he had mentioned it before, he did not specify who the interested parties were.

When answering questions about corporate governance, SBF's line was interrupted. After it resumed, SBF stated that a dozen subsidiaries have boards (Andrew might have been asking about the main parent company FT entity, which does not have a board).

Andrew: "Are you being honest with us today?"

SBF: "Of course."

Andrew: "You have also lied; do you agree?"

SBF: "I don't know when I lied, but I think there have certainly been a few times when I acted as a representative and sales representative of FTX."