— Nassim Nicholas Taleb (@nntaleb) December 5, 2022
I’m deeply sorry that this newsletter happened and like, really, really hate that I didn’t, like, that I didn’t stop that from happening. https://t.co/gC3V0XlVY9
— Matt Levine (@matt_levine) December 1, 2022
Best (and funniest) explanation I’ve read, so far:
It is good, for journalists, to ask Sam Bankman-Fried where all the money went, but he is not going to tell you. The possibilities are:
1) He knows where the money went, and he has huge incentives to lie about it, or
2) He doesn’t know where the money went, as he sort of keeps saying, and he will just pass along his confusion to you.
There is not some third possibility where you can sit Bankman-Fried down and he will be like “here is a detailed timeline of all the innocent mistakes we made and how much customer money each one vaporized.” If he had those details available to him, he would not have vaporized the money. Or he would have, but the mistakes were not innocent, and he will not describe them accurately. Either way, you will not get a satisfying explanation, from him.
The person who will tell you where the money went at Bankman-Fried’s crypto exchange, FTX, and its affiliated trading firm, Alameda Research, is John Ray, six months from now. Ray is the current chief executive officer of FTX, appointed moments before it filed for bankruptcy, and the former bankruptcy wrangler of disasters like Enron. He harrumphed into bankruptcy court last month to be like “this is the biggest mess I’ve ever seen, and I’ve seen Enron,” and if I were him I’d say that constantly to my kids. Ray’s well-paid and frankly very interesting job is to sort it out, and I assume eventually he will. That sorting apparently involves, like, Googling news articles to see what venture capital investments FTX made, because FTX did not itself keep a list of its own investments. That is what we are dealing with here.
But Ray is methodically piecing together the accounts, not giving interviews, and keeping his complaints to court filings. Meanwhile Bankman-Fried is at loose ends in his Bahamas penthouse and seems to be spending his time calling up journalists and compulsively confessing to … whatever it is he thinks he is confessing to? “I didn’t ever try to commit fraud on anyone,” he told Andrew Ross Sorkin yesterday, but, otherwise…
[At which point, an elaborate and much-footnoted narrative unwinds, sharing a strong similarity to every other ponzi scheme you’re ever heard of. Go read the article!]
…The story of FTX that we have heard over the last month — from Bankman-Fried, from Ray, from everyone else — is that it was a bunch of disorganized children who had no idea what they were doing or where the money was. The story of FTX that we heard — from Bankman-Fried and everyone else — before this month was that FTX were the adults in the room, the hyper-competent, risk-focused, regulation-friendly, sophisticated crypto exchange. If you go around telling that story it really has to be true, or true-ish, or arguably true! If now you go around being like “ah, accounting, risk management, we never really understood those things,” that is not a good defense!
Related story, from NYMag — “Sam Bankman-Fried May Regret Throwing Caroline Ellison Under the Bus”:
Last night, Sam Bankman-Fried cracked. For the last few days, the 30-year-old former decabillionaire has given various interviews from his Bahamian suite. Dressed in his most formal T-shirts, he spoke of regret and contrition to the New York Times and Good Morning America, repeating lines about big mistakes and a tone-deaf joke about how it’s been “a bad month.”
But during a Twitter spaces event on Thursday — a kind of radio call-in show — Kim Dotcom (yes, the Megaupload guy) asked him a question that seemed to make Bankman-Fried lose his cool. It was about Caroline Ellison, the former CEO of Bankman-Fried’s hedge fund, Alameda Research. Ellison, of course, also happens to be Bankman-Fried’s ex-girlfriend. “You had power over her and she did what you asked for,” Dotcom said. “Why would anyone believe anything you say when you’re throwing your own lover under the bus?”
It was here that the carefully constructed image Bankman-Fried had sought to project broke down. See, SBF wants to talk about complicated, wonky financial things — margin requirements and the complex market structure behind his now-bankrupt exchange, FTX. He will admit that he was a little careless, labeled things poorly, should have been more on top of his web of businesses — still, all this was really just a $32 billion misunderstanding. Got it? What he does not want to talk about is what this is actually all about — which is how much power and control he really had over all aspects of the FTX and Alameda. That would seem to include being his ex-girlfriend’s boss. “Look, I fucked up big, but I’m pretty offended by some parts of that,” he said. “Caroline and I had been together for a while. I don’t control her. I never did. I think it’s really fucked that you would say that I would — that that’s how things work.”
But when Bankman-Fried says, “I don’t control her,” what he’s really saying is, It’s Caroline’s fault…
But it is also not just Ellison he is trying to blame. Take a look back at his interview with Vox’s Kelsey Piper, where he throws two of his other former top lieutenants under the bus: director of engineering Nishad Singh is “ashamed and guilty,” while chief technology officer Gary Wang is “scared.” He then implied that they had acted unethically. (“It hit him hard,” Bankman-Fried said, referring to Singh while saying nothing about Wang)…
Ellison hasn’t been making the media circuit like her former boss and former boyfriend in recent weeks, but her words still loom large in the entire affair. According to The Wall Street Journal, she told employees in a video call that she, Bankman-Fried, Singh, and Wang all knew that FTX’s customer deposits were being used by Alameda — a potentially fraudulent commingling of funds that’s at the very heart of what will happen next to these traders. (He told Bloomberg reporter Zeke Faux that he “doesn’t remember it that way” and downplayed his role in that meeting to a mere “kibitzing.” However, he also acknowledged that it happened, saying “that was the point at which Alameda’s margin position on FTX got, well, it got more leveraged substantially.”) But there was a telling moment in George Stephanopoulos’s interview where the Good Morning America host pressed Bankman-Fried on this. “If she’s in court and you’re in court, and she’s under oath and you’re under oath, and you’re asked, ‘Did you know that these funds were being funneled to Alameda?,’ what is your answer?” Stephanopoulos asked.
Bankman-Fried appears to stare at the floor. Five seconds go by. “I did not know that there was any improper, uhh, use of customer funds,” he said. Clearly Bankman-Fried was not under oath. But one day, he may be, and he may have to answer that very question. I doubt he’ll give the same answer.
Of course, there’s worse possible fates for SBF…
Look you're running a ponzi scheme which also serves as a way for criminals to launder money. And that money disappears. And people start dying. That is the opposite of "weird." That is: "the only way this would end." https://t.co/JcSsNYt9T9
— Jeet Heer (@HeerJeet) December 3, 2022
I don’t think crypto guys *should* be murdered by the international criminals and rogue states who they laundered money for, but i also don’t think they were under the impression it was the United Way’s finances they were facilitating.
— William B. Fuckley (@opinonhaver) December 4, 2022