Aha! Forbes Has Got The Goods On Sam!
Bankman-Fried, in a series of high-profile media appearances this week, has begun offering his own working theory: Alameda took on far too much leverage to make risky investments on the FTX platform, and FTX failed to recognize and prevent it. A key claim: that Bankman-Fried himself didn’t really know what Alameda was up to.
“I was frankly surprised by how big Alameda’s position was,” Bankman-Fried said at The New York Times’ DealBook Summit on Wednesday. “Alameda is not, like, a company that I monitor day-to-day,” he claimed to New York magazine in an article published Thursday. “It’s not a company I run. It’s not a company I have run for the last couple years. And Alameda’s finances I was not deeply aware of. I was only surface-level aware of Alameda’s finances.”
Wow, if someone can show he was the evil genius behind the swindle, that he actually knew everything, then it's game over! And Forbes has the smoking gun!Just how “surface-level” remains to be uncovered, as a bankruptcy team picks through the wreckage to retrace what occurred. But a look inside Bankman-Fried’s discussions with Forbes provides an early baseline of Bankman-Fried’s awareness of Alameda’s dealings: Since January 2021, Bankman-Fried has sent Forbes details of some of Alameda’s major holdings at least five times in response to questions about his net worth, including explaining the specifics of certain transactions and updating the number of FTT, Solana and Serum tokens Alameda held–as recently as late August.
Why, Sam sent Forbes spreadsheet after spreadsheet covering Alameda's holdings! He updated them at least five times! As recently as late August!There's just the small problem that John Ray, the new FTX CEO, is on record as saying,
Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.
So whatever Sam sent Forbes, and no matter how often he updated it with new details, it was the purest moonshine. How on earth does this prove Sam knew what was going on? Every informed account is that Sam and the others in the luxury condo had no financial experience, they were basically just interns. How could Sam, an intern-level guy, have known enough about finance to put together even a phony spreadsheet? CEO Ray himself has said,It is my view based on the information obtained to date, that many of the employees of the FTX Group, including some of its senior executives, were not aware of the shortfalls or potential commingling digital assets.
This in turn supports my developing inference that Sam actually didn't know what was going on in his name. Take his reaction to a question about his parents' vacation home in the Bahamas:Sam Bankman-Fried claimed he didn’t know how a $16.4 million Bahamas mansion got listed under his parents’ names, insisting that it was meant to house staffers at his now-defunct FTX cryptocurrency exchange.
“I don’t know the details of the house for my parents,” Bankman-Fried told the New York Times’ Andrew Ross Sorkin via Zoom at the newspaper’s DealBook summit event in New York City on Wednesday.
“I know it was not intended to be their long-term property. It was intended to be the company’s property. I don’t know how that was papered in.”
Or take his response to a question from another interviewer about a “backdoor” that allowed Sam to execute commands that could alter FTX’s financial records without alerting others:SBF expressed surprise at the very idea. “And this is something I would be doing?” he asked. “That I can tell you is definitely not true. I don’t even know how to code. […] I literally never even opened the code for any of FTX.”
This set the tone for the rest of the conversation, in which Fong politely asked hardball questions and SBF answered with seeming openness.
What this suggests to me is more of what I surmised yesterday: Sam and his condo colleagues were a front, similar to Enron's phony trading floor with computer monitors on the tables and traders on the phones, the whole thing a sham for visitors. I think Sam was merchandised as a Wunderkind-cum-idiot savant who knew how to make crazy bundles of money despite being medicated out for ADHD. Caroline Ellison was merchandised the same way. The bottom line is that not everyone was fooled. But Sam himself was the frammis, the phony get-rich-quick formula on which the Ponzi was based. He wasn't the mastermind, he was the gimmick.The media fell for the Sam-as-idiot-savant line from the start, and so far, they won't drop it. If he was smart enough to make billions, which he didn't, he was smart enough to cover everything up, except he wasn't.
There was clearly an off-the-org-chart, off-the-books operation that handled the celebrity endorsements and arena naming deals, it also generated the phony spreadsheets that it gave Sam to pass on to Forbes, and it had a legal department that cooked the deeds for Sam's mom and dad to get their vacation home. I believe Sam when he says he knew nothing about that. John Ray is suggesting as much himself.
I think the bigger story is Prof Bankman, Prof Fried, and the Ellisons. Whether anyone in the media is allowed to pick it up is another question.
