‘We kind of lost track’: how Sam Bankman-Fried blurred lines between FTX and Alameda

Speaking from his bed in Nassau at around 3am on Saturday, Sam Bankman-Fried grappled with one of the questions at the heart of the collapse of his $32bn crypto empire.

The FTX founder insisted that he had walled himself off from trading and risk management at the Alameda Research trading firm, which he majority-owned, for “conflict of interest reasons” related to his role as guardian of customer assets as chief executive of the exchange FTX.

But he also admitted, in an interview with the Financial Times, closer involvement in financial decisions at Alameda than he has previously disclosed.

The conversation, which the 30-year-old requested be held via video call in the small hours of the morning at his Bahamas residence, was part of a contrite media campaign that Bankman-Fired has launched in the past week.

The former mogul has freely admitted in several interviews to what he called “massive oversights”, “huge fuckups” and a lack of “rigorous thinking”.

The media blitz has puzzled many at a time when the circumstances of the collapse of FTX, one of the largest crypto exchanges, are still being scrutinised by at least 1mn creditors, criminal investigators and civil litigation.

Bankman-Fried told the FT he reasoned that keeping quiet could be seen as “tacitly admitting the truth of a lot of theories” that have proliferated online about his alleged wrongdoing.

“To the extent that there’s a tactical piece of it, I think it’s basically that things have gotten to the point where, frankly, there were a lot of conspiracy theories floating around that had no validity,” Bankman-Fried said. “And to be clear, at its core, I fucked up. I fucked up big and people got hurt. And you didn’t need a conspiracy theory to get there.”

He faces accusations in a US lawsuit that his companies were a “Ponzi scheme”. Executives running the company in bankruptcy have said in court filings that FTX appeared to have “conceal[ed] the misuse of customer funds”.

Bankman-Fried has denied intentional wrongdoing, blamed his own “huge management failures” and said he did not fully realise the perilous financial state of FTX until days before it was forced into Chapter 11 bankruptcy in Delaware in early November.

He admitted that Alameda had been allowed to exceed normal borrowing limits on the FTX exchange since its early days.

Core to Bankman-Fried’s account of how FTX ended up with a roughly $8bn shortfall of client assets was excessive lending by the exchange to Alameda, which ploughed the money into venture capital investments and doomed bets on digital tokens.

Bankman-Fried deflected the FT’s questions about the excessive borrowing and soured investments that ultimately sank Alameda, blowing a hole in FTX’s finances, and would not be drawn on the legal consequences he may face. He said he deliberately avoided getting involved in Alameda’s trading and risk management to avoid conflicts with his position as chief executive of FTX, and neglected to monitor the risk they posed to the exchange.

However, he said that in early summer he participated in conversations in which Alameda’s financial health and borrowing were discussed. Previously he had suggested he only “fully realised” its parlous position last month.

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“I do remember that there were some discussions around Alameda’s positions. I don’t remember numbers from those. I don’t remember numbers being said, I’m not sure they weren’t. I think Alameda did some recounting then, or some checking in on the health of its position,” he said.

He recalled at least one meeting in FTX’s Nassau office following the crypto market crash in May where staff said that Alameda’s access to third party loans was being cut back and it might need to borrow more from FTX. He said he could not recall who participated.

“My sense of it at the time was something like people taking stock post-crash,” he said.

“Alameda had a number of margin positions, open at various borrow-lending desks, generally net long positions,” he said, and some fraction of these were transferred to FTX as other lenders withdrew credit, increasing Alameda’s liabilities to FTX by around $6bn. 

Asked how the large increase in Alameda’s borrowing from FTX was approved by the exchange, he said: “I don’t feel good about not knowing the answer.” 

He said the company did not have a chief risk officer monitoring its margin positions or rules about who needed to sign off on large changes in borrowing. “As a company, we kind of lost track of positional risk in a pretty big and pretty destructive way,” he said.

Bankman-Fried also said he was involved in two of Alameda’s largest uses of funds: the $4bn it poured into venture capital and the $3bn he says it spent buying out rival Binance’s equity stake in FTX.

“Those two add up to a pretty big number,” he said, adding that the two uses of cash were “the least unsatisfying answer that I have been able to come to” in answer to the question of how Alameda disbursed billions in FTX’s money.

He said he did not know at the time exactly what funds came from borrowing rather than Alameda’s trading profits. But he said the venture capital investments were “effectively, some of them, on margin”. 

“I regret that. I regret that quite a bit,” he added.

Bankman-Fried’s attempt to account for what went wrong was laced with caveats and references to his incomplete memory. He cited lack of “confidence” in his answers at least a dozen times, calling other responses “idle speculation” or “shitty answers”. At one point, he paused for half a minute with his head in his hands.

Some observers have interpreted his very public mea culpas as an honest attempt to recall a situation that rapidly spiralled out of control. Others find his explanations implausible.

Several former employees who spoke to the FT questioned his portrayal of FTX as a company that was led off a cliff by the well-intentioned bungling of its mostly youthful leadership team.

Ira Sorkin, the lawyer who defended fraudster Bernard Madoff, told Bloomberg that Bankman-Fried’s media campaign was a mistake. “You’re not going to sway the public. The only people that are going to listen to what you have to say are regulators and prosecutors,” he said.

But there are indications that it is having some effect. Hedge fund manager Bill Ackman this week tweeted: “Call me crazy, but I think [Bankman-Fried] is telling the truth.”

Maxine Waters, who will preside over hearings on FTX in the US House of Representatives financial services committee later this month, said in a tweet that she “appreciates” Bankman-Fried’s candour and “willingness to talk to the public”. 

But despite his public explanations, Bankman-Fried said he does not expect to win people over. “I’m not expecting positive sentiment at all,” he said. “Like, I don’t think I deserve that.”