SAM, Sorkin, Alameda discussed on The Breakdown

The Breakdown


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On November 23rd, Andrew Ross Sorkin wrote, a lot of folks have been asking if I would still be interviewing Sam at The New York Times steelbook summit. The answer is yes. There are a lot of important questions to be asked and answered. Nothing is off limits. Looking forward to it. I will say, I was nervous about whether shorten was going to ask the tough questions. But he started strong. Sorkin says, there are two ways to view what happened at FTX. There's a generous view that you are a young man, who made a series of terrible, terrible, very bad decisions. The less generous view is that you have committed a massive fraud that this is a Ponzi scheme, a manipulation of the system. What is this? What did happen? Sam says he was CEO, so whatever happened, he had a duty, blah, blah, blah, blah. But the key line is he says I didn't ever try to commit fraud on anyone. I was excited about the prospects of FTX just a month ago. I was shocked about what happened this month. Quickly pausing here, I think overall Sorkin did okay as we'll get into in a minute. But I believe that the main problem with a lot of these interviews is that they don't ask the questions in appointed yes or no style way. They ask it in ways that allow squirming and half truths and narrative construction. To his credit though, Sorkin tried to keep the focus on this question. He says next from a gentleman who said he had lost his life savings, the subject line is Sam bankman fried stole $2 million from me, says Andrew, can you please ask SPF why he decided to steal my life savings and the $10 billion more from customers to give his hedge fund Alameda? Can you ask him why his hedge fund was leveraging long all of these coins? Please ask him if he thinks what happened was fraud. These are the kind of letters I've been getting repeatedly over and over the past couple days. What do you tell this man? Now Sam for his part chose not to answer any of the actual questions about his decision, which was of course the question subject to give customer funds to Alameda. Instead he talks about Alameda's positions on the platform. Sorkin then cuts him off, the bigger question is where Alameda got the loan from. There is a view that this is about commingling of funds. In that letter, this gentleman actually copy and paste the terms of service for FTX into the email. None of the digital assets in your account are the property of or should be loaned to FTX trading, FTX trading does not represent a treat digital assets and user accounts belonging to FTX trading. So how is it possible that Alameda had this loan of such a large size? Sam says in one of the sleaziest answers, there's that piece of the terms of service, but there were a number of other parts of the terms of service in a number of other parts of the platform on top of that. He then talks to the borrow and lend portion and the futures portion claims that the platform could margin call all of those positions and close them when needed, but Sorkin cuts him off again and says, let's make this very straight. Was there comingling of funds? That's when it appears like. It appears like there was a genuine commingling of the funds of FTX customers that were not supposed to be commingled with your separate firm. Sam says I didn't knowingly commingle funds. I wasn't trying to commingle funds. Now the savvy observer here will note that it's not totally clear how much it matters whether he was quote unquote trying to or not. It certainly reads again like someone mounting a defensive gross mismanagement not fraud. But I wasn't trying to commit fraud might not be the strongest argument. Later on in the interview, Sorkin brings up Carolyn Ellison from Alameda, who had told staffers that Alameda used FTX client funds to cover loans that were being recalled because of the Luna triggered credit crunch. According to The Wall Street Journal, Caroline said that she, Sam and Gary were all aware of that. Sorkin asks how do you square that with what you said on Twitter that this was an $8 billion accounting mistake? Sam didn't really answer this one. Now a little later, Sorkin does push hard and lead Sam to start to reveal what sort of seems like another part of his plan, which is to pin this all in Alameda. At one point he said I wasn't running Alameda. I didn't know exactly what was going on. I didn't know the size of their position. To that, Jake stravinsky wrote, if you're Carolyn Ellison or Sam trabuco right now, I assume you're watching this and thinking very hard about your options. DoJ is only a phone call away. Another part of the interview that has gotten much coverage was when Sorkin asked Sam if he could go back to the U.S. to which Sam said to my knowledge I could, which short can then followed with how concerned are you about criminal liability at this point? Sam says I don't personally think that I have. It's a long interview so I'm skipping over a lot, but one of the more egregious seeming lies was when Sam said, I don't know the details of that house for my parents, but I know that it was not intended for their long-term property. Barf. Anyways, at the end, Sorkin asks were you truthful with us today and Sam says he was. And then Sorkin says I want to thank you for this interview. I hope that some of the answers have been helpful as we try to understand and entangle what is still a tangled story. I know this has been a difficult conversation and a tough conversation. On behalf of everyone here and on behalf of the public, I want to thank you for engaging in at a time and truth when I know you've been advised not to. At that point Sam gets a round of applause, which is just super weird. Now clips of that round of applause have caused a lot of folks on Twitter to be very angry at the interview as a whole. For me, I would give it like a solid C to C plus. Maybe graded on the scale of the rest of the media coverage up to this point, maybe it ekes into the bees, the reason for that is that Sorkin did ask some hard questions. But there can be too many points awarded for that as those are the clear questions. Second, Sorkin did try to drag Sam back to get answers when he obfuscated at least the beginning, he just wasn't really that successful. The third, there were some really big things he missed. Alex Krueger pointed out the Sorkin didn't ask about the $3.3 billion in loans to himself or the Alameda God mode where they didn't get liquidated as they were trading. Now some folks thought it made Sam look bad. Niraj from coin center says, as expected Sam looked terrible and had no answers. Slate wrote a piece called Sam bankman Friedman and other risky bet that didn't quite go as planned. With the juicy line whether the hole that the disgraced crypto Titan finds himself in is merely a reputational or legal or financial, he's now eagerly grabbed a shovel offered up by The New York Times columnist Andrew Ross Sorkin. Others though thought this was extremely calculated. Ledger status says I think the play on intent or lack thereof is extremely calculated and may even work. Jake stravinsky said I agree that's the play. It has a nonzero chance of tricking a jury if he wants to go to trial. That's a high risk play since the downside is a life sentence. But hey, Sam never was one to shy away from risk. Still, better chance if he shuts his mouth. Nick Carter took it even farther. This morning he wrote, Sam isn't behaving like a renegade who is ignoring the advice of his lawyers. He's behaving like he has a world class crisis management firm and legal team constructing a very specific and deliberate public narrative. It's not ten D underwater chest. It's just basically legal positioning. Obviously he has an interest in representing that he had no knowledge of Alameda and had no intent to commit fraud. Perceived intent matters. Manslaughter is a lot less worse than first degree premeditated murder. Even simpler Vinnie lingam echoed this point saying the SPF legal strategy is to attempt to characterize fraud as incompetence in order to stay out of jail. In any case, this was the entire conversation for all of last night, but shockingly. I think it was completely upstaged by an interview this morning with of all institutions, Good Morning America. George Stephanopoulos apparently flew to The Bahamas recently and had a two hour conversation with Sam, which was condensed down to what is for my money the best 9 minutes of any interview so far. It starts right off with George Stephanopoulos asking if FTX went bankrupt because it used customer funds to pay Alameda creditors. Sam gives a meandering answer as he is wont to do to which stephanopoulos responds, I'm no cryptocurrency expert, I'm no finance expert, but I don't think you answered my question. Did you know that FTX deposits were used to pay off Alameda creditors? And that, my Friends is the point when I sat up in my chair. Stephanopoulos didn't leave it either. He goes on, Carolyn Olsen says you all knew these funds were put into Alameda that these are funds that were owned by your depositors. Sam starts, GS cuts him off, reads the FTX terms of service, Sam tries to say in some cases it's okay, but then stephanopoulos says if Alameda is borrowing FTX users funds, that's a bright red line, isn't it? Sam tries to say there are a lot of cases where that's explicitly part of the program. But GS cuts him off again saying but not here. Here it says explicitly that these funds can't be loaned out. Now if you thought some of the answers were slow or meandering when it came to the DealBook interview. In this one there are just awkward minutes of silence it feels like. The last section may be even crazier. Again, what we have here is someone trying to say this was about negligence not criminal intent. Stephanopoulos is talking to Sam about risk management. He uses his own words against him when he said you've been in podcasts saying that your best skill is dealing with risk. Sam said, yeah, that was true and tried to defend himself saying that it wasn't that he was a bad risk manager. It's that he wasn't doing it at all. Specifically, he said, I wasn't spending any time to manage risk on FTX. To which stephanopoulos responded, that's a stunning admission. Sam said, I don't know what to say. What happened happened? So a couple notes on this one. First of all, huge kudos to George Stephanopoulos for being the first person to actually just not let up on the most important questions. I'm honestly quite glad that if there was going to be one interview like that, it was the one likely to be seen by the most people. Good Morning America has been the most watched morning show since 2012. Second I called this interview the interview of Sam's future because it feels like the one most likely to come back to haunt him in whatever comes next. Listen, entire psychological courses could be devoted to why this media tour is happening. I think the folks like Nick were identifying this as an attempt to craft a media narrative that moves away from fraud and towards negligence or even a benign version of fraud that could be plea bargained down are dead on. But boy, it's hard not to feel like Sam has given a hell of a lot of material to those who are actually investigating him right now. But apparently the media tour continues. Sam is saying that he'll show up on a Twitter spaces tomorrow and maybe Frank Chaparral's podcast too soon. Will that actually happen even after the reactions to these latest interviews? Time will tell how it all shakes out. For now I want to say thanks again to my sponsors and exo, circle and kraken, and thanks to you guys for listening. Until tomorrow be safe and take care of each other. Peace

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