From: allin
The SBF and FTX controversy involved a complex interplay of media appearances, alleged strategic manipulation, and failures in governance and regulation that contributed to the FTX collapse.
SBF’s Media Appearances and Strategy
Sam Bankman-Fried (SBF) was interviewed by Andrew Ross Sorkin at DealBook, who was criticized for asking “softball” questions [01:17:00]. The next day, SBF appeared on Good Morning America [01:23:00]. The New York Times was criticized for handling SBF “with kid gloves” [01:38:00], even publishing what was described as more of a “puff piece” than a “hit piece” [00:44:00]. In contrast, George Stephanopoulos “absolutely fricassade and filleted” SBF on Good Morning America [01:44:00], repeatedly pointing out that FTX’s terms of service prohibited touching user accounts [02:30:00]. SBF also conducted a two-hour Twitter Spaces session [02:54:00].
Intentionality of SBF’s Public Appearances
One theory suggests SBF’s media strategy is to frame his actions as “criminal negligence” to avoid more serious “fraud” charges [03:15:00]. This approach aims to change public perception, “muddy up” the waters, and make his actions appear as carelessness or sloppiness, potentially leading to a plea deal [04:00:00]. An alternative view is that SBF, as a “narcissistic fraudster,” believes he can “talk his way out of anything” due to past successes in securing billions in investments [04:32:00]. He has been trained by employees, partners, investors, and the press to believe his persuasive abilities are all-encompassing [04:57:00].
[!INFO] SBF’s shifting narrative: Initially portraying himself as the “smart guy in the room,” SBF later adopted a “babe in the woods” impression, claiming he “didn’t know it was my subordinator” or that he “wasn’t really in control” [06:08:00]. He suggested individual decisions “looked sensible” but “added up to something he didn’t anticipate” [06:25:00].
FTX’s Culpability and Corporate Structure
SBF’s company, Alameda, reportedly took customer funds from FTX and loaned them out, violating FTX’s own terms of service [02:30:00]. The argument that it was a “run on the bank” is challenged because FTX was not a bank and its terms of use did not allow the lending of customer deposits [03:37:00]. SBF’s explanation that Alameda had a “margin account” is disputed, as typical margin accounts require over-collateralization and automatic liquidation to prevent loss [03:30:00].
[!CRITICAL] Signs of deliberate fraud:
- Sophisticated entity construction: The corporate organizational chart of related entities was a “very sophisticated attempt to obscure” [15:52:00].
- Alameda’s special exemption: Alameda was exempted from normal margin requirements on FTX and had “Auto-Liquidation Provisions turned off” [16:06:00]. This meant it was never a true margin account [34:08:00].
- Misuse of customer funds: SBF allegedly took customer deposits, converted them, and replaced them with a “fake token” (FTT) whose value he artificially propped up [32:47:00].
- Lack of governance: FTX operated without a proper board of directors or CFO [16:17:00].
- Questionable hires: The compliance officer was previously involved in a poker cheating scandal [16:22:00], and SBF’s girlfriend, Caroline Ellison, was put in charge of Alameda [16:35:00].
- Prior losses: FTX and Alameda had already lost a “three billion dollar hole” in their balance sheet in calendar year 2021 [37:39:00].
The Role of Media, Regulators, and Investors
The media coverage and bias of SBF is seen as part of a larger issue where elite, progressive journalists attacked Donald Trump for violating their biases, but embraced SBF because he fit their “priors” (elite private education, MIT, parents teaching governance at Stanford, political donations, and support for “effective altruism”) [08:07:00]. The media, refusing to “re-underwrite” SBF, has allowed him to conduct an “apology tour” and create a defense [09:26:00]. This is seen as a failure of media to provide truth and transparency, as they are “just going to reflect their own narrative” [10:23:00].
[!WARNING] Institutional Rot and Accountability: The impact of corporate decisions on media narratives is highlighted, suggesting that the regulatory and risk management concerns surrounding FTX reflect a broader “institutional rot of America” [10:38:00], particularly the “lack of accountability when somebody gets it wrong” [10:59:00].
SBF made substantial donations to politicians [11:32:00] and also made “gifts slash advertising slash donations” to media outlets like ProPublica, Vox, Semaphore, and The Intercept [11:42:00]. This raised questions about whether these payments were premeditated fraud to buy influence [12:02:00] or merely status-seeking. SBF himself reportedly admitted to playing “the game that we woke westerners have to play” to be seen as a “good person” [19:33:00].
The role of platforms and regulators in market disruptions is hotly debated. Some argue regulators failed by being reactive rather than proactive with crypto, and were not clear about what was illegal [24:46:00]. Others contend that the media failed to ask hard questions and dig into the connections between Alameda and FTX for years [22:48:00]. A key criticism is that SBF was actively involved in crafting future regulations while simultaneously breaking them, essentially letting “the fox in the hen house” [25:37:00].
Venture capitalists (VCS) and capital allocators are also deemed responsible for failing to conduct proper due diligence and installing adequate governance, allowing FTX to operate without a board of directors [25:00:00]. The failure is attributed 99% to investors and governance [41:42:00].
[!INFO] The Debate Over CZ’s Actions: The actions of Binance CEO, Changpeng Zhao (CZ), who indicated a desire to liquidate his position in FTT tokens, are debated. Some argue he “rug pulled” FTX [26:20:00], implying he exploited a weakness to eliminate a competitor [30:02:00]. Others contend he merely indicated a desire to liquidate a perfectly liquid token, which exposed the fraud [26:40:00]. It’s argued that CZ performed a service by preventing more money from flowing into FTX, given SBF’s poor custody of customer funds [28:46:00].
The general consensus is that all three groups (media, regulators, and VCs) share blame for the FTX collapse [25:00:00]. However, the media’s failure to uncover the fraud beforehand and their biased coverage afterward is particularly scrutinized [39:56:00]. This highlights a trend in journalism where the “story is no longer the boss” but rather a “narrative” is sold, especially since 2016 with the rise of “activist journalists” [48:42:00]. This has led consumers to seek independent media for truth [49:00:00].