Transcript

Transcript Unusual Whales: We'll open up to the panel to ask their questions one at a time, allowing for as many follow-ups as necessary. Hopefully we'll have a few follow-ups there as well, but we just want to give the panel plus FTX users enough time to ask any questions or comments as they see fit. Let's try not to talk over one another so we can get as much information as possible. With that out of the way, I'm going to hand over the microphone to Nicholas, who will be moderating and introduce the panel quickly and move on to some of our questions. Thanks so much guys.

Nicholas: Thanks again everybody for coming. I am Nicholas from the UW team and I want to thank the panelists today. First I'm just going to start off quickly introduce the panelists that have joined us today. Our panelists are Molly White of Web 3 is great. We've also got Cas Pianceyi of the Crypto Critics Podcast. Dylan LeClair of 21st Paradigm, Crypto-Coleo of Ledger Art and Tracy Wang of Coin Desk. Thank you all so much for helping us out today. Let's dive right in. So with that out of the way Sam, I just want to start off with the obvious context here. Many believe you're speaking to media to be perceived as someone who just messed up without intent as well as invoke sympathy in an apology tour. Yet the past of FTX has been filled with such a huge lack of transparency, mismanagement and not looking out for the best interests of users given this fiasco. So we thank you for your time Sam, but just know that our sympathy lies with the users of FTX, many of whom are listening here who lost money, their life savings because of how FTX and Alameda was run and we want to give them a chance to voice their questions. So with that understood, I'm going to start off with some of those very questions. So if you don't mind Sam, the very first question we're going to pop off with here is a simple yes or no question. On November 8th, you said customer assets were backed one to one in a tweet that's now been deleted. Was this true?

SBF: So yes, but it was the case that FTX that the sum of all customer assets was equal to balances on hand, the West Bank knowledge. But the problem is that that includes negative balances for some customers. Whenever you have margin trading or futures positions on an exchange, there are going to be a lot of customers that have less than zero of something. And so what that means is that well, it is the case that net customer assets were equal to net assets on the platform. Net net customer balance is equal to assets held on the platform. Those customer assets were not like you had to have all the positive positions. That was a bigger number than any of the other numbers. And so while it is true, I think it frankly probably doesn't really address the well, doesn't address what actually happened and doesn't address what is probably the largest concern with a you know, director's or margin trading platform, which is customer accounts blowing out going, you know, below zero or being unable to meet margin call. And thus their negative balances having to be you know, internalized by by the system or ultimately externalized by users. That is that's what we were going to.

Nicholas: Thank you Sam. So I'm going to move directly into another yes or no. On November 7th, you said we quote, don't invest client assets. A tweet that's also been deleted. Not even in treasuries was that true?

SBF: It's it's effectively the same. Yes, but FTX did not invest customer assets. We were looking at ways to invest in treasuries, but had not gotten there yet. However, well, well, that that is true. It is also the case that that just because we don't like there's still clients with margin positions open. That means there's still clients that had positive and negative positions and and there's a danger when there are negative positions. If the client can't meet margin call on those, then you have a hole in the system. And so well, well, well, it was true. That also did not really address the scenario that actually happened and didn't address frankly probably what is generally the biggest type of worry with leveraged trading platforms.

Nicholas: Okay. And so another yes or no. If FTX did not invest, did Alameda invest in customer assets then? Yes or no?

SBF: Alameda invested with its funds. I don't know all of the details of exactly which funds were where with Alameda and per that's because I don't have access to data right now. And so I'm reconstructing this from memory.

Nicholas: So Sam, you stepped down from Alameda as CEO in the summer of 2021, correct?

SBF: I formally stepped down then I effectively transitioned out about a year earlier.

Nicholas: Okay. So in 2021, did Alameda invest customer assets during that time?

SBF: I don't believe so. And I actually, I think address a little bit of a definitional issue that is going on here, which is, it's not a small definitional issue. It's a large one, which is the following. And it sort of gets to just part of the same question. Let's say that you have two traders on an exchange, Alice and Bob. Alice deposits one Bitcoin. Bob deposits a million dollars and then withdraws one Bitcoin or alternatively gets short one Bitcoin. And then Bob takes up Bitcoin that he was through and invests it in a project. Would you describe Bob in that case as having invested customer assets?

Nicholas: So I do want to continue on the same line that we're going. I don't want to get too derailed here, Sam. So let's nail down a bit more on the customer funds and withdrawals since we have gotten a ton of questions on that. And as I'm sure you've known, Unusual Whales, we cater directly to the voices of retail investors. And that's who honestly was hurt deeply in this entire situation. So on that line, on November 9th, after saying, quote, we don't invest customer deposits, all withdrawals were paused except for the Bahamas. Recently, when asked by coffee zilla regarding the omnibus wallets for withdrawals, you said that users accounts weren't demarcated properly at all. In fact, your exact words were that withdrawals were treated equally regardless of the risk for withdrawals in November. So is it true, yes or no, that withdrawals were treated the same regardless of risk in November?

SBF: So withdrawals were only permitted for accounts that met their own margin criteria for withdrawing. So it's not true independent of the risk of the, like, the sort of like, economic risk necessary of the position that they accounts had on. They had to pass those checks and but to get to your point. I do believe that it was the case that when you look at withdrawals for accounts, it wasn't the case that, for instance, no one with an open futures position was allowed to withdraw. Clients were allowed to withdraw assets up until the point where withdrawals were shut down as long as they passed margin checks, which does mean that some clients who had solvent like very solvent and well-collateralized positions, which did have margin positions open, who did have capital, which is being used as collateral and used in the, you know, in various systems for which there is greater claw back risk were potentially able to withdraw. I don't have details like on that because again, I don't have access to the data right now, but that is, you know, there's at least a way in which that is true, and which, you know, if you wanted to think about it this way, I think you could think about it as I basically the, I, the, so on that line, on the comment of not having the data currently, I'd like to ask then, did any such withdrawals on November 7th happen while you did have that data where any non-margin user funds able to withdraw on by margin users? Oh, sorry. The problem isn't that they didn't have data then. The problem is they don't have data about anything right now. Right now I have no data about anything. So all I can go off of is my memory.

Nicholas: So to your memory then, as of November 7th, were any non-margin user funds able to be withdrawn by margin users.

SBF: So to my memory, I believe, and I don't remember exactly when things happened, but that like on November 7th, to the extent that there were deliverables available on the exchange to process withdrawals, I believe all accounts were open, were eligible for withdrawals as long as they had access margin, which is to say as long as, you know, those assets were not required for those accounts in order.

Nicholas: And this is for all accounts?

SBF: I mean, whatever, there are sort of outlier accounts that had, you know, voluntary withdrawals, holds placed on it by the users, but ignoring things like that, I think it was true for all accounts on FTX, on November, certainly on November 6th, I think on November 7th, I don't remember the exact time at which we began shutting off withdrawals, but prior to that, it was true for effectively all accounts that were sufficiently collateralized on the exchange.

Nicholas: And so in your opinion, Sam, does allowing all accounts and potentially all users to withdraw funds that may not have been theirs, but another customer's, constitute a problem?

SBF: It's a good question. And here's my honest answer to it, although I'm open to other people's answers to this, I don't want to phrase this as the obviously correct answer, it's just my sort of interpretation of it, which is that I think that's something we should have given much more clarity on. That's my honest answer, and there are actually a number of related issues that very rarely came up, but that did occasionally come up, and that there were judgment calls that would have been made on, and I'm happy to walk through what a few of those works that they touch on similar issues. One classic example of this is what happens if one user is lending out funds, another borrows, and then the lender withdraws their assets. What happens to the borrower? Like you have to liquidate them? Do you kind of like, frantically go and try and find more people lend back in? Around the edges of margin trading as a system. There are actually a number of cases where this sort of naive interpretation of it that almost always worked, as the understanding of this system broke down or at least became a lot less clear than I and others usually thought of them as, and this is one of those. What do I really think in retrospect? I think we should have had a much longer Zendesk article than we had, and I think it should have spelled out extremely clearly in scenario A, in scenario B, in scenario C, and in all these scenarios in which you're starting to touch the edge of a system in which you're starting to talk about what if there's a big clawback, but it happens in a delayed manner, and there were thralls in the meantime, what happens there? That's something we have in advance.

Nicholas: Speaking of that phrase "not so clear", with regards to customer withdrawals and all accounts withdrawing being in these omnibus wallets, were customer deposits as well, not demarcated properly?

SBF: In some ways they were, some ways they weren't, and let me give you a few of each of those. Ways in which they were demarcated well, on the internal accounting, it was clear like when FTX accounted for its financials, everything was fairly clearly laid out. However, there are a number of ways where this worked down. One of them is like, so it was omnibus wallets, so although there were basically databases that stored breakdowns of things, that wasn't reflected on chain or anything like that. That's one messiness there. A second piece of messiness here is that when we checked for solvency or for basically reconciliation, checking that assets lined up with liabilities, that check did a very good job of detecting things like hacks or ballad discrepancies or blockchain issues. But it did not think deeply about user account risk. It just treated negative numbers as negative numbers and added up all the numbers and confirmed they all added up. When you looked at processing withdrawals and are there sufficient funds to process this withdrawal from margin account, we had checks that there were sufficient assets, but those checks implicitly assumed that all accounts would be able to meet their margin calls in order for that map to work out. That's obviously, well, it's not what happened here. That was obviously always a scenario that frankly we should have paid more attention to have a lot clearer rules for.

Nicholas: Okay, so I do want to get a bit more onto the deposits now. With Alexander Osipovich from the Wall Street Journal, you said that more than half of customer money was wired to the Alameda bank accounts. You had further said that more than 5 billion was transferred into Alameda accounts. Is that correct?

SBF: So there's a version of that that's correct and just going to state it in the way I know it to be just so that it's unambiguous. Which is that the total amount ever wired straight to Alameda research by customers, so that's a total figure ever, was I believe greater than 50% of the met customer balances on FTX at the time on November 6th. And so it's comparing apples to oranges a little bit because one of them is a total amount ever transferred. And the other is a current balance I counter. But it is the case that I believe that one number was greater than 50% of that other number. And I'm sorry, there's a second piece which I've forgotten of that question.

Nicholas: So the second part was the more than 5 billion that was transferred into those Alameda accounts.

SBF: So I believe and I'm not 100% confident in this. I don't have access to the data again. But my belief is that the total amount ever wired by customers straight down made as many accounts as part of the system that was built out before FTX had its own bank accounts that it could add up all of those wire transfers over time. And I think my guess is you get number of about 5 billion.

Nicholas: So I'm curious then, how did you know that deposit number up to November 6th given you don't have the full data on withdrawals and deposits in the past and that you've said numerous times that Alameda's dashboards were incorrect?

SBF: Oh, so right, it's a very good question. There is a brief window in which I did a ton of digging. That window was from November, basically from November 6th through to November 10th or so. So in that four days, you know, it's a crazy four day period, but in that four day period, I did a bunch of digging and compiled some of these numbers and like a lot of my recollection is coming from like queries I ran then. During that period, I like dug into everything that was going on and tried to reconcile it all. And then after November, I don't remember 10th something roughly like that. My data access got cut off. So I can't currently go back and query those things. And I had not done a careful accounting of this prior to the 6th, but between the 6th and the 10th, I did a bunch of accounting.

Nicholas: Okay. So because you were the former CEO of Alameda up until a year ago, you would have known that deposits continually went to Alameda and decided not to do anything about it, correct?

SBF: So let me give you three answers to your question. One answer to start off with is like, all right, I should have been more aware of what's going on. Like that, that that was a fuck up on my part that I was not more aware. So part of my answer is like, yeah, a second part of my answer is that I do the, like I wasn't sort of like the chief accountant for it. That's not like primarily what I was doing. And I sort of like trusted the accounting team to like, you know, confirm that things lined up. The third answer. And this is something I believe to be true, but it is a little bit of an approximation. So take this with a little bit of a grain of salt, but I believe it's the case that, that up until as of, you know, a year and a half ago, and certainly as of like two and a half years ago when I was transitioning out of running Alameda, that as of those times, I believe that it was the case that this number was massively smaller than it ended up by, you know, late 2022. I don't know exactly how much smaller, but I think that it was, you know, I don't know, maybe a quarter of the size or something like that. Like I think a, to the point where, you know, I think it made the difference between being a moderately, but not incredibly important number and an incredibly important number. I'm not sure exactly when that growth happened in that number, but I kind of think that a lot of it may have happened in the last, you know, in the last two years.

Nicholas: So one thing that you continue to plead ignorance to Sam, is Alameda, yet Caroline Alameda's CEO confirmed that, and I quote directly, quote, over the recent months Alameda had taken out loans and used the money to make VC investments among other expenditures to the New York Times. Caroline also confirmed that quote, around the time the crypto markets crashed this spring, lenders moved to recall those loans, but the funds that Alameda spent was no longer easily available. A look at FTX's user fund wallet reveals after May's crypto crash, Alameda's borrowing limit was increased from FTX and also approved by the exchange. Caroline herself told reporters that FTX knew of Alameda's liabilities and increases. Can you tell me who made that approval, Sam?

SBF: I wish I, so I wish I could. And I think that speaks a little bit to one of my fuckups that I don't have a good answer to that question. Like, I don't, that's a pretty reasonable question to be asking me into expecting a clear answer to.

Nicholas: Wouldn't it essentially be you as the CEO of FTX, FTX, excuse me, that would have to give that approval? Wouldn't it have been you as the FTX CEO that gave that approval?

SBF: Not necessarily. Now, obviously, independent of who like physically gave the approval for it as CEO, like I did bear ultimately, like, ultimate responsibility for like making sure that we did the right things as a company. And I had a massive failure there, no matter what. Like, I did have ultimate responsibility in the sense that I was ultimately responsible for the company doing the right things. But it was not the case that I was involved in, like, that I was actually involved in every one of those decisions or like was mandated to be involved, although I think one could reasonably think that maybe I should have been.

Nicholas: So were you involved in this one?

SBF: When you say this one. Is it

Nicholas: A straight yes or no.

SBF: My belief is that, so I don't know of a single instance that like lines up with what you're talking about that I was involved in. I was sort of vaguely aware that, you know, I only had a position open on FTX. I was not involved in a detailed way there. I think my answer is somewhere between, and again, this isn't a good thing that I don't have a better answer to your question. Like there's a problem with me not having a better answer to it. But my answer to some extent is, is that like, I think it's not in a way that was that way.

Nicholas: So it seems a little bit that you are vaguely aware of the important things, and surely confident of unimportant things. But I want to kick this off to our panelists now for some questions. And I want to start with Tracy Wang here. Tracy, please ask any questions that you have prepared or see fit here.

Tracy: Oh, well, hi Sam. First question. Tomorrow, are you going to be testifying in person in front of Congress?

SBF: No, I'm going to be calling in.

Tracy: Got it. When you first said that you weren't yet ready to testify before Congress, and you said, you needed more information. What new information were you referring to?

SBF: So I have access to almost no information right now. I don't have access to current or historical data on FTX or Alameda's balances accounts or anything like that. So all I have is my memory. I also don't have access to most of my old documents. So I'm sort of like this.

Tracy: You've been doing a lot of media interviews these past couple weeks, but you felt like you weren't yet ready to speak to Congress.

SBF: So I mean, obviously I did ultimately consent to speaking to Congress, and I will be testifying tomorrow. But to your question, I, I, there is a testifying in front of Congress is a has a fairly, it's not a bunch of people who just sort of have, you know, free time or don't and kind of choose to like, you know, listen in or not as they see fit and sort of come and go and like, this is like, it's the United States Congress. And I felt like if I'm going to go there and cause like 50 representatives to be, I, like soft obligated to, you know, spend time talking to me and, and further to feel like they have a duty to their constituents to be able to know what happened and tell them what happened and give good answers to things and things like that. I basically felt like I was not confident I was going to be able to do that. And, and that like I was going to have to give a lot of answers that were kind of like the answers I'm giving here, which are like, maybe or like, yeah, I don't know. I think so. And that that felt underwhelming for testifying before Congress. And, you know, and on top of that, like, there, you know, I want to make sure that everything that I say everywhere, but especially there is, you know, not just something I think is probably true, but is something that I am extremely confident is true or else, disclaim extremely clearly and specifically because it's very, very important that, you know, that I not state things in a way that I'm overconfident about in, in front of Congress. And that all led me to feel like it was going to be, you know, somewhat awkward and, and, and less informative than I would want it to be and that I think people would want it to be. I wanted to make sure that that was clear to representatives, you know, Waters and and to the committee and that they understood that they were not going to be getting a lot of the answers they're looking for by having me testify that like it was going to be frustrating and underwhelming in some ways because I was, I was, I just wasn't going to be able to answer questions that I would really want to be able to and frankly really should be able to and and so that was

Nicholas: Just so we don't get derailed from the questions too far. Thank you for the responses. I want to move over to Dylan LeClair. He has his hand up here, Dylan. Any questions that you want to push forward here?

Dylan: Yeah, sure. I guess so maybe stepping a little bit away from from FTX and more so to Alameda and Sam, I know you stepped down in in October of 2021 if I remember correctly. I've had pinned in the nest, you know, maybe a shitpost, maybe not one of your two pieces of this quote. If all of you want to know how balls long crypto Alameda has been, I just want to kind of push it over a little bit. Maybe when we when we the coin desk balance sheet was leaked, on most of your net equity for Alameda was tied up in completely a liquid alt coins, FTT, locked FTT, Solana, etc. If we go back to 2021, most Alameda was by far and away the biggest redeemer and user of tether on the planet, around 36 billion dollars or so redeemed.

SBF: Created, probably, not redeemed

Dylan: Okay, created. What was the relationship with tether and did tether ever extend Alameda research loans? And if so, what was the collateral used for that?

SBF: So uh. Yeah, totally appreciate it. To my knowledge and there's always a chance there's something I'm unaware of here. I'd be a little surprised, but it could be. But to my knowledge, the answer to that question is one of the most underwhelming answers in crypto. The relationship was pretty standard. You know, basically Alameda, you know, it's included fraud or arbitrage or market maker. And when there is demand for tether, tether would start trading 25 basis points above a dollar. Alameda would go to tether. It would wire over dollars in order to create tether and sell those in markets. And that was sort of the core flow. And I'm not aware of any loans that Alameda ever had from tether or investments or anything like that. It was, you know, as far as I'm aware, just creations and reductions.

Dylan: Okay, I got it. Thanks for that. I guess the follow up would be in terms of wiring the money to tether. Is that a relationship with Silvergate Bank? We obviously saw some leaks with Alameda and the FTX wire being to an Alameda Bank account at Silvergate. And then also, I guess maybe a related question, is there any relationship to Moonstone Bank? The bank that Alameda research invested 10 million to, which was double the net equity of Moonstone Bank, the 26 smallest bank in the country, just about nine months ago in March, where subsequently deposits jumped by a factor of eight or nine. Just trying to piece together some puzzle, like some of the puzzle here. In terms of banking relationships and FTX now, Alameda had, and how does 36 billion dollars get wired potentially with funds being commingled or not?

SBF: So going through this from the back, front, Moonstone, I don't know the answer. It's not a no, it's an I don't know. I am vaguely aware that there is some stuff with Moonstone. I was never super involved there and legitimately just like, I don't know. No, exactly what happened there. I'm not saying anything untoward happened, but I think that there is some hope to use them for banking services. And like there was a constant struggle to get banks that were happy with crypto customers. And so I think, you know, mind your sayings, we saw them as like a potentially crypto-friendly bank. But that like, I don't know what happened in the talks there. In terms of silver gate and other banks, I mean, there is, I'm going to give you the answer as of like a year ago or so. I don't know if things changed in the last year. In terms of like tether, creations and redemptions, like people are often changing bank accounts, we tethered it to, I don't know. But as of, you know, 20, certainly as of 2020 and I think probably as of 2021, I, you know, most of the banks that you were talking about there, you know, the sort of like US banks that have substantial crypto banking businesses, those would be places that like a crypto firm would have a bank account at that, you know, Alameda would, but frankly, most institutional crypto players would have a bank account at each one of those major crypto-friendly banks. And then if you were to create tether, you know, you would probably send a wire transfer to tether's bank from wherever you had funds. And so, you know, some may have come from silver gate, I'm not sure, but that doesn't have anything that there's no relationship that I'm aware between silver gate and tether or between, you know, most of these banks and tether directly, it's just like it comes from whatever bank, you know, whatever bank can be a creator, happen to have dollars at. So there's nothing, maybe there's something interesting I don't know about, but I don't think so, there's nothing I know about interesting on the tether, like banks that were used to send money to create tether with. And did you have a third question I may have forgotten.

Dylan: Yeah, I was just, I mean, I guess maybe just a clarifying question just so there's no doubt.

SBF: Oh, the 36 billion. Sorry, sorry, sorry ya. So the thing with the 36 billion is like it's not that Alameda had 36 billion dollars and then took those 36 billion one dollar bills and used them to create 36 billion tether tokens. That's not at all how it works. The way that it works is much more similar to like Alameda has 10 million dollars uses that to buy, to create 10 million dollars of tether sells that out in markets to demand in markets when it's trading above a dollar or token. Sells it for, you know, one million and $10,000 takes those one million $10,000 creates more tether and cycles through it. And so the total aggregate creation size over the course of like a year long period is generally going to be like or has eventually be like, you know, 300 times as big as the actual amount of capital that was necessary to do that. And that's what was happening there. And so the, you know, there's, and similarly, and you can look out

Nicholas: So I'm just gonna step in here, Sam, as well, just to keep things kind of on track. We did receive a question from the community. It's one we've gotten a lot regarding FTX's tokenized shares. The custodial firm, CM Equity AG ceased relationships with FTX in 2021 of December. Why did that happen? If there was no risk officer at FTX, how does was this tokenized division running and risk therein?

SBF: Um, so I'm not the person who can give you the most details on that, but I can give you a general sense, um, which is that, uh, uh, the corporate structure of those, um, may have changed slightly, but, but there were teams that were in charge of that process. And, uh, and that were in charge of the process specific to the tokenized stocks. Um, I could reach out to them and try and get a better answer on that front. Um, but, uh, but I think that was just a corporate entity change, uh, to my knowledge, rather than anything else. And then I do actually think that there were people who are monitoring tokenized stock, um, executions and any solution and risk. I don't know the details of that, um, but the answer we're the in and probably not, probably not good that this is true. Um, but I believe the answer is that there's actually like substantially more like sort of man hours going into monitoring, like tokenized stock, uh, risk than like, uh, overall user account position risk on FTX.

Nicholas: So as a follow up here, because customer funds and deposits were indeed not backed one to one, can you confirm with us now whether tokenized shares of AMC, GME and others were backed one to one?

SBF: Uh, to my knowledge they were, but I, uh, I want to get you a better answer to that question and whether like, uh, I don't have an updated answer to that question like after the, the, the, the, the shit show. And, uh, I think that's a very reasonable question to ask. I think I actually know how to get a better answer to that question. So I'm going to put that on my stack as a, a two to to get back to you guys on. Um, I,

Nicholas: Perhaps you'll get that together in time for the Congress hearing. So I'm going to move it over to you, Molly White. See your hand there. Let's get some questions from Molly as well here.

Molly: Hey, Sam. Um, all right. I'm going to start with a really simple yes or no question. Oh boy. Are you playing video games right now?

SBF: Oh, geez. I actually can answer that question. Uh, I was so confident I wasn't going to be able to answer with a simple yes or no, uh, yes I am.

Molly: Okay. Is it League?

SBF: It is not no. It's Storybook Brawl.

Molly: Okay. Um, so I want to go back to the question that Tracy answered about the hearing tomorrow.

SBF: Yep.

Molly: Why are you not appearing in person?

I have a, uh, I'm here in the Bahamas where I have been for last year where you know, FTX International had been run for and run from and, um, you know, doing what I can to support basically like all of the kind of global teams who have been, you know, by running FTX International prior to and after. Um, Molly: but you have left the Bahamas in the past few years for important engagements in Washington. Why not now? This seems pretty important.

SBF: I have at some point. There's, it's also frankly a pretty important time for me to be here. Um, I'm quite overbooked and was not planning to be testifying until like very recently. Um, and then the other thing that will say is something I need to get a better handle on, but from a security standpoint, like I've been, uh, for reasons that I completely understand, um, and, uh, although it's frustrating, I feel like, um, I, I, I, I suspect as much like food for something like this where people are coming from on this. Um, it's very difficult for me to move right now and travel because just like the paparazzi effect is quite large. I'm not sure.

Molly: Are you worried you might be detained if you stepped foot into the US?

SBF: Uh, I don't believe I would be, but I haven't done a, like deep dive into that at some point. Right. That's something I have to think harder about.

Molly: And then there is a Senate hearing coming up this week as well. Are you planning to appear at that?

SBF: Um, I, I, I am not currently. Um, I, I, I'm not currently scheduled to do that. Um, and, uh, sorry, I know this is a, a bit of a halting answer. Um, I'm not currently scheduled to do that. Um, I am open and willing to have a conversation with, um, you know, with the, the chair of the ranking member, uh, about the hearing, uh, if they believe it's important that I attend, um, it's,

Molly: I think they believe it's important that you attend.

SBF: I'm sure they, I'm sure they do. I think like I, I do expect that it'll be at a very materially similar hearing 24 hours earlier. And so I think, you know, from my perspective, the, the biggest thing I'm thinking about is like, what is the relationship between these and what is it that the American people and that, you know, our, our policymakers and lawmakers would be getting from the, uh, you know, from the second one of those that would not be duplicative, um, you know, with the, the first one, um, uh, but it's, you know, that's a conversation I'm, I'm, I'm very willing to have an, and, uh, I've in fact expressed my, I don't think publicly, but have expressed my openness to having that conversation with them.

Molly: Okay. All right. Uh, one more question before I leave a little more time for other people. Um, so you have said, or FTX has said that you were instructed by Bahamian regulators to reenable withdrawals during a brief period before you shut it off again. Uh, Bahamas regulators have denied instructing FTX to take that action. So are you lying or are they?

SBF: Uh, so I don't have, um, any, um, uh, I don't have any, uh, I don't have any, uh, I don't have any, uh, I believe evidence of them lying in any cases. Um, I believe that, uh, and I, I should also just go back and look this up myself, but my understanding is that that's actually bleeding together. Um, the phrasing of two different events that happened and the instructed to language, I believe cracked into the narrative as a reference to an asset transfer, not in reference to the withdrawals. I believe the language with respect to withdrawals was somewhat different than that. Um, it's possible I'm wrong. That this, this is the actually could look up and should look up. Um, and I, uh, so I, I think that the, I believe the answer is neither in that like, that was not how I had phrased it.

Nicholas: So here I am going to move on to another panelist question. Kaleo, I see your hand, but we're going to kick to Cas Piancey here and then I'll move on to you, Kaleo. I see your hand up. So Cas, please ask any questions you had going. I saw your hand up earlier as well.

Cas: Thank you. Um, so first of all, Sam, I find it incredibly disrespectful that you're playing video games while you're talking to us. Um, I know that you said it's more important tomorrow when you talk to Congress and I hope so. I hope you, you're not playing video games tomorrow when you're trying to dissuade Congress from seeing you as a fraud. I think that this is.

SBF: Do you have a question?

Cas: It's, it's, yeah, I do have a question. So first of all, I think, uh, Moonstone Bank, it sounded like you basically described the quid pro quo to me. So you guys invested $11.5 million and then you deposited roughly $80 million. Is that right?

SBF: Uh, I'm not sure. That, that could be right. I like legitimately am not sure, but that doesn't sound

Cas: You're not not sure, but I'm confused. Like this is one of your banks.

SBF: Sorry, what do you mean it's one of our banks? As in it's a bank that we have an account at?

Cas: That's, that's my question for you. $78 to $80 million was deposited right after you guys, uh, invested $11.5 million. Was that your money?

SBF: Sorry. Was deposited by who? I, uh,

Cas: By, was it deposited by Alameda and FTX or not?

SBF: I legitimately don't know the answer to your question. It's a totally reasonable question. Um, I, again, I don't know.

Cas: Who are your banking partners, Sam? Who were you guys banking with? Like where was this money going? Was it going to Moonstone and Dell tech? Like who were your banking partners? Can you tell me?

SBF: There were a lot. We probably had like 40 payment processors when you put them all together or something like that for FTX

Cas: Banking partners, banking partners, not payment processors, banking partners.

SBF: So, uh, none of the ones you've named were like the, the banking partners that I believe the most volume went through. Um,

Cas: Can you tell me who those were then?

SBF:I, I mean, I think if you look at the like, I, it's, it's like what you would see if you like looked at wired deposit instructions on FTX, like my guess is, is it would be, you know, you'd be looking at self-reached signature, um, places like that in the United States. And then a whole host of other depository institutions, um, globally, um, because, you know, when you're trying to onboard customers from different jurisdictions, um, you often need different banking rails. Cas: Okay, so you, you, you're basically telling me that it was silver gate and signature, um, and I'm confused as to your answers to coffeezilla before where you, uh, described having customer funds sent to Alameda as opposed to FTX, um, and that these were being wired through all of these banks. Essentially, your suggestion was that the banks that these, that these customer funds were being sent to Alameda research and my, these customers who were customers of FTX, can you help me understand how that's not wire fraud? Sorry.

SBF: To, to be clear, and I'm done answering questions from you after this, like you, this is not a constructive approach, but I will answer.

Cas: None of it has been, none of it has been said. You don't answer questions.

SBF: I understand. I understand. So I'm going to answer this question. Um,

Cas: No, you're not.

SBF: All right. I won't if you don't want me to. Like you just intr

Cas: I'd love for you to answer any questions.

Nicholas: So let's, just real quick. I do want to keep things as civil as possible. I understand. I understand the positions and I understand the, uh, the, the sentiment behind some of this, but I, I do want to hear the answer here if possible, Sam.

SBF: Yeah. Totally. So, um, that, that, what you were referencing there, um, was a different paint. Like I said, there are many, many payment routes. This is an example of, you know, there being many different payment routes. Um, if you rewind back to, um, I, to, you know, 2019, 2020, at that point, which is different from what it describes just now, um, at that point, um, FTX mostly did not have its own bank accounts. And, uh, and so instead when customers wanted to wire money, um, they could reach out to Alameda, get wire instructions there and wire money, choose to wire money straight to Alameda research and then have Alameda transfer them to a ledger transfer effectively on FTX to them. That was, I believe roughly speaking, um, the route that some people used in the, especially in the early days, um, of FTX, uh, in order to, uh, you know, get wire transfer to result in them being able to access FTX. Um, I, to my knowledge, they were aware of that relationship and they were aware of, uh, why it was the way it was and, and of who they were, uh, sending funds to, um, I, you know, I think generally like the name on the account was Alameda research. Um, I, although I, like, I don't know all the details here. Um, and, uh, and so that was, that was a separate pathway that, you know, over time we decommissioned as we got access to, uh, you basically as FTX was able to get access to, uh, it's own set of bank accounts.

Nicholas: So I am going to pivot over here to Kaleo for some of the questions that they had and then I have a few more questions from unusual whales and the community. So Kaleo, please ask any questions that you had prepared.

Kaleo: All right. Awesome. I appreciate it. You have several, um, so first, first things first, November 22nd, you sent an email to employees where you piece together recently the events that led to the breakdown, the best you possibly could from what you said, yeah, on timeline where FTX went in a very short period of time from $60 billion of collateral and $2 billion of liabilities to $25 billion of collateral and $8 billion of liabilities as credit dried up across the industries you quoted. So my first question is, can you speak more to how you arrived at these estimates?

SBF: Yeah. And I'll first say I think that was probably Alameda not FTX, um, but that was referring to, um, but, um, but, but anyway, sorry. So, you know, where do those come from? I, it's patching together a bunch of things. Basically, I have, I got some data in the sort of like, you know, window between like November 6th and 10th when I was looking into this. And, you know, with that, I arrived at some estimates here. Um, you know, I piece that together frankly, like looking at market movements, estimating what token, token portfolios were and backing out from that, you know, what I think asset values were at various points in time. Um, and, uh, you know, cross checking that against big memories I have, that was like effectively the process that I was going through for that.

Kaleo: So you're using, you know, what was listed basically as the collateral that you sent to Forbes, the items such as, you know, FTT, sol, Serum, etc. as the collateral value in those estimates, Correct?

SBF: I, I, among other things, I, uh, among other things. Yeah.

Kaleo: Okay. So my, my question for you is how were you, you know, calculating that collateral value? You know, you wrote a very detailed thread recently on mango markets and how that exploit went down. And, you know, I thought you did an incredible job there of kind of explaining how the Oracle price read, you know, the fair market value way higher than what it actually is. And, you know, going back to the way the FTX risk engine works or the way it's supposed to work, you know, you've got IMF factors which are supposed to reduce the overall weight of collateral as the total position size and tokens continues to scale. So my question is, did you apply the same collateral valuation equally to everybody on the FTX platform or were there any exemptions on how that process, you know, how that process was, I guess, fairly put into place.

SBF: So, uh, yeah, a few different pieces that, um, I, so, um, uh, so first of all, uh, in terms of, I think there's a big difference between those two scenarios because, in one, it was in, it was like a manipulated price in the other, it's a less liquid price. Um, now both of those matter and like the fact that something is illiquid, like that's a big deal and it's something that I didn't handle well. Um, but you think it's worth noting that like it's a, um, uh,

Kaleo: Well to be fair, Sam, to the credit, some people, you know, whether you agree with it or not, you know, there are critics out there that say that the FTT price, for instance, or the serum price or some of the other names out there were also manipulated just, you know, in a different timeline, different fashion, you know, so I think the illiquid point is, you know, more what's fair apples to apples than that scenario.

SBF: Uh, I totally hear you and for what it's worth like, I don't believe they are manipulated and I would feel quite differently if I thought they were. Um, I, I do believe that that would be like a big deal and, um, and would, would undermine. Um, I, you know, any notion of them as reasonable collateral, even as is, um, obviously the illiquidity was a big problem, especially in size. Um, and, uh, I think I've given sort of, uh, unconfident answers to this in the past and unfortunately, you don't have to give the same unconfident one now, which is that like, um, I don't have the answer in front of me. I wasn't involved much in this process. Um, there were, um, various things for some large accounts that we were thinking about implementing. Um, I don't know exactly where all of those got to, um, I, but I, but I, uh, I'm not sure that, that there were no differences. I would like to be able to give a more confident answer to that and I also, um, would like to feel better about the answer that I had to give to that.

Kaleo: So Sam, one thing that I'll say, you know, first and foremost, so the 60, $60 billion worth of collateral, especially, you know, now, now that you're painting that as the picture for what Alameda had rather than FTX, you know, that's even more, right? So that's 60 billion dollars of collateral. If it was applied fairly using the IMF factors and calculations on your exchange, would have worth $5 billion at the peak and that's not, you know, taking into account what all of their factors you had as far as what the multiples were for actually opening positions and withdrawing. So by the time it hit June, you know, continue to scale that down when it was $25 billion, that same collateral valuation, even though Mark to Mark it was $25 billion, using your own exchanges factors was a little over $2 billion. So at that point in time, Alameda had, you know, a little over $2 billion of collateral and a little over $8 billion of liabilities. So there was already this massive gap way prior to anything, you know, anything that happened in November. How was that missed?

SBF: So a few things. First of all, the numbers that I think you're citing there were my guesses that Alameda's I read balance is not Alameda's positions on FTX in particular. And so I totally hear you with respect to the FTX calculations. I think if I remember right what I put there, though, that was talking about Alameda's like global aggregate balance sheet as best as I could predict and that, you know, much of that was with third party borrow lending desks rather than with FTX, at least at some periods. The second thing is how are you getting to the IMF factors because that would require knowing exactly what the set of assets was, right? And well, I can't

Kaleo: Sam the way that I did it, you know, rough estimates, that calculating based on the asset sheet that was both shared with Forbes back in August, but also using the assets from the total, you know, you shared yourself the assets that FTX had that were illiquid, correct? And their valuation that we've prior to everything collapsing, the week after. So using some simple math, you've been, you know, calculating what those position sizes were and then from that, you know, exactly what potential IMF factors were if they were used as collateral on the platform itself.

SBF: Yes, but on top of those, there are also a lot of liquid assets. So I think that that

Kaleo:$8 billion of liquid assets, which were withdrawn, correct? SBF: Oh, no, but they're also, sorry, that's the liquid liabilities, but on top of that, Alameda had a bunch of like dollars and bitcoins lying around, like many billions of dollars of them. And so it's, I, I, and sorry, this is not a super satisfying answer cuz there are no numbers on this, because I don't have these numbers. But, but the,

Kaleo: But you were aware that they had a bunch of Bitcoin and other cash liabilities as well. So how are you aware if you weren't aware of any of their balance sheets or anything else that was going on at that time?

SBF: So part of the, there is, there is like a, and by the way, I apologize, I have to hop off in like 30 seconds, but so you have a lot of questions.

Nicholas: So before that, I do have some follow up questions, Sam, that was being discussed earlier. Sam, you said that money was wired to Alameda for FTX customers and claimed that the money was then moved over essentially a ledger entry. We've also described a stub account that continued to be filled customer funds after FTX kept banking. The money was never properly moved to FTX customer accounts. Is that correct?

SBF: Uh, was never pro. I think it was, well, I think they, they're multi ways to think about the problem. I think the way that feels most intuitive to me is that like the, uh, accounting never clearly hit Alameda's main account.

Nicholas: So I, I just need a yes or no on that one, Sam.

SBF: Uh, can you repeat it? Then what the money was never what?

Nicholas: The money was never properly moved to FTX customer accounts after FTX got banking.

SBF: By the money, do you mean the balances are the dollars?

Nicholas: To be honest, Sam, either was the money properly moved over the balances?

SBF: The ledger entries happened properly. Were the assets moved over? I don't know that the assets were moved over. And I don't, and another way to do this would have been to have collateral posted for those. I'm not sure that happened. I think like, I can't give you an answer on that because

Nicholas: So it kind of sounds to me based on that response that the answer is probably no.

SBF: I think that very well might be right.

Nicholas: Okay. Thank you, Sam. So as you said, I believe you had to go. So I just want to thank everybody.

Kaleo: Extremely many and timing too, man. Extremely convenient, timing.

SBF: I, uh, uh, convenient to not. It was predetermined that this was when I had to go because I do have a thing I'm two minutes late for. I do want to start just 15 more seconds asked to answer anything. It's Kaleo's question. And then I will hop off. but I say get a slightly better answer, which was that there, there is a display of Alameda's account on FTX that did show them having a position, but the position it showed was substantially less than the actual full position. And so part of it was it not being clear what the actual full position size and this was related to that stuff account thing. That's part of the answer to your question. And then part of the answer is like, uh, it's a piece of shit. Like I like kind of vaguely new kind of sort of maybe, um, and a qualitative level was going on. Uh, I like didn't know all of it and I didn't know all the numbers and like I just should have dug into it and like, yeah, they're pretty negative.

Kaleo: But you knew there was a m\negative balance at one point in time on some type of stuff account, which was not reflected on the borrowlend book at that point in time.

SBF: I became, oh, I became fully aware of that like in the last, uh, I, uh, I, uh, I, uh, a couple of months like that was.

Kaleo: So in the last couple of months, you do that. Okay. So in the last couple of months, you knew that and at that point in time, if they have a massive negative balance across that that's not reflected on the borrowlend book, how is that different from theft because you're basically putting up people's assets against theirs, right? You know, real customer assets that are not opting into any type of building program. They're not risking into that. They're not getting any type of, you know, yield reward that they're risking themselves into that. You know, how is that any different from theft?

SBF: Oh, sorry. But by, like, what I meant was like, when the shit show started was when I actually did a real dive into this and became like, uh, at that point, I, at that point, we're trying to clean everything up as best we could frantically and, um, but I, but it's something I should have absolutely dove into much earlier.

Unusual Whales: Sam, Sam, I, I've just one question. Can you give us an understanding? I know you have to hop off, but can you give us an understanding about why the block was being funded?

SBF: I don't have all the details there and do have to hop off. So I'm going to do that.

Unusual Whales: Okay. It'd be great if you, you could maybe jump on again, maybe if we could work something out. I think you left. Okay. Well, uh, uh, you know, his answers are, were not satisfying. So I apologize, everyone for that. And there's a ton of questions, hundreds, um, that we could not ask, um, in time. So I really apologize on that, uh, everyone. Um, maybe I can get final, uh, thoughts from the speakers here in the panelists, uh, but what they think and how it transpired. Uh, and then we can, uh, kind of go on with our day.

Nicholas: So let's just real quick, quick follow ups to the panelists here. How are you feeling? Is there anything that you wish had been answered differently? Let's start with Tracy here.

Tracy: Yeah. I've watched a lot of these Sam interviews and, um, I, I think there's, you know, everyone thinks that he is lying and I, I really wanted to take this chance to ask him about newer developments like the congressional hearing this week. Um, new news that came out this past week about the block, who modular capital is, the FT leaked, uh, as spreadsheet with Alameda Ventures investments. And so, um, I think if anybody has the opportunity to, you know, do an interview with Sam in the future, I think a lot of what he said about, you know, the FTX margin system and its relationship with Alameda, um, has kind of been hashed through many times. So it would be great to, you know, I wish we had more time to ask him about some of the newer developments.

Nicholas Thank you, Tracy. So, Kaleo, I see you unmuted there. Go ahead. Kaleo: Dude, I'll just comment. I think everything about his approach is completely embarrassing and just the fact that he can justify playing a game in the first place during any of these, you know, continued in the fact that he can laugh it off and think that it's just this casual, you know, non-Chill on answer. First off, is incredibly disrespectful to both the people that he's speaking to and also the people that are listening and affected by the situation. You know, it almost shows to me that he's not taking it seriously. He doesn't understand the gravity of the situation of what just happened. It shows that he's in full denial. You know, I know he may have had something come up, you know, where he had a meeting that he was running like to whatever the fuck bullshit answer that was. But, you know, it just, I don't know, man, you can tell that he knows a lot more than what he is giving right now and that as soon as he's pressed on questions that are relevant to the circumstance of how stuff goes down, you can tell how shaky he gets and how much back and forth he gets. You know, like, for instance, his answer about, oh, yeah, you know, I knew about that for the past couple of months and then, oh, no, I met the past couple of weeks like, what's the real answer? You know, like, there's a lot of bullshit that's lying in there. It's incredibly frustrating listening to him speak because he's going to give answers and dance around, you know, by giving irrelevant, irrelevant answers, you know, that sound good and he sprinkles in a lot of facts with it. But, you know, he leaves out the truths, you know, it's lying by omission. So anyway, I'm sorry, I'm rambling a little bit, but it's just frustrating.

Tracy: Oh, no, I'm totally agree. I think it was super interesting that, you know, when I asked him why he would demean interviews without a pre-imprint of Congress, he basically said that he was okay with wasting the public's time, but didn't want to waste the time of like 50, you know, representatives. And also another point, you know, I've talked to Sam for a while just as a journalist. And one thing that he does, I don't know if it's because he's, you know, a traitor, but he never really speaks in certainties. For example, you can ask him about, you know, like, is your name Sam? And he might respond with like, yeah, that's probably true. Like, like, he never actually ever says anything with certainty. So I think part of that could be, you know, him, you know, covering his ass, but another part is just, I think that's how he's always been.

Nicholas: All right, Molly or Cas, do you have anything to add here?

Molly: Yes, I think it's interesting that he has basically unlimited time to do Twitter spaces. I mean, this is like the, what, like, the fifth one he's done or something, but he's worried about duplicating statements in front of Congress. I'm honestly surprised that he agreed to appear at the House hearing, and I'd be very curious why he's willing to appear there and not at the Senate. I think the answer he gave was pretty unsatisfying. But ultimately, I'm just interested in watching him answer questions under Oath because, you know, he can lie as much as he wants in these Twitter spaces. But I'm hoping that, you know, tomorrow, we might see something different.

Cas: Yeah, I'm with Molly on this. I think he's had an opportunity to waste everyone's time. I've listened to him in every single interview he's done, unfortunately. And he just rambles and goes in circles and lies. And I think it is unfortunate that he's trying to sway the court of public opinion right now when we all know that the only court that matters is the court of law. And that is where he will ultimately end up because of all this. And I think it's important to remember that and not let him, none of his answers were satisfying to me, whether it was a good question or not. And I've basically seen that happen and transpire in every single interview that he's done. And it's exhausting and it's unfortunate. But yeah, that's where we are.

Nicholas:All right. Does anyone else have anything else to add before we move people onto the rest of their days here? Kaleo:I might do follow-up space after this and just event for a little bit more. So if anybody is interested, feel free to follow, check it out. Nicholas: Perfect, Kaleo. Thank you. We've got a new person up here who has a few comments. Dave Lauer.

Dave: Yeah. Thanks for having me. Can you hear me? Okay.

Nicholas: Yeah, you sound great.

Dave: Great. Yeah, I mean, I just, I'm going to say, and I really appreciate you guys for holding this and getting them here. But it's just such bullshit, right? Like the whole thing is just such, it's like a complete Ponzi scheme and he admitted it. He admitted it explicitly in one of those last questions where it was asked, you know, were you taking the funds when they were sent to Alameda and transferring a load of FTX? And it couldn't answer it. Because of course, you know, he can't answer this stuff because when you get down to that level of granularity, it becomes very clear that it was complete Ponzi scheme, right? This was, this was like not just a Ponzi, it wasn't just made off. It was like core sign, you know, dipping into customer funds and it's couched in this complexity of margin and collateralization and balance sheets and such. But it was really just a straightforward Ponzi scheme. And it does such a disservice. You know, you, I think it was said to disservice to the people here and everyone listening and all that. Such a disservice to the people he stole money from and it really feels like we're not using the right language anymore when dealing with him. And I get it because, you know, it's going to be a stretch for somebody to expect somebody to come on when you just call them out for what they are. But it's just straightforward crime, right? Like this is, it, I feel like we're making this so overly complex, so much more complex than it needs to be when it's simply clear money was being sent in order to trade on FTX and it was just being stolen by Alameda lost with poor trading strategies or put into Bahamian real estate or paid out in loans to people who are buying yachts. And the most that was happening was maybe a journal entry on FTX that needs to think that your money had been moved over, right? So I think my frustration overall this and a lot of people's frustration is that we're not necessarily calling it, you know, straight, in a straightforward way what it is, which is a strict Ponzi scheme in which he was stealing money. And I was actually surprised that in the response that he was so explicit in admitting it was maybe, and I, you know, I will admit to not having listened to all of the spaces like you guys have or participated, but I've listened to a couple and I've always heard him kind of dance around questions that would really implicate him, but this really seemed to me to be a major implication when he said that those funds were not being sent over to FTX.

Nicholas: I think I would be inclined to agree with that Dave. Thank you. We've got another addition for some thoughts. Tiffany Fong.

Tiffany: Oh, hey, I just wanted to know. I was also curious about his donations to the block and I tried texting him on Friday shortly after that article came out and he did open it and did not respond about his donation or not donations, the money that he funneled to the CEO, Michael McCaffrey. He didn't respond to that. So just noting that.

Nicholas: Thank you, Tiffany.

Tracy: I guess as a reporter and also, you know, Coin Desk and Block, I think we've always had a little bit of a friendly rivalry and this is not to, you know, this is my unbiased opinion or try hard to be unbiased. You know, it could also, it could be, I find it hard to believe that Sam didn't influence any of the coverage. You know, I do think that, you know, FTX and Sam were big players in the crypto industry. So if you were any type of crypto reporter, you probably had some access to Sam and you had to write stories about FTX. Anything that I suspect that he probably did was also just, you know, whisper in the year of many reporters and write stories that kind of shaped things to Sam's own narrative. And this could, it's not just FTX Alameda coverage. It could be, you know, a reporter writing a story about crypto regulation and then they go text Sam like, hey, Sam, what do you think about this bill? And then Sam will whisper something into their year and then they'll cite somebody familiar with the matter. And you know, if you just look at the block's history and, you know, their historical stories. And as a reporter, I think I can kind of read through the story and kind of know who was the unnamed source behind it. And so I just suspect that he was probably a source to a lot of their stories. Although I would have liked to hear from him. He really wanted to hop off when he was asked that question. But I would have really loved to hear why, you know, he gave a $16 million personal loan to Mike McCaffrey and McCaffrey used it to buy real estate in the Bahamas, which I think is, is not good.

Nicholas: Yeah. I would agree. Maybe if we're, if we're able to get a follow up interview, we can put that toward the top of the docket to try to get him to give a direct concrete response to that this time. All right. Does anybody else have any closing thoughts before we wrap up here and send people along their way? All right, everybody. I know, as Whale said earlier, we didn't get the best responses we were looking for, but I think we did. We did get a couple of good concrete yes, nose on a couple of our questions. So that's, you know, for what it's worth, that's good. For those of you that came in late or feel like you missed anything, this will be uploaded later today, hopefully in the next few hours here as an unusual Whale's podcast on Spotify, ApplePod and YouTube. Thank you all again for coming and listening. Hopefully you were able to garner some of that. Hopefully some of the responses we were able to get were at least somewhat insightful. Until next time, folks, thanks again for coming and we will catch you on the next unusual Whale space and make sure you're following all the speakers up here today. A lot of good takes, a lot of them are doing constant coverage on the situation as it unfolds and we will be back tomorrow on the unusual Whale spaces and which with some more or less commentaryless coverage of the hearing itself tomorrow. Thanks again, everybody. Have a great rest of your day.