Original title: "How Sam Bankman-Fried's Crypto Empire Collapsed"

Originally written by David Yaffe-Bellany @nytimes

first level title

first level title

first level title

first level title

At the same time, SBF also expressed numerous regrets about the collapse of FTX, but he only provided limited details to explain the related problems surrounding him and FTX. And whether FTX improperly used billions of dollars of client funds to support Alameda Research, a quantitative trading company he founded, the relationship is being examined by the Department of Justice and the SEC.

SBF said, "Alameda has accumulated a large margin position on FTX. It is much larger than I thought. The size of the position is in the billions of dollars, but in fact the downside risk is also very large." And this actually means that It borrowed funds from the trading platform, but SBF declined to provide further details.

Still, SBF did agree with critics in the crypto community that he had expanded his business presence across the industry too quickly, and said some of his other commitments kept him from seeing signs that FTX was already in trouble.

first level title

SBF Sanqian

SBF, who currently lives in the Bahamas, declined to comment on his current location, citing security concerns. A lawyer for FTX did not respond to a request.

The collapse of FTX shocked the crypto world. But in recent months, there have been signs that his business empire is in jeopardy and that his ambitions are out of his control, according to interviews with nine of his colleagues and business partners, as well as insider information obtained by The New York Times. scope.

And the relationship between Alameda and FTX was the source of SBF's downfall. He founded the quantitative trading firm in 2017 and rents an office in Berkeley, Calif., not far from Stanford, where he grew up. In no time, the company was making millions through arbitrage in the bitcoin market.

In 2019, SBF relocated the company to Hong Kong, which has a more friendly regulatory environment. He moved in with a group of traders — including Caroline Ellison, a fellow former trader at financial firm Jane Street — and went on to start FTX, a platform for cryptocurrency investors to buy, sell and store digital assets.

Attracted by regulators in 2021, SBF transferred FTX to the Bahamas, where regulators allowed him to provide risky trading options that were not legal in the United States. On FTX, investors will be able to borrow money to bet on the future value of cryptocurrencies.

Additionally, FTX has close ties to Alameda, which trades heavily on the FTX platform, meaning it sometimes benefits when other FTX clients lose money. In the past, SBF has defended such operations, saying Alameda provided vital liquidity, injecting capital to enable other clients to complete trades on the trading platform.

first level title

Alameda is run by Ms Caroline Ellison, in which SBF is also involved, contributing to decisions on big deals, but at times there appear to be few firewalls between businesses, according to a person familiar with the company's inner workings. Alameda was supposed to operate from a separate office, but a client who visited the FTX building in recent months saw Caroline Ellison sitting in front of a computer displaying trading data from the trading platform.

FTX, on the other hand, does not have any outside investors on its board, despite the billions of dollars that VCs have poured into the company. In addition to SBF and Ellison, the executive circle at FTX in the Bahamas includes Director of Engineering Nishad Singh, Chief Technology Officer Gary Wang and Head of Product Ramnik Arora.

In the Bahamas, SBF lives in isolation at times, surrounded by a small group of colleagues, living with Caroline Ellison, Nishad Singh, Gary Wang and six others in a five-bedroom penthouse in the Orchid Building at the Albany Resort, Albany It is a 600-acre beachfront resort on New Providence Island in the Bahamas. Two people said that SBF and Caroline Ellison were sometimes in a relationship.

For now, however, SBF said he and Ms Ellison are no longer in a relationship, but declined to comment further, and Ellison did not respond to requests for comment.

first level title

"Altruism" and "Arbitrariness"

All the while, SBF and his circle of associates claim to be committed to effective "altruism," a philanthropic movement that urges followers to donate their wealth in efficient and logical ways. But for colleagues outside the group, it can sometimes be difficult to find time to talk to SBF, which prides itself on the fact that FTX has only about 300 employees, much smaller than its main competitors, Binance and Coinbase, a person familiar with the matter said.

While laying off workers, SBF has invested in dozens of other cryptocurrency companies, bought stock brokerage Robinhood stock, donated to political campaigns, given media interviews, and hoped to give Elon Musk billions of dollars in financial help Funded his Twitter acquisition.

And when he went on a buying spree this year, investing in struggling crypto companies, he didn't share that information with key employees. When he was told to overextend and encouraged to hire more staff, he also rejected those suggestions.

While in Washington, the SBF was pushing an ambitious regulatory agenda while criticizing rival trading platform Binance CEO Changpeng Zhao, who eventually mobilized his extensive Twitter following, sparking a flight to the FTX platform.

first level title

"Love and Kill" with Changpeng Zhao

Perhaps SBF's most ambitious goal is shaping crypto regulation in Washington, where he testified before Congress and met with regulators. He also used his growing influence in Washington to criticize his biggest rival, Changpeng Zhao, in private meetings, people familiar with the matter said.

SBF before a Senate committee in February, AFP: Getty Images

And recently SBF said, "Criticizing Zhao is not a good strategic move for me. I am very frustrated about it. I should understand that expressing this is not a good decision for me."

As a former investor in FTX, Zhao still owns a large amount of FTT, a cryptocurrency launched by FTX to facilitate transactions on its platform. On November 6, Zhao announced the sale of FTT on Twitter, which triggered many FTX platform customers to quickly withdraw their deposits.

Meanwhile, Zhao once tweeted: "We will not pretend to remain close after the 'divorce', and we will not support those who lobby against other industry players behind their backs."

Additionally, when FTX collapsed, Changpeng Zhao initially agreed to acquire the trading platform in what amounted to a bailout. But soon after Binance discovered that FTX had financial problems, the deal fell through.

first level title

Why Alameda misappropriated FTX client funds

Since then, SBF hastily prepared new financing, and mentioned in an internal letter to employees: "I shouldn't laugh at them, they probably never really planned to complete this transaction."

Meanwhile, in a meeting with Alameda employees on Wednesday, Ms. Ellison explained the collapse, her voice trembling, and she apologized for letting everyone down, according to a person familiar with the matter.

Caroline Ellison said: "In recent months, Alameda has obtained loans, but at the same time used the money for venture capital and other expenses, but around the time the encryption market collapsed this spring, lenders began to call back these loans. And Alameda spent The lost funds were no longer readily available, so the company used FTX client funds for the payment.” Meanwhile, besides her and SBF, two other people knew about the arrangement: Nishad Singh and Gary Wang.

first level title

Improvisation

With FTX's debacle, SBF said on Sunday that he has been working constructively with regulators, bankruptcy officials and the company in an effort to do what's best for consumers.

But he is now the subject of an investigation by federal prosecutors in New York, who have begun contacting possible witnesses. Several people with knowledge of the matter said that others related to FTX have also begun contacting lawyers for possible representation. The law firm of Sullivan & Cromwell will represent FTX in the investigation of the bankruptcy case, while Paul Weiss' lawyers will represent SBF.

Also in the interview, SBF declined to discuss the possibility of jail time.

“People can say all the mean things they want about me online, but what matters to me is what I do and what I can do,” SBF said.

In addition, he has found other ways to pass the time in recent days, such as playing the video game Storybook Brawl, although less than usual. "But it helps me relax a little bit, it clears my mind," SBF explains.

first level title

Original link