Spellcaster: The Fall of Sam Bankman-Fried
Magic Beans
Mon Jun 26 2023Description
The episode covers the questionable balance sheet that revealed a significant hole in Sam Bankman-Fried's books. Panic ensued as the price of FTT fell and investors withdrew funds from FTX. Sam and his inner circle fought for survival, eventually leading to FTX filing for bankruptcy. Sam expressed remorse for his mistakes but denied fraud. The episode ends with prosecutors building a case against him.
Insights
FTX's Questionable Balance Sheet
The leaked balance sheet for Alameda Research revealed a significant hole in Sam Bankman-Fried's books, causing panic among investors.
Panic and Decline of FTT
Binance CEO CZ liquidated FTT tokens, leading to a decline in their value. Caroline Ellison's attempt to reassure the market backfired.
The Fight for Survival
Sam and his inner circle worked tirelessly to save FTX, but investors were hesitant to bail out the company. FTX eventually filed for bankruptcy.
Sam's Downfall and Remorse
Sam apologized for his mistakes at FTX but denied fraud. He expressed remorse for betraying people who lost money and faced potential legal consequences.
Chapters
The Questionable Balance Sheet
00:00 - 08:02
- Mike Burgersberg received an email with a balance sheet for Alameda Research that looked nothing like a traditional balance sheet.
- The balance sheet listed various crypto tokens as assets, including an FTT token created by Sam Bankman-Fried's company.
- Mike calculated that Alameda owned almost all of the tokens in existence and their market value was practically zero.
- The balance sheet revealed a significant hole in Sam's books, indicating either massive incompetence or something worse.
- Nick Baker, an editor at CoinDesk, received the same balance sheet and realized its potential implications for Sam's empire.
- On November 2nd, CoinDesk published the story about the questionable balance sheet, which quickly spread on social media.
- Caroline Ellison tweeted that the leaked balance sheet was for a subset of their corporate entities and they had more than $10 billion of other assets.
Panic and Decline
07:37 - 15:49
- Binance CEO CZ decided to liquidate any remaining FTT on their books due to recent revelations and beef between his company and Sam's.
- The price of FTT started to fall, causing panic among investors. Caroline tried to reassure the market by offering to buy FTT at $22 per token.
- But her message was interpreted as a sign of weakness, leading to further decline in FTT's value.
- Caroline expressed her increasing dread about the situation while Sam urgently ordered Alameda traders to sell as much as possible.
- With customers withdrawing funds from FTX and time running out, Sam turned to Alameda for money. Meanwhile, Warren Winter remained unaware of the chaos.
- There was urgency to get at least $2 billion USD.
- Warren Winter, an FTX customer, was unaware of the situation while on a retreat.
- After checking his phone, Warren became concerned about the safety of his funds on FTX.
The Fight for Survival
15:20 - 22:36
- Sam and his inner circle were up for three nights straight, trying to save FTX
- FTX tech team worked from the penthouse war room to avoid difficult questions
- Sam called CZ's former deputy, Bill Chen, seeking help for FTX's $5 billion hole
- Investors were hesitant to bail out FTX as Sam didn't know how much money was needed
- During calls with investors, Sam confessed that FTX had loaned money to Alameda
- Employees started leaving and Sam moved to a mansion with loyalists
- Lawyers urged Sam to declare bankruptcy in the US, but he hesitated
- Sam eventually signed the bankruptcy agreement with his father's help
- FTX filed for Chapter 11 Bankruptcy and Sam resigned as CEO
- Most FTX staffers had already left the Bahamas when news of bankruptcy broke
Sam's Downfall and Remorse
22:17 - 27:58
- Sam apologized on Slack and felt alone in an empty warehouse of monitors
- Zeke Fox interviewed Sam at his $30 million penthouse after the collapse of FTX
- The penthouse was filled with abandoned shoes and remnants of a party
- Sam explained his mistakes at FTX but denied committing fraud
- Sam tried to explain what had gone wrong at FTX, admitting to inattentiveness and stupid mistakes but denying fraud.
- Sam showed a fantasy balance sheet on his laptop, claiming FTX had $9 billion left to cover debts.
- Zeke asked Sam about the effective altruism movement and Sam's mentor, Will McCaskill, condemned Sam's actions.
- Sam expressed remorse for betraying people who lost money and felt alone despite a few supporters remaining with him.
- Zeke compared the situation to the end of Scarface, with Sam isolated in the apartment.
- As Zeke left, Sam was still trying to raise money and pay customers back, but prosecutors were building a case against him.