SBF's Final Interview Before Arrest: The Truths and Rumors

Original Article Title: " Before SBF's Arrest, We Had a Chat with Him "

Original Source: DeepTech TechFlow

On December 13, FTX founder Sam Bankman-Fried was officially arrested by the Bahamian police.

According to the Bahamian officials, the U.S. Department of Justice has formally charged SBF with a criminal lawsuit, and the Bahamian police arrested SBF upon receiving formal notification from the U.S. and will extradite him as required. A tweet from the U.S. Attorney's Office for the Southern District of New York also confirmed this and stated that an indictment will be forthcoming. According to sources cited by The New York Times, FTX founder SBF has been accused of wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.

Previously, SBF had frequent interviews with major media outlets and lingered in various Twitter Spaces, leaving many people puzzled: Why did SBF seem unscathed after the FTX collapse?

The dust is gradually settling.

Just a few days before SBF's arrest, DeepTech TechFlow conducted a video interview with SBF. On that day, SBF seemed in good spirits, showing multiple smiles that had been rare. Throughout the interview, he repeatedly emphasized his remorse, repeatedly saying "I screwed up," indicating that he wanted to "actively address customer issues." However, on the other hand, he turned his criticism towards CZ and the current CEO and team responsible for bankruptcy liquidation at FTX. In his view, CZ was the trigger and the one ultimately responsible for the explosion of FTX.

It is worth noting that SBF admitted in the interview that in the past, he had wasted a lot of energy on media and FTX branding, rather than focusing on product optimization and risk management, which now appears to have caused many problems.

At the end of the interview, we asked him, what do you regret the most?

He said, "I regret not staying out of the media during that troubled time; I could have done more."

Truth or Rumor?

DeepFlow TechFlow: From FTX bankruptcy to the collapse of LUNA, Three Arrows Capital has repeatedly accused Alameda of hunting them down in the event of the LUNA crash, ultimately causing Three Arrows Capital to lose all of its own LP and creditor funds. In addition, The New York Times has reported that the U.S. Manhattan federal prosecutor has started investigating whether Alameda was the hidden hand behind the LUNA collapse. How do you respond to these accusations? Did Alameda hunt down LUNA and Three Arrows Capital?

SBF: Absolutely not. Although many things have gone wrong this year, I regret deeply because these directly led to FTX's bankruptcy. I am extremely saddened, but not everything happened for this reason.

The collapse of Three Arrows Capital has nothing to do with us, and Terra has even less to do with us. In a sense, Three Arrows Capital and Alameda have had a similar experience. Leveraged long positions, a decline in market capitalization, and eventual liquidation. I feel sympathy and sadness for their experience, for everyone hurt this year due to the market downturn, but I cannot agree with them spreading rumors and trying to blame others for their own actions.

I think they are all smart people, and I truly can't believe they genuinely believe that Alameda had anything to do with their positions. The market crashed, that's straightforward, but it has nothing to do with the actions I took, nothing to do with Alameda. From my perspective, they are just looking for a scapegoat, trying to shift the blame onto others for their problems.

DeepFlow TechFlow: After the FTX incident, you have continuously insisted that you did not have a detailed understanding of Alameda's financial situation, leading to being unaware of the fund misappropriation that occurred. However, Forbes reported that you spent two years compiling five asset lists, with your understanding of Alameda's finances accurate down to the single digits. How do you view the content of the report?

SBF: The document I sent to Forbes was in response to an inquiry about my holdings. I sent them a summary regarding my holdings and Alameda's holdings, which gave me some information, and I also learned some information about Alameda's token holdings, but I was not fully immersed in it.

I just took a look at some of Alameda's open futures positions, but did not dive into the details of all positions, which means I did not have a comprehensive understanding of Alameda, including their actual total asset value, I only knew some of their assets until the recent incident made me aware of everything.

TechFlow: So you knew specific data but not the why?

SBF: I only knew part of it. For example, I knew where Alameda's largest assets were, but I did not know their liabilities. I knew which loans or borrowings they had, or their positions on FTX, the main token holdings. I expected to know more, but obviously, the reality was different.

TechFlow: Recently, the Financial Times (FT) exposed the details of nearly 500 investments by Alameda and FTX Ventures, totaling over $5 billion. Where did the money for these investments come from? Looking back, were some of these investments too hasty?

SBF: Making such investments was definitely a mistake. While I believe many of the investments were reasonable, Alameda's investment scale was too large, probably ending up in the tens of billions. This is also partly why they ended up in long positions for a long time and lacked liquidity. I absolutely wish Alameda had not made such large-scale investments.

Media and Self

TechFlow: On Twitter, many people feel dissatisfied, believing that you "bribed" media outlets like The Wall Street Journal/Bloomberg, etc., they seem to downplay the harm and nature of FTX's bankruptcy. What is FTX's media strategy?

SBF: The media strategy depends on whether it was before or after the incident. If we go back to a month before the collapse, it is clear that I had a lot of contact with the media. I was quite proactive in talking to the media a lot. My goal was to help as much as possible, to help people understand what was happening in the cryptocurrency ecosystem, and to try to help with advocacy to lawmakers and others.

But in all of this, a lot of what I said ended up being used against me. When FTX crashed last month, I did the same thing, I talked to journalists, gave my thoughts, and tried to help, but they would take the crash as somehow being my fault. Since then, I've entered a period of not talking to the media much. I regret doing that because the reporting during that time was a bit divorced from reality. Clearly, I messed up a lot of things, that's absolutely true, and the media has every right to report on that, but there's also a lot of conspiracy theories starting to spread, which are all untrue. And this narrative has taken hold, including the collapses of Luna and Three Arrows Capital... none of which have anything to do with me, yet are frequently brought up in the media.

*Background: Recently, the Financial Times revealed Alameda's nearly 500 portfolio positions, including investments in several media outlets. Additionally, prominent crypto media outlet The Block disclosed that its former CEO had secretly received a total of $43 million in loans from SBF.

SBF: I did indeed disappear for a while when the crash happened. This meant that my voice wasn't heard for a while, which at the time felt right. Looking back, though, there was a lot of craziness happening at the time. But I knew that the truth would come out in some way, and I should have actively fought back against those untrue things.

TechFlow Deep Dive: Previously in the media, you were portrayed as an "effective altruist," but now, to most, that seems like a persona crafted for disguise and deception. What is the real Sam like, and what are your unchanging beliefs?

SBF: I tried to do things that I thought would benefit the world in the future, clearly. But I've messed up now, and I know I haven't had the impact I had hoped for. I have deep regrets, and it's a problem I can never fully fix, and it will haunt me. But it's what I've always tried to do, and it's what I will continue to try to do. It's exciting, but it's also regretful. I want to do things that I think are beneficial to the world as I perceive it, that's unchanging, though I've made a lot of mistakes, it's the direction I've always tried to go.

Tech Flow Deep Dive: Are you a believer in cryptocurrency and blockchain, or is cryptocurrency simply a tool for you to make money?

SBF: Yes, I am a true believer. When I first got into crypto, it was just a tool to make money. In 2017, when I first started trading, I didn't know what cryptocurrency was, didn't care that much, it was just something I could trade and make money with. But in my first year of trading, I learned a lot about what cryptocurrency is. I had to use it and transfer it between crypto exchanges. In this process, I learned about the original purpose of cryptocurrency.

The Future of Exchanges

Tide of TechFlow: With FTX stumbling, Binance's position has been strengthened. How do you see the future development of centralized exchanges, and will Binance continue to dominate?

SBF: Good question. I'm not sure what will happen, but clearly Binance has become more powerful. At this point, they have most of the trading volume. I have had disagreements with them and am quite frustrated with many things they did during the FTX incident. However, they have also built a good product, and their users love using Binance, so kudos to them for that.

In this market, having competition is crucial. If there's a monopoly, you may not necessarily see real competition or growth. Preventing monopolies is important, and having multiple exchanges with real liquidity is also crucial, including Binance. I hope other institutions can continue to survive and grow, but I am worried that this may lead to a certain level of centralization in the exchange market. I don't think that is a healthy trend for everyone.

Tide of TechFlow: How do you view the future of Centralized Exchanges (CEX) and Decentralized Exchanges (DEX)?

SBF: Some things can only be done on centralized exchanges. To illustrate this point, we can think that anything that is truly computationally intensive is hard to do on a DEX due to throughput and latency limitations. Even on today's fastest decentralized networks, with tens of thousands of transactions and hundreds of millions of seconds of delay, these numbers are much worse than what you can get on a centralized server. Therefore, when you have a large number of transactions or high-frequency trading, there are advantages to using a centralized exchange.

On the other hand, a decentralized exchange is verifiable, it has proof of reserves, it is clear what it is supposed to do, and the code is all on-chain. Anyone can build on top of it and can compose other things with it, which is very powerful. Therefore, decentralized exchanges also have many advantages.

My guess is that we will see a combination where you see glimpses of decentralized exchanges in some centralized exchanges, with truly computationally intensive products tending to trade on centralized exchanges and less so on decentralized exchanges. You can trade faster on centralized exchanges, have more computational resources to use, but obviously, this comes at a cost.

Tide Deep TechFlow: How do you view CZ's role in the event process, and what impact did his behavior have on the entire event?

SBF: He played a significant role in it. I think, in the months leading up to it, he had a lot of PR campaigns ready to undermine FTX's market trust. In the end, he triggered the bankruptcy. Not only did he initially say he would sell FTT, but that weekend, a large number of people followed up with tweets, trying to stir up market sentiment as much as possible, rather than just attempting to find an OTC trade. If selling FTT was his primary goal, he chose a very lengthy process that would take a long time, allowing him to keep talking about the subject. I think this may have been intentional. He may have deliberately wanted FTX to lose more during this process. As it was about to collapse, he said he wanted to acquire it. I don't believe he was prepared to seriously follow through with this idea, nor do I think he ever seriously considered acquiring FTX. He just wanted to interact with us once, and he would definitely back out in the end. I am not satisfied with the role CZ played in the event; it was a targeted behavior, not an attempt to help improve the industry, just to harm a competitor.

Tide Deep TechFlow: Do you think he triggered this crisis?

SBF: Yes, he was the one who ultimately took the action that led to the explosion. Of course, I also have responsibility; FTX did not manage risks well, which was my fault, so he was able to take advantage of it. But I do think he pulled the trigger.

Tide Deep TechFlow: Assuming there were no reports from Coindesk and CZ's FTT sell-off, what do you think would have been the outcome for FTX?

SBF: That's a very good question. I don't know what would have happened, but I believe we would have had more opportunities. In the early stages of the event, different forces came from all sides, leading to the collapse. In the past few months, I have started to re-engage in the business, believing that FTX will become stronger, and our balance sheet will become stronger.

Tide Deep TechFlow: Why did you start re-engaging in the business? Any specific milestones?

SBF: There's nothing particularly special. It's just that the previous year, I wasted a lot of time on some things, I've been putting more time into media, into brand building around the future vision of FTX that I care about. They are important, not to say they are unrelated to the business, but I have a lot more important things.

First, I should have focused on risk management, focused on overhauling our matching engine and other things. And besides screwing that up, there's no space for any explanation. Over the past few months, I've basically accepted this fact that I've become less grounded, and I need to get more involved in the business development, work harder, and focus more on some important things about the work, such as patching the matching engine and other things. At that time, I had a lot of things to do, and I had figured out how to do risk management, unfortunately, the breakdown came earlier than the results.

Tide TechFlow: Skybridge Founder & Anthony Scaramucci said that on a fundraising trip to the Middle East, you fiercely criticized CZ in front of Middle Eastern investors, and later these words reached CZ's ears, is that true? If so, do you regret it now?

SBF: I don't know. Scaramucci certainly heard something, I don't know his thoughts or feelings. In fundraising calls, everyone talks about their products. I talked a lot about the advantages of exchanges, talked about where we do well, and how we stand out from the competition. The most common question asked during fundraising is, what makes you different from your competitors?

That's what I said, sometimes I just talked broadly about what makes us different, and sometimes I also specifically talked about our advantages compared to other specific exchanges. I tried to honestly talk about what I saw as their pros and cons, and obviously Binance has done some things very well, which has made them the world's largest exchange, which is incredible. But I also talked about where I think we are better than our competitors, I think FTX has a lot of areas where we excel compared to Binance. For everyone, it may be the same, that when they hear good and bad things, what resonates with them is often the negative part.

Tide TechFlow: FTX has received investments from many star VCs, such as Sequoia Capital, Paradigm, and Temasek, what do you think was the reason you attracted so many institutional investments at that time? Any tips?

SBF: At the time, we were looking for a corporate partner, and they were also in the process of building a consortium of white-label partners. They helped us invest to achieve this goal, establish relationships, and also gain acquisition capital. I don't know why they invested in FTX and me, they know better than I do. But I do believe that in many ways, we can be considered a very remarkable product and company, but obviously, we also have a lot of room for improvement.

TechFlow Insight: Since 2019, you have been donating to support the Democratic Party, becoming one of the largest donors to the party. What is your motivation? Did this money come from users? What benefits did FTX gain from "personally political" activities?

SBF: These donations were not made on FTX; they were donations I made to Kennedy. They benefited all the causes that I deemed important, and that I thought the candidate could help support, such as epidemic prevention and other causes. I did spend a lot of time in Washington, D.C., talking to regulatory agencies and policymakers, but to help establish a regulatory framework for the cryptocurrency ecosystem and then discuss FTX's license with regulators. The main purpose of the donations was to prevent a major epidemic outbreak.

The Road Ahead

TechFlow Insight: Currently, various parties are vying for control of FTX's assets. When do you expect users who are unable to withdraw from FTX to get back some of their assets?

SBF: It's very chaotic. Many governments have already intervened. There are The Bahamas, the Chapter 11 Team, European regulatory bodies, Australian regulators, Japanese regulators... It's really messy. I hope that whoever ultimately gains control, they will prioritize customers and do everything possible to help them more. Some of them are doing this, many international regulators and administrators have been helping customers, but unfortunately, it does seem like there will be a jurisdictional battle.

TechFlow Insight: As we understand it, many FTX employees trusted you, most of their assets are also on FTX and have not been withdrawn. For these employees, will you compensate them? What would you like to say to them?

SBF: I am very sorry. I am willing to do anything I can to make it right with them, but I don't currently have the ability to do so. I don't have the funds to give them, but I haven't forgotten. I hope I can make it up to them. I hope that one day, I can make it right with every other FTX customer. I am working towards that. I can't promise that I will definitely succeed, but this is where all of my time is going right now.

Frankly, I thought it had already happened, and I am not surprised, frustrated, and angry that it hasn't. I thought by now all U.S. and Japanese customers should have been compensated, that should have already happened. I am confused and surprised that the chapter 11 team hasn't done this yet. Also, I have had several billion dollars in potential financing proposals, and none of them have been accepted. Both of these things are very frustrating. I think that if the chapter 11 team wanted to, they could have started returning some assets to the customers, but that has not happened. I will do my best to get customers as compensated as possible. There will be movement on this in the next month or two.

TechFlow Deep Tide: Have you been criminally charged? Are you worried about going to jail?

SBF: Not yet, I don't know what will happen. Obviously, regulators are looking into this. But that is not my focus right now, I am currently focused on dealing with customer issues. At some point, I might need to think about myself, but certainly not now.

*Note: This interview was conducted before SBF was sued by the U.S. Department of Justice, and arrested by the Bahamian police.

TechFlow Deep Tide: Having such a significant impact on the industry, do you feel any guilt, and what is the most regrettable thing for you?

SBF: I feel incredibly guilty and incredibly terrible about what happened. I didn't want this to happen, but if I had taken more action, I could have stopped it, I should have had more say, but I didn't, and I really regret that, I shouldn't have disappeared from the media after the incident, I could have done more.

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