New York Times Runs Softball Article on FTX’s Sam Bankman-Fried

FTX filed for chapter on Friday, leaving cheap folks to marvel how a cryptocurrency platform based in 2019, which reached a valuation of $32 billion in 2021, may plummet to zero in such a short while. There’s a brand new piece within the New York Times which gained unique entry to FTX founder Sam Bankman-Fried, however in the event you’re on the lookout for solutions, you’re not going to search out it there. In reality, the interview with SBF, as he’s typically referred to as, is offered with such a gauzy lens that you must begin questioning what the hell is happening with crypto reporting on the Times.

The new article within the New York Times by David Yaffe-Bellany lays out the details in methods which are clearly useful to SBF’s model of the story and leaves lots of his extremely questionable assertions with out correct context and even essentially the most minimal quantity of pushback. The end result isn’t to light up the shadowy world of crypto. It reads like if the Times had performed an interview with Bernie Madoff after his ponzi scheme collapsed and in the end prompt he simply made some dangerous investments.

As one instance, take a paragraph close to the start of the article that quotes SBF’s dealings with hedge fund Alameda Research, the sister group of FTX, run by SBF’s someday romantic accomplice Caroline Ellison. The paragraph, certainly one of just some about Alameda, brushes previous all a very powerful details which have been reported by retailers like Reuters, Bloomberg News, and the Financial Times.

From the New York Times:

Alameda had accrued a big “margin position” on FTX, basically which means it had borrowed funds from the trade, Mr. Bankman-Fried mentioned. “It was substantially larger than I had thought it was,” he mentioned. “And in fact the downside risk was very significant.” He mentioned the scale of the place was within the billions of {dollars} however declined to supply additional particulars.

SBF’s quote about “borrowing” billions between FTX and Alameda appears to be a wild mischaracterization, if we’re to consider dependable reporting by quite a few different retailers, and paints the company three-card-Monte as some sort of harmless funding transfer gone flawed. At least $4 billion of FTX funds, together with buyer deposits, had been moved to prop up Alameda, based on Reuters, and that’s simply one thing you may’t do legally.

The billionaire CEO of Citadel, Ken Griffin, defined simply at this time at a convention in Singapore why transferring cash on this approach isn’t allowed in conventional finance.

“There’s no doubt that customer assets were used to make investment decisions in favor of FTX’s shareholders, which didn’t work, at the expense of the customers. That’s not permitted in American broker dealers. You can’t just use your customer assets to go engage in proprietary trading,” Griffin defined in an interview with Bloomberg News.

“That’s a huge no-no. And that’s a good no-no, to be clear, too,” Griffin continued.

As one other instance, take a paragraph the place the Times discusses FTX’s relationship with Changpeng Zhao, the CEO of Binance:

A former investor in FTX, Mr. Zhao nonetheless owned a considerable amount of FTT, a cryptocurrency that FTX invented to facilitate buying and selling on its platform. On Nov. 6, Mr. Zhao announced on Twitter that he was promoting the FTT, spooking prospects who rushed to withdraw their FTX deposits.

There’s quite a bit occurring on this paragraph however let’s begin with the declare that FTT was a cryptocurrency that was “invented to facilitate trading.” That’s a really crypto-industry-friendly approach of speaking about what was taking place. In actuality, FTT was created by SBF for a similar cause that some other cryptocurrency has been created: as a speculative asset that permits early buyers to extract wealth from individuals who place cash into the asset after the worth has soared.

The Times piece additionally mentions Zhao’s introduced sale of FTT token final week, with out explaining why the sale itself was an issue. Zhao had acquired the FTT cash in an odd approach and needed to dump it. It began when Zhao purchased a 20% curiosity in FTX again in 2019. After Zhao’s relationship with SBF soured in mid-2021, SBF purchased out Zhao’s share in FTX for $2 billion. But an enormous chunk of that $2 billion was in FTT, the token invented by SBF. When Zhao introduced he was promoting all his FTT, $580 million price based on Reuters, the complete home of playing cards got here crashing down.

Earlier within the piece, the Times calls what occurred to FTX a “run on deposits,” a characterization that obscures what actually occurred. It’s not clear that FTX even had $580 million liquid sufficient to money out simply Zhao’s share in a cryptocurrency token that was solely invented three years in the past. If you fail to elucidate what FTT really was, you may’t perceive why it was arguably the biggest fraud of the previous decade.

FTX held simply $900 million in liquid belongings, and its largest single asset was a cryptocurrency referred to as Serum, based on the Financial Times. FTX held $2.2 billion price of Serum, however the market worth of all Serum all over the place was simply $88 million. And you’re by no means going to guess who created Serum. Much like FTT, Serum was created by FTX and Alameda, based on Bloomberg News. The folks behind FTX created their very own faux cash they usually had been treating it as if it was actual {dollars} and cents.

But each single clarification within the new Times piece offers each SBF and cryptocurrency extra broadly the good thing about the doubt, utilizing the former billionaire’s quotes extensively, and even attempting to place his angle as certainly one of self-reflection quite than ruthless calculation to make himself sound higher.

Another excerpt from the Times:

Mr. Bankman-Fried did, nevertheless, agree with critics within the crypto neighborhood who mentioned he had expanded his enterprise pursuits too shortly throughout a large swath of the {industry}. He mentioned his different commitments had led him to overlook indicators that FTX was operating into bother.

“Had I been a bit more concentrated on what I was doing, I would have been able to be more thorough,” he mentioned. “That would have allowed me to catch what was going on on the risk side.”

Did SBF “expanded his business interests too quickly” ultimately? Did SBF simply not “catch what was going on” with the dangers he was taking? Or was the complete enterprise rotten to its core?

Paragraph after paragraph within the Times offers a mild gentle to FTX’s extraordinary implosion, explaining that SBF’s “ambitions exceeded his grasp” or speculating that maybe he was “overly dependent” on a small group of advisors.

And, based on the Times, SBF’s lean workers rely wasn’t additional proof that it was all simply smoke and mirrors, however quite one thing to be happy with, alongside along with his charitable contributions:

Mr. Bankman-Fried’s circle of colleagues was certain by a dedication to efficient altruism, a charitable motion that urges adherents to provide away their wealth in environment friendly and logical methods. For co-workers outdoors the clique, it was generally troublesome to get time talking with Mr. Bankman Fried, an individual conversant in the matter mentioned. And Mr. Bankman-Fried made it some extent of pleasure that FTX had solely a couple of 300-person workers, a lot smaller than its high rivals, Binance and Coinbase.

Even as he stored hiring down, Mr. Bankman-Fried constructed an formidable philanthropic operation, invested in dozens of different crypto firms, purchased inventory within the buying and selling agency Robinhood, donated to political campaigns, gave media interviews and provided Elon Musk billions of {dollars} to assist finance the mogul’s Twitter takeover.

Mr. Bankman-Fried mentioned he wished “we’d bitten off a lot less.”

Again, this characterization from SBF makes it sound as if he simply overextended himself in an in any other case respected enterprise. In actuality, SBF had constructed a home of playing cards “where each individual card is itself a house of cards,” as Rusty Foster put it yesterday.

Even the obvious conflicts of curiosity made apparent within the FTX downfall are solely identified as one thing that SBF’s “critics” would point out:

FTX and Alameda had been carefully linked. Alameda traded closely on the FTX platform, which means it generally benefited when FTX’s different prospects misplaced cash, a dynamic that critics referred to as a battle of curiosity. In the previous, Mr. Bankman-Fried has defended the association, saying Alameda supplied essential liquidity — injections of capital that enabled others prospects to finish transactions on the trade.

And, on the finish of the day, SBF simply desires to cooperate with investigators and do what’s proper for the individuals who put their cash into FTX, based on the Times, which quotes SBF uncritically:

As FTX has crumbled, Mr. Bankman-Fried has been “working constructively with regulators, bankruptcy officials and the company to try to do what’s best for consumers,” he mentioned on Sunday.

To high all of it off, the Times article by no means addresses the truth that FTX was allegedly “hacked” over the weekend to the tune of roughly $600 million. Not even a passing point out of this very weird factor that can absolutely have a big effect on the chapter proceedings transferring ahead.

The Times piece ends with a point out of SBF’s love of video video games and his weird social media antics over the previous two days:

“People can say all the mean things they want about me online,” he mentioned. “In the end, what’s going to matter to me is what I’ve done and what I can do.”

He has additionally discovered different methods to occupy his time in latest days, enjoying the online game Storybook Brawl, although lower than he normally does, he mentioned. “It helps me unwind a bit,” he mentioned. “It clears my mind.”

Shortly earlier than the interview, Mr. Bankman-Fried had posted a cryptic tweet: the phrase “What.” Then he had tweeted the letter H. Asked to elucidate, Mr. Bankman-Fried mentioned he deliberate to submit the letter A after which the letter P. “It’s going to be more than one word,” he mentioned. “I’m making it up as I go.”

So he was planning a collection of cryptic tweets? “Something like that.”

But why? “I don’t know,” he mentioned. “I’m improvising. I think it’s time.”

The Times piece has been met with a disgusted response on social media, as folks attempt to make sense of how somebody who misplaced actually billions of {dollars} from FTX customers may simply be handled as an harmless businessman whose worst crime might have been some dangerous trades. But the SEC and DOJ are each investigating FTX, based on the Wall Street Journal, so even when the Times has determined to go simple on SBF, at the least there’s hope some justice shall be served in some unspecified time in the future sooner or later.