FTX Crypto Derivatives Exchange logo seen displayed on a smartphone screen

FTX’s Sam Bankman-Fried loves peanut butter, hates reality

Sam Bankman-Fried (SBF) continues to insist that FTX customers could still be reunited with their stolen funds if, you know, those funds hadn’t been squandered by he and the other members of his polycule.

After pleading not guilty last week to eight criminal charges related to the collapse of the FTX digital assets exchange and its affiliated market-maker Alameda Research, SBF has resumed the ill-advised media tour he embarked upon following FTX’s bankruptcy filing in November and before his arrest in the Bahamas in December.

On Thursday, SBF launched a Substack account with an article titled FTX Pre-Mortem Overview, in which the ‘crypto’ sector’s mop-haired former wunderkind doubled down on previous claims that FTX’s U.S.-facing exchange “remains fully solvent and should be able to return all customers’ funds.” SBF also claimed that “very substantial recovery remains potentially available” for FTX International customers due to the latter entity’s “many billions of dollars of assets.”

FTX’s post came one day after a U.S. Bankruptcy Court of Delaware hearing in which Adam Landis, the attorney representing FTX’s current management, said the restructuring team had recovered “over $5 billion of cash, liquid cryptocurrency and liquid investment securities measured at petition date value.” This is in addition to the $425 million worth of FTX/Alameda assets currently under the control of Bahamian authorities.

The amount FTX owes to its numerous creditors remains undetermined, but it would be much greater than its liquid assets. The recovered assets also include some “illiquid” assets, including FTX’s in-house FTT token, but Landis warned that the quantity of these illiquid assets “are so large relative to the total supply that our positions cannot be sold without substantially affecting the market for the token.”

Among the other revelations from Wednesday’s hearing was the size of the ‘backdoor’ between FTX and Alameda that SBF left open. As detailed in the U.S. Commodity Futures Trading Commission complaint against SBF, Alameda enjoyed a “special designation” that allowed Alameda to ignore its credit limit while making trades on FTX (with funds borrowed from FTX customers without their knowledge). Landis said Wednesday that this borrowing limit was a jaw-dropping $65 billion.

SBF continues to plead his innocence despite former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang dishing dirt on him to federal prosecutors. Former FTX compliance chief Daniel Friedberg is reportedly also willing to serve as a witness against SBF and former FTX engineering chief Nishad Singh is doing his own bargaining with the feds.

Perhaps SBF’s view of the field is obscured by trees surrounding his parents’ home, where SBF is currently stranded under house arrest. But his capacity for denial remains as vast as Alameda’s credit limit, to the point that his now infamous initials may actually stand for Sam Blacknight-Fleshwound. Read on.

SBF determines whether or not funds were stolen, okay?

Before we dig into SBF’s Substack copy, just read this passage and then consider the veracity of anything he says thereafter:

I didn’t steal funds, and I certainly didn’t stash billions away. Nearly all of my assets were and still are utilizable to backstop FTX customers. I have, for instance, offered to contribute nearly all of my personal shares in Robinhood to customers–or 100%, if the Chapter 11 team would honor my [directors and officers] legal expense indemnification.

On January 5, SBF’s attorneys filed a motion to block the U.S. Department of Justice (DoJ) from seizing the 56.3 million shares of the Robinhood digital trading app (currently worth around $450 million) that were purchased by Emergent Fidelity Technologies (EFT) in May 2022. SBF held a 90% stake in EFT and the cash used to purchase the Robinhood shares was ‘loaned’ to EFT from Alameda.

In addition to the DoJ and FTX’s current management, the bankrupt digital asset lender BlockFi has also made a claim on the Robinhood assets, based on the assets being used as collateral for a $671 million loan BlockFi made to Alameda shortly before FTX went belly-up. An Antiguan court froze the Antigua-based EFT’s assets following a complaint by an irate Antigua-based FTX/Alameda creditor.

SBF has argued that he needs access to the Robinhood shares in order to pay his high-priced legal representatives. Never mind that the funds used to purchase these shares were obviously FTX/Alameda customer funds that SBF treated as his to do with as he pleased, including paper over billions in trading losses at Alameda.

In short, SBF has no right to these shares or the hundreds of millions they might bring after being sold. Not for ‘legal expense indemnification’ or any other self-serving reason. Thieves don’t get to keep goods bought with stolen cash. End of story.

On the bright side, SBF’s latest legal team are likely to follow their predecessors in dumping their client due to frustration with his inability to STFU. With his history of ignoring legal counsel, SBF will have a hell of a time finding new representation, leaving self-representation his only option. And since that’s free, he won’t need those Robinhood shares. Problem solved.

You can’t spell ‘insolvent’ without ‘solvent’

Getting back to the Substack post, SBF claims Alameda was doing just swell until the collapse of the Three Arrows Capital (3AC) hedge fund, whose former bosses wisely decided to flee to a country without an extradition treaty with the U.S. rather than embark on a half-baked sorry/not-sorry publicity tour. The contagion from 3AC’s demise took down a host of other crypto Ponzis, and SBF claims this resulted in Alameda’s assets losing 80% of their (stated) value.

November brought “an extreme, quick, targeted crash precipitated by the CEO of [digital asset exchange] Binance,” Changpeng ‘CZ’ Zhao, who publicly threatened to dump $580 million worth of FTT on the market. This crash “made Alameda insolvent” and the “contagion spread to FTX and other places.”

Regardless of CZ’s willingness to push his former partner over the side, Alameda was insolvent long before that. The infamous leaked balance sheet that preceded CZ’s tweet showed that Alameda valued its FTT holdings at a level beyond the token’s total market cap. Other Alameda assets were similarly inflated, making further mockery of SBF’s assertions.

SBF claims FTX.US “remains fully solvent and should be able to return all customers’ funds,” given his claim that the exchange had “+$350m net cash on hand beyond customer balances” and that FTX.US funds and customers “were segregated from FTX International.”

This is, as we now know, utter bullshit. In December, FTX’s court-appointed CEO John J. Ray III confirmed that “FTX US was not operated independently of FTX.com.” Ray also revealed that SBF’s sprawling financial operations were conducted via QuickBooks and funds that customers wired to FTX went instead to plug Alameda’s leaky boat.

People just like giving SBF money

As for FTX International, SBF insists that “despite processing roughly $5b of withdrawals over its last few days of operation, FTX International retains significant assets–roughly $8b of assets of varying liquidity as of when Mr. Ray took over.” SBF claims that, had FTX been given a few more weeks before being forced into bankruptcy, “it could likely have utilized its illiquid assets and equity to raise enough financing to make customers substantially whole.”

SBF claims to have secured “potential funding” worth over $4 billion via letters of intent from unspecified parties but that these “pathways may have been abandoned” once news of FTX’s bankruptcy—and the true extent of SBF’s criminality—became public.

Assuming these phantom investors—presumably acquaintances of SBF’s Canadian girlfriend—had been willing to step into the breach, this sum would have papered over the holes in FTX/Alameda’s balance sheets, not fill them. His imaginary rescuers might have bought him a little more time, nothing more.

SBF then swings for the fences by claiming that “FTX International and Alameda were both legitimately and independently profitable businesses in 2021, each making billions.” Here again, SBF relies on the creative accounting that inflated assets’ paper values and effectively treated customer deposits as revenue. And never mind that these supposed billions in profits were somehow insufficient for FTX/Alameda to carry on, necessitating multiple funding rounds since July 2021 that raised nearly $2 billion, yet never quite seemed to scratch SBF’s funding itch.

SBF even had the stones to claim that FTX “successfully passed” an audit of its 2021-22 financial statements, neglecting to mention that the audit was conducted by Armanino LLP. Following FTX’s implosion—and public references to SBF as their “buddy”—Armanino was rubbished as ‘crypto industry cheerleaders’ by the Wall Street Journal and the firm got out of the digital currency business altogether. (Another crypto client who passed an Armanino audit? Nexo. Ahem.)

SBF tried to throw Caroline Ellison under the bus by declaring that “I haven’t run Alameda for the past few years.” Not according to the Securities and Exchange Commission (SEC) complaint against SBF, which states plainly that he “remained the ultimate decision-maker at Alameda, even after Ellison and Trabucco became co-CEOs in or around October 2021. [SBF] directed investment and operational decisions, frequently communicated with Alameda employees, and had full access to Alameda’s records and databases.”

Honestly, we could go on but we’re sick of this guy’s schtick, already. Trouble is, SBF can’t stop talking. He closes his post by saying he has “a lot more to say” and that this pity-party is only “a start.” Shut. Your. Pie-Hole. Seriously.

Puck off

The day before SBF’s Substack debut, Puck News writer Teddy Schleifer posted a lengthy account of his visit to SBF’s parents’ home in Palo Alto, California. Schleifer is the second writer (that we know of) to score this invite, following SBF welcoming crypto influencer Tiffany Fong for a follow-up to her November phone interview with SBF.

(Interestingly, Schleifer wrote a Vox article two years ago on the “secretive Silicon Valley group” Mind The Gap (MTG), a political action committee. MTG, co-founded in 2018 by SBF’s mother Barbara Fried, focused on helping Democrats win control of the House of Representatives. Last year, MTG got a $1 million donation from Nishad Singh, FTX’s former engineering chief who is now seeking a deal with the feds.)

Among the scintillating items that Schleifer gleaned from his SBF visit was that the latter tried to survive on peanut butter during his brief stay at the notorious Fox Hill prison in the Bahamas last month. While other outlets had reported that SBF was served toast, jam and vegetables to accommodate his vegan lifestyle, SBF played the martyr card by claiming that his (mental?) health was “a little touch and go for a while.”

SBF also bemoaned that his new status as crypto’s Bernie Madoff meant most of his friends were ghosting his calls and emails. SBF was philosophical about his pariah position, declining to blame anyone for trying to “avoid getting drawn into the shitshow.”

Others aren’t as keen to keep their distance. SBF related a (possibly apocryphal) tale about how some individual—presumably a former FTX customer—attempted to access the property to place SBF under ‘citizen’s arrest.’ SBF expressed confusion over this, saying: “I don’t get it. I’ve already been arrested.”

True or not, his parents reportedly acquired a massive German shepherd to serve as SBF’s guardian/companion. The dog is named Sandor, which we’re assuming is a reference to Game of ThronesSandor ‘The Hound’ Clegane, who served as foul-mouthed guardian to two different Stark girls over his six-season run. With any luck, SBF’s Sandor will eventually realize his master is the real bitch and deservingly bite the hand that feeds.

Schleifer went on CNBC’s Squawk Box to suggest that SBF’s oversharing is due to his belief that “the crisis comms playbook that we’ve seen over the last century is too conservative.” With his trial not set to get underway until October, SBF is apparently unwilling to “sacrifice losing the public relations war” based on his assumption that “maybe the lawyers are wrong.” Sure they are.

Finally, while FTX customers might not find it funny—and SBF definitely won’t be laughing—this is pretty good. And hey, humor may prove to be the only real compensation they ever get from SBF.

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