The underreported story

Here are three examples of key parts of the prevailing narrative, alongside alternative accounts that have been put forward by people with firsthand knowledge.

1. Was the $8 billion permanently lost?

Media: “Definitely.”

Further, the complaint asserts that defendants’ actions caused the loss of over $8 billion in FTX customer deposits…Bankman-Fried and other key personnel of FTX and Alameda acknowledged internally that this shortfall was not merely a matter of having sufficient liquid funds on hand to cover customer withdrawals in the short term; rather, FTX customer funds were irrevocably lost because Alameda had misappropriated them. CFTC, December 2022

[T]here is no serious dispute that around $10 billion went missing. Prosecutor, Sam’s trial, November 2023

Insiders: “No. As everyone now knows, the money was always there. It was just temporarily tied up in investments.”

By November 10th, 2022, Alameda’s balance sheet had only ~$8b of (only semi-liquid) assets left, versus roughly the same ~$8b of liquid liabilities…There were billions of dollars of funding offers when Mr. Ray took over, and more than $4b that came in after. If FTX had been given a few weeks to raise the necessary liquidity, I believe it would have been able to make customers substantially whole. Sam, January 2023

Where did all that money go? The answer was: nowhere. It was still there. Michael Lewis, Going Infinite, October 2023

FTX forecasts that the total value of property collected, converted to cash and available for distribution will be between $14.5 and $16.3 billion. FTX bankruptcy lawyers, May 2024

2. Did Sam set up secret ways for Alameda to misappropriate other customers’ funds?

Media: “Unmistakably, yes.”

Civil charges, filed by the Securities and Exchange Commission on Tuesday, claimed that Bankman-Fried had been engaged in a scheme to deceive investors in FTX and his companies since at least May 2019…“Bankman-Fried diverted FTX customer funds to Alameda in essentially two ways: (1) by directing FTX customers to deposit fiat currency (e.g., U.S. Dollars) into bank accounts controlled by Alameda; and (2) by enabling Alameda to draw down from a virtually limitless ‘line of credit’ at FTX, which was funded by FTX customer assets.” Bloomberg, December 2022

Now, the defendant set up two secret ways through which Alameda could take or borrow customer money…Each of these witnesses testified that they stole customer money at the defendant’s direction, and they described the ways he told them to do it…Now, there were two ways that they were able to take customer money, by withdrawing it from FTX from its cryptocurrency wallets in unlimited amounts, and by taking it out of the bank accounts that received those customer deposits. Prosecutor, Sam’s trial, October 2023

Insiders: “In fact, Alameda only borrowed from and lent to other customers in legitimate ways.”

And you recall we had testimony from Dr. Pimbley, who did an analysis of the data, and he concluded that 80 percent of the assets on FTX were margined assets used in futures trading. 80 percent are in this margin trading where customers are always borrowing other customers’ assets. Defense attorney, Sam’s trial, November 2023

FTX didn’t have restrictions on what people could do with funds that they borrowed. So the answer like for other users was, anything—so long as we believed that the risk was being managed, which is to say, so long as we believe that its assets were greater than its liabilities, we didn’t care if a user withdrew funds and used them to buy muffins, to pay business expenses, to invest, or anything else. Sam’s testimony, October 2023

[At the first sign of the famous $8B “Hidden, poorly internally labled ‘fiat@’ account” in June 2022] I asked Caroline to confirm that this definitely meant that Alameda’s NAV [assets minus liabilities] was positive 8 to 10 billion Sam’s testimony, October 2023

Can you name any customers that were allowed to pledge outside investments as collateral for withdrawing money on FTX apart from Alameda? …I believe that we did that with a firm called Crypto Lotus, and I believe that we considered that with Three Arrows. Sam’s testimony, October 2023

And are you aware of any other customer on FTX who had the ability to spend FTX customer fiat deposits out of bank accounts? …I think multiple other payment processors for FTX had accounts on FTX as well. Sam’s testimony, October 2023

But at least in early 2021 you were aware that Alameda was receiving FTX customer funds, fiat deposits? A. Yes. Q. And that fact alone didn’t concern you, right? A. That’s correct. FTX employee testimony, October 2023

Do you recall telling the prosecutors that to you, the idea of borrowing from anywhere, as long as you were good for it, didn’t feel wrong? [Exhibit shown to witness.] About borrowing in general? No. This refreshes me on something specific I thought about bank accounts. Nishad’s testimony, October 2023

The FTX.com exchange user agreement included conclusory language stating that customers “owned” “their” digital assets, yet it did not include the other provisions necessary to create a conventional custody or trust relationship under applicable law. The user agreements also did not provide for the segregation of assets or the return of assets in specie to customers. Nor did such “ownership” language cover the billions in fiat currency owed to customers. FTX bankruptcy lawyers, June 2024

[Gary] testified about several changes Bankman-Fried asked him to make to FTX’s software code to allow Alameda to withdraw unlimited funds from the exchange…Wang agreed that the changes were necessary for Alameda to provide liquidity on the exchange. Reuters, reporting on Gary’s testimony, October 2023

Singh also acknowledged that he originally thought some of the special treatment Bankman-Fried’s trading firm Alameda Research received on FTX was meant to protect customers by allowing it to more effectively “backstop” some trades. “My view at the time [was that] it would be helpful for customers,” Singh said. Financial Times, reporting on Nishad’s testimony, October 2023

[B]y this time, September 2022…What was your reaction about hearing Alameda owed $13 billion? …I thought Alameda had positive balances on FTX, that it was borrowing lots in some places but that overall they had more money than they didn’t. Nishad’s testimony, October 2023

3. Was Sam motivated to steal out of greed?

Media: “Obviously. Just look at him.”

Images of FTX founder and former CEO Sam Bankman-Fried’s $35 million penthouse in the Bahamas submitted as exhibits for his criminal fraud trial show a lavish lifestyle on the water with a private pool, bar and wide-open living room with a full-size grand piano. FOX News, October 2023

Federal prosecutors have accused him of indulging in luxuries purchased with stolen money…Bloomberg obtained a cache of photos and video taken in the final year before Bankman-Fried’s companies, FTX and Alameda Research, went into bankruptcy. They offer an intimate look at the lives of Bankman-Fried, who declined to comment on them, and his inner circle at their peak—hosting parties and schmoozing with political figures and billionaires. Bloomberg, August 2023

Insiders: “Well, look again. The Sam we know actually cares a lot about everyone else and little for himself.”

The Bahamas real estate was corporate housing for FTX employees. It had to convince skilled professionals to uproot their lives and move their family and friends to the Bahamas to work for FTX. Defense attorney, Sam’s trial, November 2023

A year into his new life in the Bahamas, Nishad Singh had stepped onto that beach just once, and then only because some relatives were visiting. That was once more than Sam, and likely Gary too. Caroline appeared with a glass of wine, which here counted as an act of hedonism, and the meeting began. Michael Lewis, Going Infinite, October 2023

He eschews materialistic trappings…As his calendar manager, I can confirm that he never takes a day off…It is crucial to recognize that the portrait of Sam portrayed in some media outlets is often misunderstood and misrepresented. The Sam I knew and worked with never acted out of greed or self-interest. Instead, he consistently demonstrated a commitment to ethical business practices and a genuine desire to make a positive impact on the world. Sam’s executive assistant, February 2024

I watched the media coverage of his trial closely and it saddens me that so much of it was sensationalized and littered with claims I knew were false…Our work focussed on building capacity in Africa for high quality clinical research that could detect pandemics early and respond rapidly. At his invitation, my team and I spent a week with him in the Bahamas discussing every detail of our proposal. Sam had thoughtful contributions to this discussion that were well-informed of Africa’s unique challenges and opportunities for future global leadership on this topic. I believe that Sam was deeply motivated by a desire to make the world a better place. Rwandan charity advisor, February 2024

I’ve been harmed immensely by his actions, losing most of what I had…He is person non-grata in my community, and if I publicly say anything positive about Sam, it could be really bad for me. I have every reason to stay quiet and not say anything to help this person who’s harmed me. But it’s clear to me that Sam is not the villain portrayed in the media…He cared about chickens in university. And people hate animal rights activists…To maintain his vegan diet he lived off of just bread for months. With just the occasional peanut butter. Could you do that, to uphold your values, during the most stressful period of your life? FTX customer, February 2024

This case must rank as the first time in the entire history of criminal justice where the defendant donated most of his earnings at his previous job to charity. Crypto critic and fellow effective altruist, February 2024

I told him that he may not be noticing the consequences for his everyday health, but that his focus on work at the expense of personal health could well shorten his life. He sat for a few seconds and shocked me with his response. He asked me if it would impact the next five years of his life, and said he was not concerned about his health past that. He explained that due to circumstances, he was in a unique place to help others right now by earning to give [to charity], and that opportunity would probably not last more than five years or so. Thus, he didn’t care what happened to him after that. I knew what Sam meant. I knew it because, in the 3 years I had known him, he had been steadfast and invariable in his goal of benefiting the world through earning to give, and almost completely unconcerned about his own happiness. That makes him, for better or for worse, an exceedingly unusual person, and anyone who tries to understand him through the lens of normal human desires will misunderstand him. Sam’s psychiatrist, February 2024

[H]e has never felt happiness or pleasure in his life and does not think he is capable of feeling it. Sam’s mom, February 2024

For more examples, check out…

  1. Going Infinite—Michael Lewis’s bestseller about the central characters of the FTX story, drawing on unparalleled access to Sam and his colleagues both pre- and post-collapse
  2. FTX’d—forthcoming paper examining Sullivan & Cromwell’s undisclosed conflicts of interest in their work for FTX (and featuring FTX general counsel Dan Friedberg’s objection to the retention of S&C)
  3. Ryan Salame’s feed on X—many recent tweets offer a fresh insider perspective on the FTX collapse
  4. A Second Glance—a website making the case for Sam’s innocence
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Thanks for writing this summary! Appreciate the links to sources for each claim too.