I Accidentally Got SBF To Admit to Fraud

I tricked Sam bankman freed into a third interview with me and this time he may have admitted to fraud you'll be the judge you can click to this timestamp if you just want to listen to the interview but I want to explain the background the strategy that went into this call to try to learn where others had failed including by the way learning from my own failures interviewing Sam now first I want to give some background Sam at no point has wanted to talk to me every time I've kind of snuck on these q and

A's and started peppering them with questions he usually leaves but I realized that since this was my third time basically doing the exact same trick it was probably going to be one of my last because at some point he was going to catch on so I knew going into this it might be my last chance to interview Sam and because of that I had to think long and hard about what the perfect line of questioning would be to really pin Sam down knowing that he's a master at dodging questions he's done it with everybody so

far including me by the way and I mean look I think we've got some great stuff but to this point I didn't think anyone had gotten that Smoking Gun he always denies everything he always has a sort of a loophole out of it so I'd have to try a different tactic and here was my plan Sam's whole excuse about not being a con man all hinges around Alameda research basically he says he knew nothing of what was going on there because he was just the CEO of FTX and while that's nearly impossible to believe that

he's this stupid or incompetent it's really hard to prove a hundred percent so I realized if we're gonna do this I'd have to remove Alameda from my case right I need it to show that Sam had knowingly defrauded people without invoking Alameda at any point and here was my plan to do it I was going to spend the entire time laser focused on the FTX terms of service now some of you may know FTX lays out that they cannot use customer funds for anything they can't trade with them they can't loan them out and I

thought this was a really important point because obviously that money is no longer there so clearly something must have happened but I'm far from the first person to notice this many people including myself have already tried to ask him about this and pin him down but for various reasons well it didn't work and I needed to learn why so we could avoid it so I want to go through a few major interviews with Sam and show why this line of questioning has always fallen apart starting with the New York Times the terms of service for

FTX and I just want to read you this it says None of the digital Assets in your account are the property of or shell or maybe loan two FTX trading FTX trading does not represent or treat digital assets and users accounts as belonging to FTX trading so how is it possible that Alameda had this loan of such a large size so there's that piece from the terms of service um but there were a number of other parts of the terms as there's a number of other parts of the platform on top of that there is

the borrow lending facility where users were lending billions of dollars of assets to each other um you know collateralized by assets on the exchange um you had uh and you got obviously Futures contracts where there are leveraged positions on now of course all of this um it's meant to be the case that these are positions where fgx could uh if it needed to Margin Call those positions and close them down in times such that it would cover all of those uh you know all those shorts all those liabilities obviously that wasn't the case here and

that's a massive failure of oversight of risk management um and of uh you know diffusion of responsibility from from myself running FTX but just make this very straight was there commingling of funds that's what it appears like it appears like there's a genuine commingling of the funds that are of FTX customers that were not supposed to be commingled with your separate firm I ain't knowing leeco mingle funds okay Sorkin tried and failed here to pin him down on the terms of service why well because Sam Escapes in this talk about a different part of the

terms of service which related to margin trading where you take out some kind of a loan and in a way it was a complete deflection like it doesn't matter that there's a separate margin trading in terms of service because the people who weren't margin Trading still should have had their funds kept safe but it sort of threw Sorkin off track and so now we're going to move to the Stephanopoulos interview which was a bit better because Sam's going to try the margin trading story but watch Stephanopoulos he does a better job at honing in on

the question but as you know the FTX terms of service tell the people who signed up none of the digital Assets in your account are the property of or shall be or may be loaned to FTX Trading but you're saying that happen my understanding is a few things happen the first is there is a margin trading facility on FTX by which users can lend out funds by which other users borrow funds and so there are explicit cases where there is you know marching extended where there is borrow lending if the Alameda is borrowing the money

that belongs to FDX depositors that's a bright red line isn't it there are a lot of cases where that's actually explicitly part of the programs and that are happening here here it says that the digital assets may not be loaned to FTX Trading they can't be loaned out I there existed a bar lending facility on FTX and I think that's probably covered I don't remember exactly where but somewhere else in the terms of service but they'd have to approve of that they're saying they didn't approve of it here they're saying you approved of it now

this is great stuff from Stephanopoulos he refocused the question but Sam's about to weasel out with the new trick go ahead and watch if you've rewinded to you know the beginning of FTX um where you know some customers were you know uh I think in line with sort of existing relationships that they've had at least in some cases wiring money straight to Alameda research in order to trade on FTX so you do know and you did know that FDX deposits were being funneled to Alameda so I was vaguely aware that that was how some virus

were being sent in the first place um didn't that set off alarm bells in your head so there are a lot of people who are involved in that process and look I really deeply wish that I had taken like a lot more responsibility for understanding what the details were of what was going on there this is how he slips out again he tried the margin trading explanation it didn't work so he pivots to okay well there's this weird backstory where FTX used to take wires from Alameda and maybe that's where we lost the money right

it's another smoke screen but unfortunately it kind of hamstrung the conversation and if I was going to succeed I'd have to beat that explanation and in the first couple interviews I did with Sam I tried to go with like this Insider angle where insiders I had talked to had told me something very different but it didn't work go ahead and watch there's sort of all this talk about the terms of service did you break terms of service did you not you're basically claiming that there was a separate side of your terms of service but I

talked to somebody from Alameda and asked how big the position of like or how many people had assets in the type of accounts that that terms of service would apply to versus the regular terms of service which said you couldn't use their money and they said it was about a billion that was in the margin trading or the the margin like uh side of things where you could reuse their funds or whatever and there was the rest of it was not there so it seems like you're putting all your eggs behind this one excuse about

you know there was this separate side of the terms of service how do you address everyone else Sue I don't have all the day in front of me my memory is that it was substantially more than a billion I can't verify that um on top of that there were other effects as well some of those were early uh wire transfers sent directly to Alameda yeah I kind of got stuck where Stephanopoulos roughly got stuck I I should have known that he was just going to refuse the evidence of insiders and just say why disagree and

go back to his Alameda wire explanation and I tried following it up a bit but it didn't really matter I had kind of missed my shot on that particular angle and as I reflected on this I realized all of the talk about margin trading future trading why are transfers to Alameda all of it is a smoke screen from the big problem the big problem is that some percentage of ftx's customer base never sent a wired Alameda they never signed up to margin trading they never did spot margin all they did was put their assets on

the platform and they were told that their assets would not be borrowed it would not be loaned out and that money would always be there and it wasn't there why wasn't it there there's no other way to explain that if the money's not there then fraud and I had to laser in on that one point not get distracted by these shiny objects that Sam's throwing up about this or that or what about this what about that no there's only one question that matters and it's impossible for him to answer I thought so that was my

strategy going into it that was the back story and how I learned from previous interviews so without further Ado here's my third and probably Final Call with Sam bankman freed if you're trying to do things with good intentions I'm about to go up hey Sam it's me again I just wanted to ask real quick about the terms of service question which wrecked brought up a little bit I want to expound on it can you just tell us yes or no were you treating client assets just on the regular digital asset side different from the margin

trading side uh I do think we're treating them differently um there were there were a bunch of different sides there are more than two sides there um but I do think that we that we I that we work cognizant of the fact that like there were differences between uh uses for for like you know margin versus staking versus uh spot versus Futures collateral uh versus other things yeah just people I'm just talking about people just you know putting Bitcoin on the exchange obviously there was really clear uh terms of service around that if it's true

that you didn't invest client assets not even in treasuries as you said via a now deleted tweet why do those client assets no longer exist so I'm trying to trace through some of this here's my best guess and and I wish I could give you more confident answer but I don't have the data um but my best guess is basically it's a combination of the following um one piece is uh the transfer sent directly to uh uh directly to Alameda research um uh from customers uh one piece and that I think is a is a

I think a fairly substantial piece um uh one piece is wait can you explain what that piece means so people were sending money to Alameda instead of either getting credited on FTX and Alameda just ended up using those funds and they were never held held separately per the terms of service well there was a separate legal agreement with that I don't know the details of it I don't have it in front of me but there's separate legal agreement with respect to transfers that were sent directly to Alameda research uh by users um especially before um

FTX had um its own bank accounts um and so I do think that that is part of what happened there likely let's focus on let's focus on only client assets that happened after FTX got a bank y'all said digital assets are treated a very specific way why were those digital assets not treated that way so after so of of the ramp meaning a piece and there there's a few other pieces as well um around features and other things I understand that's not what you're talking about um for the ones that you are talking about right

for the ones that were left and I'm again I'm I'm I'm just taking a stab at this because I don't have the data but my my best guess is the following is that there were a lot of those assets remaining um we processed something like um you know five or six billion dollars I think of withdrawals um over the uh you know over the few days um prior to or I guess a few days you know during the crash and um there are still a few billion dollars of those remaining I think in the estate

um and so you put those together you have many billions of dollars of those assets um but I think and and so that's part of the answer is that um there were a large number of actual assets there um I I think there's one follow-up question you probably still have there which is well how about people who didn't withdraw and were also in that bucket and part of the answer is well there still do exist some number of billions of dollars of assets of hard assets no is there one-to-one assets because that's the whole thing

we're talking about a separation of funds so those funds should be a completely different in a different place and a different wallet than everybody else what you talked about servicing billions of dollars of withdrawals has nothing to do with those specific digital assets because that's just first come first serve whoever pulled out first we're talking about people who never agreed to have their funds loaned out who never agreed to have their funds put on margin they should have according to your terms of service one-to-one backing it should all still be in some bucket somewhere and

are you confident today as the CEO of FTX this has nothing to do with Alameda are you confident today to say that you those are absolutely real and they exist and they're present people are backed one to one on client digital assets so I think and again this is I'm just taking a stab here but I think what happened um is that if you look at especially a lot of the withdrawals that happened um those withdrawals were not necessarily only coming from people who never used margin trading or futures or staking or anything else those

weren't just withdrawals from people who were um uh who were keeping one-to-one backed or or or were you know we're sort of you know just keeping them as pure spot balances um and it was Omnibus wallets you know between the various categories um and so I think that the answer to your question is that um uh is that a number of those assets um were withdrawn by people who had balances on the exchange um potentially in the few days prior to the collapse um and uh and you know if you wanted to think about it

this way it could be that you know that happened and then um you know when when the collapse sort of completed uh the um that that effectively meant that there was you know if you wanted to put it this way like uh fungibility created during those withdrawals between assets uh for people who had and had not uh been using anything but that means that there is no separation of fund if there's fungibility between two different buckets of God there are no buckets it's just one bucket everyone's taking out of the bucket which means substantially anyone

who had your terms of service with digital assets wasn't actually subject to that terms of service they were subject to the same terms of service of your margin trading right which is your more risky product so you subjected everyone to the higher risk product because fundamentally when it came down to it you're saying there's fungibility it's a dollar here a dollar there everyone can take out a dollar as fast as they want don't you see that as like defrauding your customers the people who trusted you to just say hey this is not going to go

anywhere except for we're not investing your assets if it if I can exchange one to one and I'm the one who put risky stuff on on with risky um assets with risky terms of service I can take the money that someone who didn't sign up to those same risky terms didn't agree to isn't that fraud so I'm specifically talking about what happened unit the days immediately um during and following the crash in that you know three or say so day period um and during that period um I think we may have allowed uh you know

just generalized withdrawals I think that was um you know if you're saying that we should have held up withdrawals for everyone who had an open Futures position um you know for clawback potential or something like that uh I don't know maybe that would have been the right thing to do I hear where you're coming from on that um I felt you know at the time um that you know we wanted to treat customers equally and it was an incredible but they had agreed to different things so you can't treat them equally I mean it's like

this is the whole problem of the story of FTX and Alameda is all the funds were being co-mingled isn't this just another story of co-mingling funds except this is now FTX which you can't pass the blame to Alameda anymore this is your company your funds that you are treating all the clients the same when they clearly signed up to different terms of service so I I just want to respond to that and please I completely respect your question but you have monopolized all of these discussions coffee Zilla you need to let others speak and you

need to respond to what I am saying and not grandstand as much here I completely understand where you're coming from but the to answer your question I didn't make a decision there I just we process withdrawals as we normally do until it became clear we couldn't anymore at which point we shut them off and it was the case that like at that point um there was a big liquidity hole that's what happened if you want to judge that process and think that like we should have been spending those days frantically trying to code up a

new withdrawal process um I disagree with you but I understand where you're coming from yeah sure I think that's uh fine I mean it's not about coding up a new withdrawal process it's about treating your client assets the way you told them they'd be treated right it's a very different thing uh completely but anyways I'll stop a grandstanding for Sam thanks guys ha whoa [Applause] oh my gosh wow we got the call out we got we got the shout out all right you can probably tell I was I was pretty excited about that because I

finally got what I was looking for a straight answer on the problem of funds right Sam explicitly says that FTX was not separating funds they were allowing generalized withdrawals the dollars were fungible from different buckets you can't do that we finally dodged all the BS about margin trading about Alameda wires we finally got to the heart of it which is that there are no funds left over for the people who just had should have had their fun separated because they never separated them from the beginning they were always seemingly co-mingled and although Sam wouldn't necessarily

agree that they were always co-mingled the proof is in the pudding FTX owes billions of dollars that they do not have and it's because of how they allowed withdrawals to give you kind of a regular Finance analogy about why the this is so cataclysmically bad and in my opinion fraud imagine you banked at JPMorgan Chase right and you have your money in the savings account part well then you find out that they actually had this risky hedge fund and you know what they actually kind of blew up in fact they blew up so badly that

JPMorgan Chase it's all shutting down but when you go to the bank to withdraw your money you find out that instead of keeping your money safely in your savings account they had allowed the people in the hedge fund business to just withdraw it you know first come first serve right they treated all clients the same according to them well you say well no that's fraud because you signed up to very different terms of service than the guy who knew he was going to be like you know in this hedge fund right he had a different

level of risk he acknowledged that level of risk and if you just throw all the money in one pot the terms of service are meaningless right you're exposed to the same level of risk as the guy who took on huge risk and that's fundamentally what happened at FTX that's fraud they told people their money was safe and ultimately they just subjected everyone to the same risk as like the day trading degenerate Gambler on 100x Leverage and I really found the last thing Sam told me like so telling to answer your question I didn't make a

decision there I just we process withdrawals as we normally do that's what happened if you want to judge that process and think that like we should have been spending those days frantically trying to code up a new withdrawal process um I disagree with you but I understand where you're coming from this is so interesting because no of course I don't think you should be coding up a new withdrawal process while you're going bankrupt but if throwing all your client funds in a pool and letting the first come first serve get the money that's the wrong

process to begin with your process was fraudulent from the start it should have never been your process your process should have been what you promised clients which is of course what I told Sam and although I think Sam's probably guilty of a lot more than we covered here I really wanted to get to this minimum viable fraud case and I think we did get it I mean there is no sort of wiggling around the fact that he was the CEO of FTX and all of this stuff that was bad that we proved happened at FTX

you don't have to invoke Alameda to get to this so you you can't say he didn't know because he definitely did know and he says he knew so the last thing I'm going to close on and I think I thought it was the funniest part was his little Outburst at the end about me monopolizing his time so I just want to respond to that and please I completely respect your question but you have monopolized all of these discussions coffee Zilla you need to let others speak and you need to respond to what I am saying

and not grandstand as much here and I thought it was notable for two reasons one he hasn't lost his cool once in any interview this is the first time I heard him like really crack and I thought that was interesting but I also thought it was interesting because it's just not true it's totally wrong I've talked to Sam for I think 30 minutes across three interviews total like in total and for context he gave the New York Times an hour he gave George Stephanopoulos two hours I think out of everyone he's talked to or at

least of the major interviews I've talked to him the least so if anything I'm efficient with my type that's all I'm going to say and speaking of being efficient with my time this video is over lock this man up and I'll see you later thanks for watching