How To Make My Own Crypto

Last night, Sam Bankman-Fried DMed me on Twitter.

That was surprising. I’d spoken to Bankman-Fried via Zoom earlier in the summertime when I was working on a contour of him, so I reached out to him via DM on Nov 13, after news broke that his cryptocurrency exchange had collapsed, with billions in customer deposits apparently gone. I didn’t expect him to respond — typically, people under investigation by both the Securities and Exchange Commission and the Section of Justice don’t render requests for comment.

Bankman-Fried, though, apparently wanted to talk. Well-nigh how FTX and his hedge fund Alameda Research had gambled with customer money without, he claims, realizing that’southward what they were doing. About who gets lauded every bit a hero and who’s the fall guy. About regulators. (“Fuck regulators.”) About what he regrets (“Chapter 11,” the decision to declare bankruptcy) and about what he would have done differently with FTX and Alameda (“more careful bookkeeping + offboard Alameda from FTX once FTX could live on its own”).

It was past midnight Bahamas fourth dimension, where Bankman-Fried is reportedly still located, and nosotros went back and forth on Twitter for more than an hour. He was, he said, all the same working to try to enhance the funding needed to pay dorsum all his depositors.

As we messaged, I was trying to brand sense of what, behind the PR and the charitable donations and the lobbying, Bankman-Fried actually believes about what’south right and what’s wrong — and especially the ethics of what he did and the industry he worked in. Looming over our whole conversation was the fact that people who trusted him have lost their savings, and that he’s washed incalculable damage to everything he proclaimed only a few weeks ago to care nigh. The grief and pain he has caused is immense, and I came away from our conversation appalled by much of what he said. Simply if these mistakes haunted him, he largely didn’t prove it.

(Disclosure: This August, Bankman-Fried’southward philanthropic family unit foundation, Building a Stronger Futurity, awarded Vox’s Future Perfect a grant for a 2023 reporting project. That project is now on suspension.)

On regulators

Earlier his empire collapsed, Bankman-Fried was actively engaged in lobbying in Washington for a regulatory framework for cryptocurrency. While many crypto CEOs — similar Bankman-Fried’s nemesis Binance CEO Changpeng “CZ” Zhao — are openly skeptical of government regulation, Bankman-Fried has largely avoided criticizing regulators. But in our conversation, he dismissed their role. He characterized his past conciliatory statements — similar when he said simply last month that some corporeality of crypto regulation would be “definitively adept” — as footling more “PR.” In doing so, he all but confirmed the view of critics who accept argued that his overtures to Washington were much more about image than substance.


Kelsey Piper: you said a lot of stuff about how you wanted to make regulations, just good ones - was that pretty much just PR too? Sam Bankman-Fried: there’s no one really out there making sure good things happen and bad things don’t; usually there’s only one toggle—do more or do less. yeah just PR; fuck regulators; they make everything worse; they don’t protect customers at all.


Kelsey Piper: does seem like some kind of consumer protection would be good tho? like maybe regulators can’t deliver it, but sure does look like consumers lose their shirts a bunch Sam Bankman-Fried: agreed on both; it would be good. but regulators can’t do it


Kelsey Piper: and you couldn’t do it, and CZ sure isn’t doing it, so...who? Sam Bankman-Fried: they can’t actually distinguish between good and bad; just ‘do more business’ vs ‘do less business’ and ‘put up more moats’ vs ‘put up fewer moats’; no one will but you want to know the truth? no one’s doing it in the rest of finance, either


Sam Bankman-Fried: or, for that matter, other areas that are regulated; the FDA isn’t helping the giant Crackdown on Big Tech has no point or goal or philosophy behind it; OFAC is slowly undermining US interests globally and is the single biggest threat to the US being a suprepower ESG has been perverted beyond recognition Kelsey Piper: I’m sort of putting together a picture where - you don’t believe anyone is doing anything for good reasons, you don’t believe the “good guys” are good


Sam Bankman-Fried: what we’re left with, at the end of the day, is: “only the rich can inest; only they can make or lose money.” eh there’s *some* truth to it—but it’s *also* true that I didn’t want to do sketchy stuff, there are huge negative effects from it. and I didn’t mean to. each individual decision seemed fine and I didn’t realize how big their sum was until the end.

On being willing to bear unethically

One question on which I’ve seen widespread speculation is whether Bankman-Fried thought it was okay to practice unethical things “for the greater good” — a position that hardcore utilitarians, which Bankman-Fried has identified as in the past, might agree.

That question happens to be one I had asked him in the interview this summer, which I had just relistened to the dark earlier our Twitter conversation. At the time, of grade, I idea the ethical dilemma where Bankman-Fried had perchance crossed a line was whether information technology was adequate to run a cryptocurrency exchange in the first place — and whether the adept he claimed he meant to do made information technology okay.

A lot of people, I said to Bankman-Fried in that earlier interview, would think of “starting a crypto company to make billions of dollars the fashion I would think of starting a tobacco company to brand billions of dollars: deeply immoral. Presumably, there’s some line where you shouldn’t do something that bad even for good reasons. I’m curious whether you think there’south some line? And if so, where would you depict that line?”

“There is some line,” he told me then. “The reply can’t be there is no line. Or else, y’all know, you lot could end up doing massively more than impairment than good. And I recollect more mostly, you could say, okay, fine, but simply, like, subtract that out. But I don’t think it’south that simple, either. Because in that location are a lot of complicated but important second-social club harms that come if your core business is bad for the world, in terms of your ability to work with partners and your ability to piece of work with partners in your philanthropic efforts.

“Y’all could imagine that if the Philip Morris Foundation had really practiced ideas about how to improve the earth, they probably would still have a really hard time working with the Gates Foundation. So I do call up information technology’s more than complicated than that. And you have to seriously argue with what the impact is of your direct work.”

I returned to those questions in our Twitter chat. Those well-considered ideas almost balancing ethical imperatives? “It’s non true, non really,” he said now.


Kelsey Piper: I was just relistening to that conversation we had this summer about whether you should do unethical shit for the greater good Sam Bankman-Fried: what did I say Kelsey Piper: you were like, nah don’t do unethical shit, like if you’re running Philip Morris no one’s going to want to work with you on philanthropy Sam Bankman-Fried: heh Kelsey Piper: and there’s a risk of doing more harm than good, but even if you subtract that out, pretty not worth it Sam Bankman-Fried: yeah


Kelsey Piper: I was trying to figure out like - if that was kind of the PR off the cuff answer Sam Bankman-Fried: man all the dumb shit I said it’s not true, not really Kelsey Piper: yeah I thought it might not be Sam Bankman-Fried: everyone goes around pretending that perception reflects reality. it doesn’t. some of this decade’s greatest heroes will never be known, and some of its most beloved people are basically shams.


Kelsey Piper: so you kinda don’t believe in, like, ‘doing unethical shit’, as anything other than a judgment we bestow upon the losers? Sam Bankman-Fried: a month ago CZ was a walking example of “don’t do unethical shit or your money is worthless.” now he’s a hero. is it because he’s virtuous? or because he had the bigger balance sheet, and so he won Kelsey Piper: well I can see why you didn’t give that answer in interviews Sam Bankman-Fried: heh


Kelsey Piper: so the ethics stuff - mostly a front? people will like you if you win and hate you if you lose and that’s how it all really works? Sam Bankman-Fried: yeah. I mean that’s not *all* of it. but it’s a lot. the worst quandrant is “sketchy + lose.” the best is “win + ???.” “clean + lose” is bad but not terribel


Kelsey Piper: you were really good at talking about ethics, for someone who kind of saw it all as a game with winners and losers Sam Bankman-Fried: ya. Hehe. I had to be. it’s what reputations are made of, to some extent. I feel bad for those who get fucked by it, by this dumb game we woke westerners play where we say all the right shiboleths and so everyone likes us.

On bending the truth

Bankman-Fried has maintained that FTX has never invested the deposits of crypto account holders on the commutation. I pressed him on that point via Twitter, and while he connected to insist that FTX did not direct utilize business relationship money in this way, he said that Alameda — which he too owns — had borrowed far more coin from FTX’southward balance sheet for investments than he had realized, which ultimately left FTX vulnerable to the crypto equivalent of a bank run.

Why didn’t Bankman-Fried realize what was happening until it was too belatedly? “Sometimes life creeps up on you,” he said.


Kelsey Piper: you tweeted out some stuff like - we never invest your deposits. that was bs, right? Sam Bankman-Fried: it was factually accurate Kelsey Piper: huh!!! but like - their deposits were totally not there? or do you just mean, technically it was Alameda Sam Bankman-Fried: FTX. correct


Kelsey Piper: so....FTX technically wasn’t gambling with their money, FTX had just loaned their money to Alameda, who had gambled with their money, and lost it? and you didn’t realize it was a big deal because you didn’t realize how much money it was? SBF: and also thought Alameda had enough collateral to reasonable cover it KP: I get how you could have gotten away with it but I guessthat seems sketchy even if you get away with it SBF: It was never the intention Sometimes life creeps up on you

On what happened

One theory is that the seeds of FTX’southward downfall were sown earlier this yr, when Alameda reportedly took huge losses after the crypto company Terra’s LUNA stablecoin collapsed. Bankman-Fried said he didn’t realize the extent of the problem because of “messy accounting” — albeit messy accounting to the tune of billions of dollars.


Kelsey Piper: was the Alameda thing when LUNA crashed the first time customer deposits got lent out (that’s what people are saying) or was it more like, the accounting was such that a lot of the stuff you were doing was implicitly backed by customer deposits? Sam Bankman-Fried: messy accounting + margin exchange —> position built up over time, though in retrospect LUNA crash was when a lot of it did. but messy accounting —> I didn’t realize full size of it until a few weeks ago


KP: if you could do it all over again, would you just take more careful accounting? never touch customer funds? never go into crypto? SBF: more careful accounting + offboard Alameda from FTX once FTX could live on its own KP: are there people who told you to be more careful? are there people you would’ve listened to? SBF: it’s odd. I mean, maybe? but not really, and those who did—they did on other things, not that. it’s odd.


SBF: everyone was so worried and concerned about dumb shit we definitely wouldn’t do and that made no sense KP: but not about whether you were lending out customer funds? seems like such an obvious thing for them to worry about! SBF: ya but it’s complicated: it wasn’t quite lending them out—it was messier and more organic than that; each step was in isolation rational and reasonable, and then when I finally added it all up last week it wasn’t b) most exchanges did some variant on what we did


Kelsey Piper: if you could do it all over again, would you just take more careful accounting? never touch customer funds? never go into crypto? Sam Bankman-Fried: more careful accounting + offboard Alameda from FTX once FTX could live on its own. Kelsey Piper: are there people who told you to be more careful? are there people you would’ve listened to? Sam Bankman-Fried: it’s odd. I mean, maybe? but not really, and those who did—they did on other things, not that. it’s odd

On what he regrets

Bankman-Fried best-selling that he “fucked up. Big. Multiple times.” Just he also insisted that much of the trouble could take been avoided if FTX had not alleged defalcation, which has largely taken financial matters out of his command. (During the procedure, Bankman-Fried was replaced every bit CEO of FTX past John J. Ray III, a lawyer who helped creditors recover billions of dollars after the defalcation of the free energy trading firm Enron.) “The people in charge of [the company] are trying to fire it all to the basis out of shame,” he told me.

Bankman-Fried argues he should instead have kept trying to raise more money, and insisted that if he’d just done that, “withdrawals would be opening up in a month with customers fully whole.” The Wall Street Journal reported earlier this week on Bankman-Fried’s efforts to find funding and found no indication any investors were committing. Fifty-fifty if fresh funding were obtained, the newspaper connected, information technology would require negotiations with FTX creditors and the approving of the bankruptcy court.

While he said that some of his colleagues — co-founder Gary Wang and managing director of engineering Nishad Singh — were “scared,” and, in the example of Singh, “ashamed and guilty,” Bankman-Fried seems to maintain some emotional distance from the collapse: “The globe is never so black and white.”


SBF: I fucked up big multiple times you know what was maybe my biggest single fuckup? KP: oh? SBF: the one thing *everyone* told me to do everthing would be ~70% fixed right now if I hand’t KP: I’m trying to guess but I have no idea 9SBF: chapter 11


KP: like, should’ve just rode it out and kept trying to make the $8billion back? SBF: if I hadn’t done that, withdrawals would be opening up in a month with customers fully whole but instead I filed, and the people in charge of it are trying to burn it all to the ground out of shame I might still get there  1 but after way more collateral damange and only 50/50 KP: I’d take the under on that


SBF: basically we get there if both: a) EITHER Gary OR Nishad comes back b) we can win a jurisdictional battle vs Delaware KP: Gary and Nishad are gone? SBF: yea, scared or gary is scared, nishad is ashamed and guilty KP: ashamed and guilty because all the customer deposits are gone? SBF: yea


Kelsey Piper: people I’ve talked to have said Nishad was much more into the ethics/not being sketchy stuff than you were Sam Bankman-Fried: yeah. it hit him hard. I mean it hit all of us hard but it hit him HARD. Kelsey Piper: it seems like you have more of a - sense of yourself to fall back on, more of a sense that you are only wrong if you lose and he was more like “wow we stole money from people who trusted us” Sam Bankman-Fried: the world is never so black and white

On the hack of FTX

Shortly afterward FTX filed for bankruptcy, watchers of blockchain transactions noticed someone had transferred hundreds of millions of dollars out of the visitor. I asked Bankman-Fried what was up.


Kelsey Piper: do you know what’s actually up with the money that got mysteriously moved out of FTX after the bankruptcy? that’s the other thing a lot of people are speculating about SBF: hack —   either ex-employee, or malware on an ex-employee’s computer; a few hundred M

On what’s next

Bankman-Fried says his No. i priority at present is to try to enhance $8 billion to make account holders whole. “That,” he told me, is “basically all that matters for the rest of my life.” Just while he said that “a month ago I was one of the world’s greatest fundraisers,” that $8 billion dwarfs what FTX was able to raise so far, there’s no indication whatever investors would seize with teeth, and fifty-fifty if he could secure funding, it would likely crave both creditors and the defalcation court to get on board.


Kelsey Piper: what’s next, what’s your plan? SBF: I have 2 weeks to raise $8B. that’s basically all that matters for the rest of my life KP: well, I really hope that the depositors get the money back, but I gotta say, I have no idea how anyone could possibly pull that off from this starting point SBF: well a month ago I was one of the world’s greatest fundraisers now I’m the fallen wreckage of one but there’s a thing about being fallen— there are people who know what that’s like

This morning, I emailed Bankman-Fried to confirm he had access to his Twitter account and this conversation had been with him. “Still me, not hacked! Nosotros talked terminal night,” he answered.

His lawyers did not return a request for comment.

$95
/year


$120
/year


$250
/year


Other

Aye, I’ll give $120/year


Source: https://www.vox.com/future-perfect/23462333/sam-bankman-fried-ftx-cryptocurrency-effective-altruism-crypto-bahamas-philanthropy

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