Sam Bankman-Fried was once called the “crypto king.” But in November 2022, his company, FTX, imploded within a matter of days. All around the world, customers of the cryptocurrency exchange were suddenly cut off from their money.
“I tried to withdraw an amount, you know, and it would spin and say, your, your withdrawal is pending,” says Tareq Morad, an investor from Canada. “I remember myself doing that around 7, 8 o’clock at night, checking back, going to look: Okay, did it go through? Did it go through? No. No. No.”
Meanwhile, inside the company, employees were panicking. “All that we were told was there’s been a run on the bank and, somehow, money is missing and we don’t know who to trust,” remembers Caroline Papadopoulos, part of FTX’s accounting leadership at the time.
This week on Reveal, through prison interviews with Bankman-Fried, his parents, FTX insiders, and customers, we take you through the frantic week of FTX’s collapse and the controversial and less well-known bankruptcy that followed. At a cost of nearly $1 billion, it has become one of the most expensive in history.
Read the FTX bankruptcy estate’s on-the-record statement to Reveal.
Dig Deeper
Listen: Part 2 of the series
Listen: So You Don’t Understand Crypto. Buckle Up. (More To The Story)
Read: Sam Bankman-Fried and the Billion-Dollar Drama Over FTX’s Ruins (Mother Jones)
Explore the Documents
Credits
Reporter: Jonathan Jones | Producer: Sophie Bridges | Editor: Taki Telonidis | Additional editing: Daniel Schulman | Additional reporting: Artis Curiskis and Sophie Bridges | Production assistance: David Ritsher | Archival research: Julia Haney | Fact checker: Sarah Szilagy | General counsel: Victoria Baranetsky | Production manager: Zulema Cobb | Digital producer: Artis Curiskis | Score and sound design: Jim Briggs, Fernando Arruda, and Claire Mullen | Deputy executive producer: Taki Telonidis | Executive producer: Brett Myers | Host: Al Letson
Support for Reveal is provided by listeners like you, and the Reva and David Logan Foundation, the John D. and Catherine T. MacArthur Foundation, the Jonathan Logan Family Foundation, the Robert Wood Johnson Foundation, the Park Foundation, The Schmidt Family Foundation, and the Hellman Foundation.
Transcript
Reveal transcripts are produced by a third-party transcription service and may contain errors. Please be aware that the official record for Reveal’s radio stories is the audio.
| Al Letson: | From the Center for Investigative Reporting and PRX, this is Reveal. I’m Al Letsonm. Last summer, Reveal’s Jonathan Jones got an unexpected phone call from a relative who said he had a scoop for him. |
| Jonathan Jones: | It’s not… Generally when your family calls you up with story ideas, you should take everything with a grain of salt. It’s a little perilous. |
| Al Letson: | The relative just had dinner with Barbara Fried and Joe Bankman. They’re Stanford law professors, widely considered experts in their fields, and they’re also the parents of the former cryptocurrency CEO Sam Bankman-Fried. Remember Sam Bankman-Fried? He founded the cryptocurrency exchange FTX, became the face of the industry and one of the world’s youngest billionaires, and then one day… |
| Speaker 3: | From crypto king to criminal suspect, Sam- |
| Speaker 4: | … arrested in The Bahamas on Monday- |
| Speaker 5: | … so many people wondering where their money is. |
| Al Letson: | It was one of the biggest financial scandals in American history. Sam was convicted of fraud and sent to prison for 25 years. But the story hadn’t grabbed Jonathan’s attention. |
| Jonathan Jones: | Honestly, I knew very little about Sam Bankman-Fried. I don’t know, I’m not even sure I could have picked him out of a lineup at that time. |
| Al Letson: | Still, there his relative was, telling Jonathan that the Bankman-Frieds believed the story about how FTX collapsed was all wrong. The relative asked if he could put them in touch. At this point, crypto was back on the rise. What had once seemed like a shady underworld had gone decidedly mainstream, with big banks getting in on the action, and public figures touting gains in their crypto portfolios. |
| Jonathan Jones: | It became clear that this story was not just about Sam Bankman-Fried. It was about all these other people, from customers to lawyers to government regulators, and understanding how these pieces fit together was fascinating to me. |
| Al Letson: | That was the kind of story Jonathan couldn’t say no to, and it’s the story we’re going to tell you today and next week too, because Jonathan would end up talking to a bunch of people, from the customers most deeply impacted by FTX’s collapse to the staffers who had a front row seat to how it all went down. He also dug into courtroom audio, thousands of pages of legal filings, and crucial emails from inside the company to understand how things unfolded, because the story of FTX didn’t end with its collapse. It was also about the controversial bankruptcy that followed, and whether it served the best interests of customers. For Jonathan, it all started when he agreed to chat with Barbara Fried. |
| Jonathan Jones: | After some back and forth with Barbara over email and then Zoom, I found myself driving down to Stanford to meet with her and Joe in their home. We sat in their living room, and they told me that there was this untold story about what happened with the fall of FTX. |
| Barbara Fried: | I think in Sam’s case, the prosecution and the law firm played a significant role in diverting the media away from digging into the facts from the very start. |
| Jonathan Jones: | Joe and Barbara said there was this law firm, Sullivan and Cromwell. They claimed the firm’s lawyers helped engineer Sam’s exit from FTX and then cashed in on the bankruptcy, a claim the firm says is false. |
| Barbara Fried: | Sullivan Cromwell shouldn’t have been in that role to begin with. So [inaudible 00:03:32]. |
| Joe Bankman: | Can I just jump in? |
| Barbara Fried: | Yes you can. |
| Joe Bankman: | When you ask these questions, do you want just a three-sentence answer, or the longer answer? What’s your preference? |
| Barbara Fried: | Because if it’s three-sentence, go with him. |
| Jonathan Jones: | We talked for hours. It was clear that all they ever thought about, night and day, was Sam, and trying to clear their son’s name. |
| Why should anyone trust Sam Bankman-Fried’s parents on these questions? Of course. | |
| Barbara Fried: | No, first of all, they shouldn’t trust us. They should look at the facts. And many of the relevant facts are public. They’ve been public for a long time. And so all we would say to people is, you have heard one side of the story only. |
| Jonathan Jones: | A few days later, they invited me to a call with Sam. When the time came, there he was, sitting in a cinderblock room, with a poster of animals sitting on toilets behind him. Messy hair, rumpled gray T-shirt, loose collar. |
| Sam Bankman-Fri…: | My name is Sam Bankman-Fried. I went to college at MIT, worked on Wall Street trading ETFs, had a blast. In 2017, I- |
| Jonathan Jones: | Sam was game to talk at length about what had happened. |
| Sam Bankman-Fri…: | And then a crisis came. A bunch of lawyers took over the companies, and I ended up in federal prison, and that’s where I am today. |
| Jonathan Jones: | I got a sense Sam couldn’t help but push the boundaries of what he could and couldn’t do, like whether he always had to wear his prison jumpsuit. |
| Sam Bankman-Fri…: | There’s this extremely dumb cat and mouse game, where for reasons no one has ever bothered to articulate, between the hours of six AM and three PM on weekdays, the only clothing we’re allowed to wear is the one piece prison jumpsuit. I’ll just keep an ear out, and if I hear noise, I’ll sort of scramble to put the jumper back on. |
| Jonathan Jones: | We talked and talked, and mainly there was one thing Sam wanted me to know. |
| Sam Bankman-Fri…: | You know, I never defrauded anyone. |
| Jonathan Jones: | The money wasn’t gone. FTX wasn’t bankrupt. He was innocent. |
| Sam Bankman-Fri…: | Even if I had been aware of everything, I don’t think that means I committed a crime. |
| Jonathan Jones: | We spoke about a half dozen times before he was moved to another prison and I lost access, but by then I’d started piecing together how Sam Bankman-Fried’s empire came crashing down, and the warning signs that had been missed along the way. |
| Growing up, Sam was a math kid, on the spectrum, didn’t party. After MIT, he became a trader on Wall Street, using algorithms to make lightning fast bets on the stock market. Then this odd thing about crypto caught his eye. Bitcoin prices were trading way higher in some countries than others. My first instinct was, “This is wrong. This data is just incorrect, because it’s crazy.” It turned out, if you timed it right, you can make boatloads of money. | |
| Sam Bankman-Fri…: | You were in fact allowed to spend a hundred dollars in America to buy a hundred dollars of Bitcoin, send it to Japan and sell it for a hundred and thirty dollars of yen, and you could make $10 million a day. That is the best trade I’ve ever seen in my life. |
| Jonathan Jones: | Sam moved to Berkeley, California to start a new company to buy and sell crypto. He called it Alameda Research. The name sounded prestigious and purposely avoided the word crypto, which was rife with scams, fraudsters, and Ponzi schemes. |
| Sam Bankman-Fri…: | The early golden era was January of 2018. Basically we were making a million dollars a weekday. On the other hand, I had no fucking clue how to run a company. |
| Jonathan Jones: | Colleagues described those early days as messy. Money vanished, then reappeared. Some raised concerns about ethical gray areas, misleading investors, unexplained financial gaps. Many of the early employees, including his co-founder, resigned. Sam, told me he was bad at accounting and managing people, but he insisted it was nothing to worry about, just the normal growing pains of a typical startup. By 2018, Sam was touting that Alameda was moving hundreds of millions of dollars in crypto every day. Yet Sam had his sights set on creating something bigger. FTX, a crypto marketplace where customers could deposit funds, buy and sell crypto, and trade with each other. |
| What does FTX stand for? | |
| Sam Bankman-Fri…: | Oh God. Futures Exchange. The F and the T both from the word futures. |
| Jonathan Jones: | Futures are a common type of trading in the financial world. They’re basically bets on the future price of something. Crypto traders love them, because if you’re right, the payouts can be huge, and FTX would make a lot of money off fees from these transactions. |
| Getting licensed as a crypto futures exchange in the US was tricky, though. So Sam went offshore. He launched FTX in Antigua, then moved it to the Bahamas. He wasn’t hiding out in a tax haven, though. He was very much out there, talking directly to possible FTX customers all day, every day, on any platform he could think of. | |
| Sam Bankman-Fri…: | You can follow me on Twitter, you can go to our Telegram, and obviously check out the website, FTX.com, and make it your one-stop shop for trading crypto. |
| Jonathan Jones: | And it worked. By 2022, Sam was running one of the biggest crypto exchanges in the world from a luxury apartment overlooking the Caribbean. He surrounded himself with loyal insiders. Gary Wang, his MIT roommate, nishad Singh, an old family friend, and Caroline Ellison, a former colleague Sam dated on and off. But Sam owned nearly all of Alameda and most of FTX, giving him control over major decisions at both companies. Sam bought the naming rights to the Miami Heat arena. He was flying around in private jets, rubbing shoulders with celebrities like Orlando Bloom and Katy Perry, and spending big on splashy ads. |
| Narrator: | This is Steph Curry, the world’s leading expert on cryptocurrency. |
| Steph Curry: | No, I’m not an expert, and I don’t need to be. With FTX, I have everything I need to buy, sell, and trade crypto safely. |
| Jonathan Jones: | In April of that year, he threw a conference called Crypto Bahamas. The lineup was stacked. Bill Clinton, Tony Blair, and the author Michael Lewis. |
| Michael Lewis: | Three years ago, nobody knew who you were, and now you’re sitting on the cover of magazines and you’re a gazillionaire, and your business is one of the fastest growing businesses in the history of the planet. |
| Jonathan Jones: | FTX was attracting all kinds of new investors, from hedge fund managers to celebrities to everyday traders. |
| Tareq Morad: | Bitcoin was a very weird thing. It was almost shady-like. |
| Jonathan Jones: | Tareq Marad was a hotel owner and operator in Calgary. He’d started investing in crypto before it went mainstream, when buying a coin felt a little sketchy. |
| Tareq Morad: | I remember having to go to the bank and wire just some stranger money with a picture of my ID and a letter that I authorize this transaction, and he would send me a Bitcoin. |
| Jonathan Jones: | FTX seemed to offer an attractive alternative. No backchannel wires, just a decent app that made crypto feel safe, aboveboard, and professional. |
| Tareq Morad: | They were gaining traction, and there was a lot of media and advertising around them. It was really the major one that was within our continent. |
| Jonathan Jones: | The platform was also drawing in smaller investors. People like Lydia Favario, a conceptual artist originally from Italy, now living in the UK. She earned most of her income working as a life model, posing for students in drawing classes. |
| Lydia Favario: | So I earn an average of 20 pounds per hour, so it’s not really so much. |
| Jonathan Jones: | In addition to some small savings from life modeling, Lydia had a modest sum she’d received as a settlement from a car crash years ago. She put it all on FTX, planning to use it as her retirement nest egg. |
| Lydia Favario: | And this money were literally my life saving. Literally all what I had was there. |
| Jonathan Jones: | Lydia wouldn’t describe herself as a crypto person, but when she heard about Sam Bankman-Fried, she was intrigued. |
| Lydia Favario: | I was really fascinated about this super young person that had this extraordinary ethos and managed to became rich so young with the idea to do something good for the humanity. |
| Jonathan Jones: | That’s another reason why everyone loved Sam. He said he wanted to make money just to give it all away, part of a movement called effective altruism. It used data and algorithms to figure out where money could do the most good, and it was gaining traction in tech circles. The FTX Foundation funded academic research, policy groups, animal welfare campaigns, and a slew of other efforts aimed at building what Sam called a better future. Some contributions were harder for Sam to explain, like the one million dollars to a super PAC co-founded by his mom. Sam became one of the largest donors to Democrats in 2022, while also secretly funneling dark money to Republicans. |
| Sam Bankman-Fri…: | I ended up making a lot of campaign contributions in 2022, and not all of those were public. |
| Jonathan Jones: | At the same time, FTX was expanding. Sam was spending money all over the world, snapping up crypto exchanges from Japan to Europe, hoping to fast-track licenses and legitimacy in key markets. In the US, FTX bought Ledger X, which was licensed to offer a full range of crypto trading options. |
| Along the way, FTX recruited a network of auditors, compliance officers, and lawyers who knew how to speak the language of regulators and open doors in Washington. One of them was Ryan Miller, a former partner at Sullivan and Cromwell, one of Wall Street’s most powerful law firms. Sullivan and Cromwell would eventually be brought in to help with US acquisitions. | |
| Miller became general counsel for FTX US. He says when he first arrived, the company felt like a young startup, struggling to keep up with its rapid growth. On the law podcast Original Jurisdiction, miller remembered talking with Sam about building stronger internal controls. | |
| Ryan Miller: | Sam really valued, he would profess to really value, being nimble and not overburdened by a huge corporate structure. |
| Jonathan Jones: | Other employees noticed Sam’s scrappy startup mentality too. Like Caroline Papadopoulos, a seasoned accountant. |
| Caroline Papado…: | They were extremely intelligent. They all moved very fast with, “Hey, this is an idea. Does it make sense? Great. Go figure out how to implement it.” |
| Jonathan Jones: | Did you have moments where you felt he played a little too loose with the rules? |
| Caroline Papado…: | Probably, yeah. I mean, I think it was, “Wow, we’re moving really fast. I think we need to stop and consider maybe more strategy here and there.” But he also was so confident that it kind of diminished the concern. Like, “He’s got this.” |
| Jonathan Jones: | Not all FTX employees shared that belief. Dan Chapsky also joined FTX in 2021, as head of data science. He’d worked at other tech companies, including Facebook. |
| Dan Chapsky: | So I worked for a child billionaire for many years. My impression of Sam was that he was another child billionaire. |
| Jonathan Jones: | A young CEO being rewarded for growing fast, no matter the cost. That was nothing new to Dan. And yet… |
| Dan Chapsky: | I was a little surprised at how Spartan FTX was. They had some tooling and data and stuff, but it was really ad hoc and built one-off every once in a while by a couple of the engineers, and not really maintained. |
| Jonathan Jones: | To Dan, FTX felt disorganized, almost like a glossy site held together with the data equivalent of Scotch Tape. At its peak, FTX was operating in 250 jurisdictions around the world, overseeing tens of billions in assets, and handling as many as 26 million transactions per day. But behind the scenes, something wasn’t adding up. And on November 2nd 2022, word got out. |
| Sam Bankman-Fri…: | CoinDesk reached out saying they’re going to be running an article, looking for confirmation. |
| Jonathan Jones: | CoinDesk, an online news site covering crypto, had a scoop. They had a leaked balance sheet from Alameda Research, Sam’s private trading firm. It suggested Alameda was dangerously short on cash. Much of its assets were actually made up of FTX’s own crypto token, its in-house currency, not dollars or traditional assets. |
| Sam Bankman-Fri…: | And at the time I basically thought, “Oh, this is going to be a negative PR thing, but not…” You know [inaudible 00:17:18] bad PR week. |
| Jonathan Jones: | It’s about to be much worse than a bad PR week. |
| Al Letson: | Coming up, the CoinDesk article prompts a tweet from a powerful rival, sending customers all over the world into a panic. That’s next on Reveal. |
| Al Letson: | From the Center for Investigative Reporting and PRX, this is Reveal. I’m Al Letson. |
| In the initial days after the CoinDesk article dropped, Sam Bankman-Fried wasn’t panicking, at least not yet. | |
| Speaker 2: | Hey, Sam. |
| Sam Bankman-Fri…: | How’s it going? |
| Speaker 2: | [inaudible 00:00:18] good to see you. |
| Al Letson: | In fact, he was so not worried that he made this appearance virtually at a Forbes conference the day after the article came out. |
| Sam Bankman-Fri…: | I would say things are stable. I’m cautiously optimistic, I would say. |
| Al Letson: | And it seemed like other people weren’t worried, either. He doesn’t get asked a single question about his trading firm, Alameda Research. But then four days after the article, a big shoe drops. |
| Speaker 4: | This just in. Binance founder CZ liquidating over $500 million worth of FTX positions- |
| Al Letson: | Changpeng Zhao, who goes by CZ, is a Chinese-Canadian crypto mogul. He ran Binance, the world’s largest exchange and FTX’s biggest rival. He’d been an early investor in FTX and still held about half a billion dollars of FTX’s crypto tokens known as FTT. |
| Sam Bankman-Fri…: | CZ tweets out saying roughly this article came out, it gives us concerns, and because of those concerns, we’re going to be selling all the FTT that we have left. |
| Al Letson: | CZ unloading half a billion dollars of FTT tokens signaled to his millions of followers, and the market, it’s time to get out. |
| Sam Bankman-Fri…: | That was much more worrying because that’s sort of how runs on the bank start. |
| Al Letson: | And that’s exactly what happened. The panic spread, withdrawals surged, and inside FTX things began to spiral. |
| Reveals’ Jonathan Jones takes us back to those chaotic days. | |
| Jonathan Jones: | Tareq Morad was one of the customers following the rumors swirling around FTX in the early days of November 2022. |
| Tareq Morad: | The first time I heard of something fishy going on was through a guy I watch, a YouTuber called EllioTrades. |
| EllioTrades: | Okay, quick video update, a weird one. Right now on Crypto Twitter, there is an explosive amount of talk about FTX and whether or not they are in trouble. There’s a bunch of FUD going on if you have- |
| Tareq Morad: | And he said, “You know, there’s some FUD around,” and FUD is short for Fear, Uncertainty and Doubt, “around FTX and the platform and people being able to withdraw their money.” And he said, “You know, I tried and I had no problems with it at all.” |
| Sam Bankman-Fri…: | As recently as today, I withdrew a significant amount of funds just to make sure that there wasn’t any issue. |
| Tareq Morad: | I thought, okay, well, he withdrew his funds, that worked for him. I’m sure everything’s fine. |
| Jonathan Jones: | Of course, everything was not fine. FTX was in free fall. On a normal day, FTX customers might withdraw $50 million worldwide. On Sunday, November 6th, the day of CZ’s tweet, customers pulled out 2 billion, and then… |
| Sam Bankman-Fri…: | On the seventh, we had $4 billion of net customer withdrawals, so like 40 times as much as we’d ever seen in a day before. |
| Jonathan Jones: | The next day Tareq had a long drive home from an out-of-town meeting. |
| Tareq Morad: | So I started putting my YouTube stuff on and the things I typically listen to, and then I started hearing all the news about the exchange being frozen. |
| Jonathan Jones: | Confusion reigned. YouTubers were urging folks to pull out their money. But then Sam tweeted that everything was fine, that FTX had more than enough to cover withdrawals. Then he deleted it. |
| When Tareq got home, he tried to withdraw a chunk of money. He still had somewhere around $250,000 on the exchange. | |
| Tareq Morad: | I remember checking back, going to look okay, did it go through? Did it go through? No, no, no. |
| So then late before I went to bed that night, it was probably closer to midnight, I tried to withdraw like the majority, just pressed Withdraw, crossed my fingers, went to bed, and woke up in the morning and nothing. | |
| Jonathan Jones: | By that Tuesday, November 8th, FTX had frozen all customer withdrawals. Tareq wasn’t getting his money out. |
| Inside the company, things were melting down. Despite assurances that Alameda Research, Sam’s trading firm, and FTX were separate from each other, in reality, they were deeply entangled. | |
| The public didn’t know this yet. Most Alameda and FTX employees didn’t know this yet, either. But inside Alameda, that was about to change. | |
| Caroline Elliso…: | So I guess you guys have probably seen a lot of what’s happening on, I don’t know, Slack and Twitter, but I can just start- |
| Al Letson: | In the company’s Hong Kong headquarters, around 15 employees sit in a circle at an all-hands meeting. Others join on Zoom. |
| Caroline Ellison, the CEO of Alameda Research, walks in and sinks into a beanbag chair. She looks exhausted. She doesn’t know that a new employee is secretly recording. | |
| Caroline Elliso…: | … ask questions- |
| Jonathan Jones: | Now with the company disintegrating, she begins to confess. |
| Caroline Elliso…: | And the basic story here is that starting last year, Alameda was kind of borrowing a bunch of money via open-term loans and use that to make various illiquid investments. |
| Jonathan Jones: | Alameda had run out of money, so they’d started dipping into FTX, borrowing customers’ money without permission. |
| Caroline Elliso…: | … which led to FTX having a shortfall in user funds. Yeah. |
| Jonathan Jones: | Caroline says she thinks they’ll probably close down Alameda, but maybe some of the employees can get jobs at FTX. |
| Caroline Elliso…: | First, I want to say, I’m sorry, this really sucks. It really sucks for all of you guys. |
| Jonathan Jones: | Employees fire off questions. How much money is missing? |
| Speaker 10: | Can you say how big the hole is or [inaudible 00:06:24]? |
| Caroline Elliso…: | I probably don’t want to share the exact [inaudible 00:06:29], but it sucks. |
| Speaker 10: | Is it closer to like one bill or six bill? Or- |
| Caroline Elliso…: | The latter. |
| Jonathan Jones: | It would turn out to be more than 8 billion. Someone asks, who knew? |
| Speaker 11: | Who else was like aware of this? |
| Jonathan Jones: | I mean, I guess like Sam, Nishad and Gary and… |
| She doesn’t finish the sentence. Someone asks, what happens now? Caroline says she doesn’t know. She thinks they might be bailed out by CZ of all people, Sam’s biggest rival, the one who triggered the sell-off in the first place. | |
| Then a tweet goes up. CZ has changed his mind. The deal is off. No one is coming to the rescue. | |
| Caroline Papado…: | 11 o’clock at night, one of my colleagues called me and he said, “Make sure no one else is around.” |
| Jonathan Jones: | While Caroline Ellison is talking to her staff in Hong Kong, the other Caroline, Caroline Papadopoulos, is home in California. She was the controller of FTX US, part of the leadership team on the accounting side. |
| Caroline Papado…: | Someone had told our boss about that all-hands meeting and there was extreme panic, and we got our other colleague on the phone and he said, “I think we’ve been lied to. We didn’t know the details. Somehow money is missing, and we don’t know who to trust.” |
| Jonathan Jones: | Caroline says, she and her colleagues turned to the one thing they had control of. |
| Caroline Papado…: | The three of us stayed up all night preserving our accounting records. We were just backing everything up because, hey, if we don’t know who to trust, we want to make sure we have all the raw records in case anybody doctored anything. |
| Jonathan Jones: | Dan Chapsky, the company’s head of data science, remembers rushing back to The Bahamas when he heard the company was dying. |
| Dan Chapsky: | By the time I get there, many of the execs are just broken. They’d been awake for days. A couple of people I know, who were part of the leadership, I saw on their way out in tears, kind of giving me a final hug before they left. |
| Jonathan Jones: | Sam’s inner circle is panicking, not just about money, but about potential criminal investigations. |
| Dan Chapsky: | You could definitely feel in the air that perhaps there was something illegal that had happened that Sam had done or the leadership had done, and people didn’t know if they had any liability or not because they just didn’t know. |
| Jonathan Jones: | On Wednesday, November 9th, the same day as the Alameda all-hands meeting, Sam makes a key decision that he and his parents will come to regret. He agrees to retain Sullivan and Cromwell, the powerful law firm that had previously been advising FTX to prepare for a possible bankruptcy. The firm wants Sam to bring in a veteran crisis manager named John Ray as Chief Restructuring Officer. |
| Sam Bankman-Fri…: | By the 9th and 10th of November 2022, there’s extremely large pressure on me coming from the law firm itself, from ex-Sullivan and Cromwell lawyers who were working for FTX, from other advisors that they were routing their messages through, and it was quite intimidating. |
| Jonathan Jones: | Joe Bankman, Sam’s dad, is already in The Bahamas. Barbara flies in the next day. At the urging of his parents, Sam hires a defense attorney. That same day The Bahamas financial regulator freezes FTX’s assets and takes control of the company’s local operations. |
| Zach Dexter, the head of the company’s US division, is sending frantic messages urging Sam to step aside. “You have good people around you who can help you do the right thing,” he tells Sam. “I promise you, doing this now will result in a far better outcome than doing something else.” | |
| As pressure mounts for him to make a decision, Sam leans on the advice of his personal lawyers and his dad, Joe. | |
| Joe Bankman: | I was there at 4:30 in the morning with Sam and I thought, well, this is a great law firm. Everybody’s in the same boat here. We want to get new financing so that the employees and the stakeholders and the investors all continue. |
| It might be that Sam ends up with nothing. That was frankly likely given this, but everybody else will be made whole. So this was no longer even about Sam. | |
| Jonathan Jones: | Sam is torn. He’s still trying to secure emergency funds to keep the company afloat, sometimes not responding to desperate messages from advisors. |
| Deep down, he doesn’t want to step aside. But on the other hand… | |
| Sam Bankman-Fri…: | I was thinking of that speech from Wolf of Wall Street. |
| Jonathan Jones: | In the Wolf of Wall Street, Leonardo DiCaprio plays Jordan Belfort, the embattled stockbroker. |
| Audio: | I want you to understand we don’t do anything illegal whatsoever, and you could talk to the SEC. They were at my office 15 times over the last six months, so I mean, I got nothing to hide. |
| Jonathan Jones: | In a climactic scene, as FBI agents close in on his offices, he gives a speech to his staff. |
| Sam Bankman-Fri…: | The “I’m not fucking leaving speech.” |
| Audio: | So you know what? I’m not leaving. I’m not leaving. I’m not fucking leaving. The show goes on. |
| Sam Bankman-Fri…: | I was thinking, I don’t want to be that. Like I don’t want to be the one clinging on to power when it’s clear to the rest of the world that that shouldn’t be what they’re doing. |
| Jonathan Jones: | So at 4:24 AM on Friday, November 11th, Sam Bankman-Fried signs the company over. |
| Al Letson: | What Sam doesn’t realize at this moment, he isn’t just giving up control of FTX. He’s also losing his ability to control the narrative about what went wrong. That’s next on Reveal. |
| Al Letson: | From the Center for Investigative Reporting and PRX, this is Reveal. I’m Al Letson. The day before handing over his crypto empire to a corporate crisis fixer named John Ray, Sam Bankman-Fried did what he often did, he turned to Twitter. He posted an apology at 9:13. a.m. Then came 21 more tweets, rapid fire, all over the place and defensive. He said that he was sorry that he had, quote, “F’d up.” Then he tweeted that he was still fleshing out what had happened himself. The feed reads like a scattered monologue of panic, denial, and analysis of his own culpability in real time. But two years later, the story he told Jonathan Jones was different. |
| Sam Bankman-Fri…: | The single biggest mistake I made by far was handing the company over to Sullivan & Cromwell. |
| Al Letson: | Considering all the other decisions he’d made, the co-mingling of funds, the lavish spending and dark money campaign contributions, that’s really saying something. |
| Sam Bankman-Fri…: | I made a decision and a large part of me was screaming at me that it was the wrong decision while I was making it, and I should have just said, “No,” and put my foot down. |
| Al Letson: | Reveal’s Jonathan Jones spent months unraveling what happened in those critical moments in November 2022, and the aftermath. He picks up the story. |
| Jonathan Jones: | After signing over his company, Sam still believes he’ll be able to help fix FTX. And part of why he believes that is because Andrew Dietderich, a lawyer for Sullivan & Cromwell, said as much in an email to Sam two days before. |
| Jonathan Lipson: | In that November 9th email where he says, “Well, we’re here to help you and you’re going to go out, and get new financing, and you’ll remain a director.” |
| Jonathan Jones: | Jonathan Lipson is a law professor at Temple University. He’s spent decades studying big corporate bankruptcies, served as an expert witness in Enron, and represented victims’ interests in Purdue Pharma. He’s closely studied the FTX case and reviewed messages between Sam Bankman-Fried and Sullivan & Cromwell. |
| Jonathan Lipson: | Ray’s just going to be here to help and you can terminate him whenever you want. |
| Jonathan Jones: | In that email, Dietderich urges Sam to appoint a restructuring officer and attaches John Ray’s resume for consideration. He writes, quote, “We recommend Sam stay as a director,” but over the next 36 hours as the crisis deepens, they scrapped that plan. Dietderich later explained there wasn’t time for endless board meetings and any delay could mean losing records or more assets. At a crypto bankruptcy panel in 2023, here’s how he described those critical moments. |
| Andrew Dietderi…: | It was clear to us when we knew the depth of the problem that we could not file with current management having anything to do with the company. So we insisted on the replacement. |
| Jonathan Jones: | So the document Sam signs at 4:24 a.m. on Friday, November 11th, makes John Ray not chief restructuring officer, but the new CEO. |
| Andrew Dietderi…: | It’s a funny piece of paper, but there was something called the Omnibus Corporate Authority and it said, “I, Sam Bankman-Fried as officer, director, shareholder, [inaudible 00:03:16] authorized signatory, et cetera, of any of the following 130 companies around the world, hereby give all of my authority to John Ray and authorize him to appoint independent directors.” And Sam signed that. |
| Jonathan Jones: | Within minutes after signing, Sam claims he tried to take it back. He says he’d just gotten a last-minute offer of emergency funding from a crypto billionaire. Barbara Fried, Sam’s mother, is there in The Bahamas as Sam contacts his personal legal team. |
| Barbara Fried: | And Sam called up his lawyers and said, “You have to revoke my consent.” And his lawyer made the phone call, it’s too late and went back to bed. |
| Jonathan Jones: | Sam’s personal lawyers never informed Sullivan & Cromwell that he wanted to take it back. Hours after taking control, John Ray files for bankruptcy, which would mean freezing the exchange and putting the company under court supervision. He also consolidates all of FTX’s entities under US control. A move he later said was necessary to protect customer funds and stop the bleeding. Ray then proposes appointing Sullivan & Cromwell as bankruptcy counsel. If approved, the firm would lead the investigations into the apparent fraud and the recovery of funds to pay back customers, and they’d collect the massive legal fees that come with it. |
| Sam Bankman-Fri…: | So if you yourself in charge of a bankruptcy estate, you can pay yourself. And the way bankruptcy law works, and this part was very unintuitive for me, all such opinions take precedence over creditors, over customers. |
| Jonathan Jones: | And it wasn’t just Sam. Later critics would raise concern about Sullivan & Cromwell’s appointment. After all, the firm hadn’t just helped line Ray up. It had also spent years advising FTX before the collapse. On Twitter, Sam is still acting like he’s in charge. “Today, I filed FTX, FTX US and Alameda for voluntary Chapter 11 proceedings in the US,” he posts, “I’m really sorry again that we ended up here. Hopefully things can find a way to recover. My goal, my one goal, is to do right by customers.” But the man who’s actually now in charge, John Ray, has no intention of letting Sam anywhere near FTX customers or their accounts. In the days ahead, Sam keeps emailing, asking to talk. Ray never responds. Here he is speaking about his decision on Freakonomics Radio. |
| John J. Ray III: | It’s pretty clear for me what happened in the company and what his role was, and I didn’t really want to have any dialogue with him based on what I knew at the time. |
| Jonathan Jones: | Less than a week after taking over FTX, Ray files his first statement to the bankruptcy court, laying out the company’s condition. He tells the court there had been virtually no board oversight and no centralized cash management system to track billions of dollars. Within hours, it goes viral, quoted in headlines, shared on Twitter, turned into memes, a damning blunt assessment from the guy who handled Enron. |
| Speaker 8: | [inaudible 00:06:45] FTX’s new CEO is slamming. |
| Speaker 9: | Sam Bankman-Fried and other former [inaudible 00:06:48]- |
| Speaker 10: | Ray, who took over from disgraced founder, Sam Bankman-Fried, and previously oversaw the bankruptcy [inaudible 00:06:52]- |
| Speaker 11: | This is the man who oversaw Enron’s bankruptcy. |
| Speaker 8: | [inaudible 00:06:55] he had never seen such a complete failure of corporate controls [inaudible 00:06:58] complete absence [inaudible 00:06:58]- |
| Speaker 10: | Failure of corporate controls [inaudible 00:06:59]- |
| Speaker 11: | Failure of corporate controls [inaudible 00:07:00]- |
| Speaker 12: | [inaudible 00:07:00] such a complete absence of trustworthy financial information. This situation is unprecedented. |
| Jonathan Jones: | Ray says he has no confidence in FTX’s books and no way to know how much money customers would get back. That means pensioners, family foundations, and others who have their savings on the exchange, could lose everything. From his penthouse in The Bahamas and through his Twitter feed, Sam watches this play out, powerless to do anything to stop it. |
| Can I ask you when he first declared that FTX was a dumpster fire, whatever, worst accounting since Enron, when he makes that assessment publicly, how long has he been in charge? | |
| Sam Bankman-Fri…: | Yeah. He’d been in charge for about a week. The first thing he did, his first policy decision was to refuse to look at any of the accounting done by the company, to decide it was all presumptively fraudulent and thus he was not even going to consider it. |
| Jonathan Jones: | Ray had brought in outside teams of forensic accountants, private investigators, and cybersecurity specialists to look at the books. His conclusion was that the company’s internal records were unreliable. But he’d also fired dozens of FTX staff, some of whom knew the company inside and out. Dan Chapsky, FTX’s chief data scientist, was one of the last employees left. He believed the financials were messy, but there was trustworthy information if you knew how to find it. |
| Dan Chapsky: | I was sending a lot of Slack messages and emails saying, “Hey, let me help you with this thing. I would love to help you. You don’t have to give me any access to data if you don’t trust me for any reason. Tell me where to go.” |
| Jonathan Jones: | Like Sam, Dan believed many customers could have been repaid and the exchange restarted, maybe within weeks if Ray and his team would just work with people inside the company. |
| Dan Chapsky: | They had no idea what they were doing. They were just looking at the data and hoping for the best. |
| Jonathan Jones: | Dan agreed with Sam who was saying the money was there, just tied up and that bankruptcy wasn’t necessary. But the new leadership was saying something completely different, bankruptcy was the only hope for customers, and Sam’s claims were both reckless and false. Here’s what Ryan Miller, general counsel of FTX US at the time, had to say about this on the Original Jurisdiction podcast. |
| Ryan Miller: | The reason the insolvency filing happened, from my perspective, was to bring stasis to a situation where there was an extreme financial shortfall. It’s an asset preservation and recovery exercise. |
| Judge John Dors…: | Morning everyone. Thank you. Please be seated. |
| Jonathan Jones: | Five days after Ray files his initial statement, FTX’s bankruptcy case comes before Judge John Dorsey in Delaware, and a packed Zoom meeting of over 500 spectators. |
| Judge John Dors…: | Before we begin, I wanted to make some announcements about conduct and decorum. [inaudible 00:10:02]- |
| Jonathan Jones: | And in front of all those people, James Bromley, a lawyer for Sullivan & Cromwell presents a damning assessment. |
| James Bromley: | FTX was in the control of a small group of inexperienced and unsophisticated individuals, and unfortunately the evidence seems to indicate that some or all of them were also compromised individuals. |
| Jonathan Jones: | And in case anyone didn’t get the point… |
| James Bromley: | So Your Honor, what we have is a worldwide organization that was run effectively as a personal fiefdom of Sam Bankman-Fried. |
| Jonathan Jones: | Sam is not at the hearing, but he wants to be heard. He continues speaking up through a flood of tweets. He reposts claims that the bankruptcy team is motivated by potential millions in legal and consulting fees. He arranges a handful of interviews where he can try to defend himself, even if it means having to apologize. |
| Sam Bankman-Fri…: | At the end of the day, I was CEO of FTX and that means whatever happened, why ever it happened, I had a duty. I had a duty to all of our stakeholders, to our customers, our [inaudible 00:11:08]- |
| Jonathan Jones: | This is from a live interview at a conference with The New York Times writer, Andrew Ross Sorkin. |
| Sam Bankman-Fri…: | I didn’t ever try to commit fraud on anyone. I was excited about the prospects of FTX a month ago. I was shocked by what happened this month. |
| Andrew Ross Sor…: | What are your lawyers telling you right now? Are they suggesting this is a good idea for you to be speaking? |
| Sam Bankman-Fri…: | No, they’re very much not. |
| Jonathan Jones: | Sam’s media offensive is all happening under the threat of criminal prosecution. It’s already all over the news. The DOJ had opened an investigation into FTX. What isn’t in the news, Sullivan & Cromwell, the law firm representing FTX had begun communicating with federal prosecutors before Sam handed over control of the company. Later in a sworn declaration, Andrew Dietderich, an attorney for Sullivan & Cromwell said the firm had reported concerns with reconciling the balance sheets, and they had done so in consultation with FTX’s senior lawyer, Ryan Miller. Law Professor Jonathan Lipson says… |
| Jonathan Lipson: | As any lawyer who’s listening to this knows, you don’t go to prosecutors about your client without informing your client. |
| Jonathan Jones: | There are some narrow exceptions, like to stop a crime or if your client consents. Lipson says, “The issue was the timing,” a point he and other critics made in a legal brief. Sullivan & Cromwell was talking to prosecutors about FTX accounting issues. At the same time, they were advising Sam on navigating the crisis. And DOJ prosecutors told Sullivan & Cromwell they wanted more information, balance sheets, customer agreements, a list of employees. |
| Sam Bankman-Fri…: | Information they can give them to help make a case, a criminal case. |
| Jonathan Jones: | The questions are about FTX, but they don’t send them to Sam. |
| Sam Bankman-Fri…: | It’s a questionnaire for FTX, the company, but they send it to Sullivan & Cromwell, the law firm. |
| Jonathan Jones: | And this is prior to you signing over the company? |
| Sam Bankman-Fri…: | That’s correct. So I was still CEO at this point. I was not aware of this happening. |
| Jonathan Jones: | Sam says, the lawyers who are supposed to be representing his company, were now working with the prosecutors who were building a criminal case against him. In courtroom testimony, John Ray said that Sullivan & Cromwell’s cooperation with prosecutors was both legally required and in the best interest of FTX customers. Jonathan Lipson believes Sam may have decided not to hand over the company to John Ray if he’d known about the meeting with prosecutors. |
| Jonathan Lipson: | Now, if Sam had been fully informed that they’d gone to prosecutors, at the time he signed all these powers over to Ray, I’d be like, “Oh, I’m really sorry, Sam, but that’s life. You shouldn’t have done that. That was a mistake. Bad on you.” But there’s no evidence that Bankman-Fried was ever told about this and Bankman-Fried insists that he wasn’t. |
| Jonathan Jones: | The whole situation had also raised the interests of lawmakers, including Representative Maxine Waters, the chair of the House Financial Services Committee. Weeks after the collapse, she called for a hearing on FTX to understand what went wrong and assess regulatory failures. She even tagged Sam in a tweet, publicly inviting him to testify before Congress. |
| Sam Bankman-Fri…: | And I was very much looking forward to the opportunity to testify, and it was going to be a very contentious hearing. |
| Jonathan Jones: | The plan was for John Ray and Sam to appear back to back. |
| Sam Bankman-Fri…: | I don’t anticipate that Ray and I would’ve agreed on very much, but at least I would’ve gotten my side out. And there were a lot of congressmen who were very interested, I think at the time, in hearing what had happened. |
| Jonathan Jones: | The night before the hearing, Sam is in his Bahamas penthouse. |
| Sam Bankman-Fri…: | And I get a phone call from my lawyers that in 45 minutes I was going to be arrested. And that is in fact what happened. I was arrested by Bahamian Police at the request of the United States Department of Justice. |
| Speaker 18: | Breaking news in the dramatic downfall of a one-time cryptocurrency billionaire. |
| Speaker 19: | Sam Bankman-Fried has been arrested in The Bahamas and we got that confirmation from The Bahamas [inaudible 00:15:25]- |
| Jonathan Jones: | Sam’s mom, Barbara, is there when he’s arrested and she watches as he’s taken away to jail to be booked. |
| Barbara Fried: | We went to the jail where he’s being held overnight. They wouldn’t let us see him. [inaudible 00:15:38] one of the guards who could not let us in said, “I promise I will tell him you came.” And when we came back in the morning to drop off a suit for him to wear to court, they wouldn’t let us see him. They couldn’t let us see him, but one of them said to us, “Just remember, the sun will shine tomorrow.” |
| Jonathan Jones: | The next day, back in New York, US attorney, Damian Williams, gives a triumphant press conference. |
| Damian Williams: | Bankman-Fried and his co-conspirators stole billions of dollars from FTX customers. He used that money for his personal benefit, including [inaudible 00:16:15]- |
| Jonathan Jones: | Prosecutors are sending a message. |
| Damian Williams: | To anyone who participated in wrongdoing at FTX or Alameda Research and who has not yet come forward, I would strongly encourage you to come see us before we come see you. |
| Al Letson: | And they did. Almost everyone in Sam’s inner circle flipped and testified against him. 10 months after his arrest, a jury found Sam Bankman-Fried guilty of fraud, conspiracy and money laundering. He was sentenced to 25 years in prison. Sam has appealed his conviction, which is scheduled to be heard in court this fall. But Sam’s arrest and conviction was not the end of the FTX story. Customers around the world had lost access to their money and the bankruptcy court would determine what, if anything, they’d get back. And as the case dragged on, questions about how the bankruptcy was being run and who was running it only grew louder. |
| Speaker 21: | It’s like an aggressive tactic, try to exclude people from the bankruptcy because they don’t do the paperwork right, set up artificial deadlines, stuff like that. |
| Speaker 22: | I was fuming. I was furious because these people, they were playing around our lives, with our money. |
| Al Letson: | Join us next time for part two of The Secret Story of FTX’s Rise and Ruin. To see original documents related to the FTX collapse and the bankruptcy, visit our website, revealnews.org. |
| Our story was reported by Jonathan Jones. The lead producer is Sophie Bridges. She had help from Artis Curiskis and David Ritsher. Taki Telonidis edited the show with additional editing from Daniel Schulman. Archival research by Julia Haney. Sarah Szilagyi is our fact-checker. Victoria Baranetsky is our general counsel. Our production manager is the great Zulema Cobb. Score and sound designed by the dynamic duo, Jay Breezy, Mr. Jim Briggs and Fernando, my man yo, Arruda. They had help from Claire C-Note Mullen. Our executive producer is Brett Myers. Our theme music is by Camarado, Lightning. Support for Reveal is provided by the Reva and David Logan Foundation, the John D. and Catherine T. MacArthur Foundation, the Jonathan Logan Family Foundation, the Robert Wood Johnson Foundation, the Park Foundation, the Schmidt Family Foundation, and the Hellman Foundation. Support for Reveal is also provided by you, our listeners. We are a co-production of the Center for Investigative Reporting and PRX. I’m Al Letson, and remember, there is always more to the story. |