Why did the FTX exchange collapse?

Here’s a quote from Sam’s interview at the event, which talks about Alameda Research. CryptoSlate cites the quote.

That’s not the company I run. I haven’t done it for the last couple of years. And I wasn’t deeply aware of Alameda’s finances. I was only superficially aware of Alameda’s finances.

Sam spoke at the DealBook Summit in a virtual format

Indeed, until August this year, Sam Trabucco and Caroline Allison served as executive directors of Alameda Research. Trabucco left the company in August, which means Allison was the head of Alameda for a few months before FTX went bankrupt. She also had a romantic relationship with Bankman-Fried himself, as she has written about more than once on her Tumblr blog.

Ex-CEO of Alameda Research Caroline Ellison

Even some celebrities have found Sam’s arguments compelling. Here’s what billionaire Bill Ackman had to say on Twitter, for example.

Call me crazy, but I think Sam is telling the truth.

Billionaire Bill Ackman’s tweet

Forbes would disagree with that assumption. In January 2021, Bachman-Fried sent the publication’s reporters documents confirming his ownership stakes in Alameda and FTX, which were 90 per cent and 50 per cent respectively. He also sent a table to Google Sheet describing Alameda’s reserves, which can be seen in the screenshot below.

The September 2021 version of the table

Forbes needed this information to compile its annual list of billionaires. Most interestingly, while the journalists were compiling the rankings, the information in the Google Sheet was changed several times by its author. As the crypto market grew, Alameda increased its FTT reserves to 195.8 million tokens.

As a result, the “Funds under management by Alameda” line showed $37.6 billion. Here’s a rejoinder to that.

In a separate column listing only unlocked tokens – that is, those that can be transacted with – Alameda’s total funds were a more modest $14.7 billion. Such updates have appeared periodically. Almost every time Forbes requested them.

In March 2022, Bancman-Fried updated the table again, adding more details about Alameda’s ownership stake. FTT’s holdings were reduced to 176 million tokens and Solana’s cryptocurrency holdings to 53 million coins. The form was last edited about two months before FTX’s bankruptcy filing.

August 2022 version of the table

Sam was in direct communication with FTX journalists and sent them the spreadsheet. He could not have been unaware of its compilation, so he was aware of all its edits and the figures that were filed there. Accordingly, Sam was very likely to have been aware of all the financial manipulation within Alameda. Now Bankman-Fried is most likely trying to shift as much blame as possible specifically to the official Alameda management.

According to CryptoPotato, back in early 2021 FTX incurred huge losses in a major margin deal by a client. Alameda had to step in and close the hole in the budget with its own funds, costing the company hundreds of millions of dollars. The token in question is MobileCoin, whose price soared from $6 to $70 in April 2021 and then quickly fell back.

The rise and fall of MobileCoin

A trader on FTX opened a large position by borrowing money from the exchange. However, due to high volatility, the loan actually depreciated as the FTX mechanisms failed to prevent a financial loss for itself. Normally trading platforms would take a portion of a trader’s balance as collateral and put up an acceptable price to liquidate the position so as not to incur a loss.

In the case of FTX this did not happen: the reason for what happened is not as important as the fact that Alameda used its own funds to cover the losses. Bankman-Fried has repeatedly stated that Alameda and FTX are supposedly independent entities, although experts have found evidence of insider trading between them in the past.


Apparently, Sam is now trying to play the victim of circumstance through various interviews. He has already managed to state that he was not aware of the financial situation with Alameda, nor does he fully understand how money could disappear in some of the company's deals. Although Bankman-Friede's early Twitter feeds make it clear that he understands very clearly, for example, how margined deals and other such details are formed. So we can only hope that journalists and the blockchain community can find important inconsistencies in Sam's current and previous statements. That, in turn, will prevent him from getting away with it.