SBF

Chapter 2The Third Turn: CZ

There are three turning points in the story of Sam Bankman‐Fried. In each one, his project started to go in the wrong direction. This one, the last one, turned so hard and so fast there was no saving it.

SBF's empire fell apart because the crypto news site CoinDesk got a look at something that looked much like a balance sheet. Its report, by reporter Ian Allison, ran only a few hundred words, but it ended up being the most high‐impact single dispatch in all of business news in 2022. Maybe in all of news?

FTX, the cryptocurrency exchange he founded, was created based on the experience of running Alameda Research, a trading firm SBF started with others in 2017. Theoretically, FTX and Alameda were separate companies, but every indication suggests that the borders between them were much fuzzier than they should have been.

The balance sheet Allison got his hands on belonged to Alameda Research, and he presented it that way. He wrote:

The financials make concrete what industry‐watchers already suspect: Alameda is big. As of June 30, the company's assets amounted to $14.6 billion. Its single biggest asset: $3.66 billion of “unlocked FTT.” The third‐largest entry on the assets side of the accounting ledger? A $2.16 billion pile of “FTT collateral.”

By “ftt” he meant an exchange token that FTX had spun up in order to make using the exchange more addictive. We'll go more into how this worked later, but for now, think of it like this: ftt was like a loyalty ...