Thank you foreign Thank you! Go! Goonies Now now now now I Know you might be thinking to yourself what in the world is going on You might be thinking to yourself for the various reasons such as why is the astronauts Moon not on Oh oh there we go or you might be thinking to yourself what's going on. Usually it's at six you scheduled 5 30. why are you live at five right now I Know your mind is probably rushing with an endless amount of questions, but I'm gonna ask you. so please please please calm down because we're going to get it all sorted out. I've been sitting here for the better part of the afternoon creating the show for you tonight and I had the funny three things: I wanted to show you I wanted to talk about the overall Market I wanted to talk about the craziness that is Kanye West's current life and we're going to get into all of that. We have a lot of stuff to get into, but as I was sitting here getting ready I just found out that apparently Sam Bakeman Freed is literally going to be speaking live first Crypto appearance the Round Table uh I'm looking at it. it's the Mario Nafal like apparently it's supposed to start now because it is 504 and I think I know how to check the time Uh I has it just not started officially? Um, just spoke with Sam He confirmed he'll be joining the space in 1.5 hours. See you all there! That was at 3 30. So time sensitively is this live? Start listening. Okay, wait. I found it on my they're talking already. It's the same. but how do you find it here we go I'm trying to find the links. Listen, Live here we go. You guys are all on the stream. Uh, we're waiting for you guys. Got it? Oh, we got it apparently. Dude, this is some live stuff. Um, we'll see if this space will be Elon's one in terms of the record. I'm not sure. Hopefully he doesn't crash it I'm sure it will I'm sure it will actually. I'm pretty sure that Elon's going to join the space at some point. All right I can't even see you right now. Just to clarify the entire show that I created for you, we're talking about. Uh, we're really going to get more into FTX stuff we're going to get into Kanye stuff I We have the full show I Just figured this is awesome breaking news and I want to go through it with you all Live stuff. Let's do it all right. He's trying to join. Let me send them the link. All right he's trying to do. This is gonna get spicy. This is gonna get spicy. What a day? Out of nowhere Content finds you I Just sent the link to Sam Now there's a lot of reports of people not able to join, so a standard glitch. Let's get after it. let's do this thing. Hey everyone, What an exciting day! Kim How are you very good Hi Sam Nice to see you Sam is not here hey honest I can't see him I I Like you are here. Just got here. very nice. There's the mail. it's been quite the month bro. I Message you uh hey, you're all good and you're like am I I'm stuck in traffic I might be late so I'm not sure what you're doing in traffic. Um, let me get Simon Simon are you there? can I maybe I can't see Simon All right so as you can see: I can't hear around either Chet Can you hear me? Fine, Yeah fine. I Was just waiting for the co-host Uh, all right, just waiting to co-host Sam and we can kick it off. I've sent you an invite Sam You can hear me? Yeah man. I've sent you an invite to I'm gonna send it again to you and then I'll kick off. So I'm just talking to Sam uh now you're good. You're good. Uh, so I'm talking to Simon sorry you're a good Sam I can hear you. You're good just inviting Simon I've sent you the co-host invite again Simon Chet If you could try to bring up Simon while I uh give an intro to the show and kick it off. Uh, if you can try to bring up Simon in the meantime as a speaker and then I can co-host him, That'll be okay I'm here now. All right everyone. thank you for joining. For anyone that doesn't know my name is Mario Norful we do this space. um whenever there's major news, breaking news, and major events we've had, you know we did Marathon spaces when FTX imploded and we've had guests from Elon Musk to to Mick Mulvaney we had CZ Hunter Biden bunch of regulators. So everyone came into the space and we broke down the events live on stage and had a lot of people within the company outside the company and come in and comment on the event's life. So it was a pretty pretty crazy times and here we are again today with Sam Sam I'm going to kick it off with the questions you ready. Go for it All right? So the first question is is um pretty? General and I think you've been asked this before as well. What's the intention of doing these interviews? I I mean I think at the end of the day like I feel like I I mean you guys all deserve to hear from me about what happened and I want to be able to uh to say is it me or is he choppy I I I've lost the connection as well. Yeah, yeah. so Sam you're a bit choppy my friend so you gotta just uh, fix the internet somehow. If you don't mind, sorry, give me one second. Yeah, no worries man. All right there we go. Can you hear me now? Yeah, yeah. all right. so uh, the question again, um, the intention of doing uh, this interview? yeah I think you know at the end of the day like it's uh, you know I feel like you all deserve to hear from me about what happened I feel incredibly bad about it and I feel like um I don't know if that's the least that I can do all right. So the first question I have and I know Chet has got a lot of questions as usual, but the first question is, you know there were many other Executives around you and I won't name anyone and they've been pretty silent throughout all this. So my question to you is how involved were they in making those major decisions I mean to some extent I think that there was I mean there is a pretty big diffusion of responsibility and I mean I feel I feel incredibly bad about what happened and I feel bad about everything and I think we're losing the connection. you're you're choppy. You're choppy again. you're choppy again. I'm not sure why. yeah, sorry about that. Maybe go somewhere with a with a better internet connection. Do you have a different connection? It is? not that. um but uh. but anyway, it should be good for now. Um so okay yeah. I think like at the end of the day look I was I was CEO of yet and like that means that one way or another like what happens is my responsibility and um, and you know I'm I'm the one person who doesn't get to say that whatever that wasn't sort of like you know that wasn't in my realm. that wasn't something that I was chiefly responsible for. That's something that other people are thinking about like I I shouldn't get to say that and um I did massively screw up in I wasn't on top of I wasn't on top of some of the most important things that I should have been Um, that's that's on me and you know I I don't think uh I think no one was really on top of um, you know International uh, position, risk, uh, risk management and I You know a lot of of people could have been, but I was the person who should have been responsible for making sure that someone was how how involved were you on the Alameda side versus the CEO and co-ceo at that company I haven't really been involved in Alameda for a number of years and I get like you know, periodic high level uh, you know, summaries from them on some of what was going on. Uh, but I haven't been making trading decisions there I have been making day-to-day decisions there. um, you know I hadn't been paying much attention to it and um, uh. and and part of the reason that I had been paying so little attention to was out of you know, frankly, out of a concern about Um about conflicts of interest, I have a follow-up question. Yeah, if we do, if we don't So Kim the way we structured it is so we've got a list of questions, me and chat that we've prepared and then we'll give the the mic to the to the rest of the stage to ask. uh, follow-up questions. That's important that there's context here to what he's just said. So after that, I can ask the first question first question when we move the mic to the panel so you'll be the first one to ask question after after we're done with the line of question. If you don't mind, yeah, that's something that is quite important that I think is relevant to. Uh, uh, catch up on if I may, I'll let you just add this comment please and I will go through the line of questioning please Kim And she's just keep it short if you don't mind, please I appreciate it. So Caroline Allison The former CEO of Alameda research says that you knew that FDX customer deposits were misused against your own uh, terms of service and then you've stated in several interviews without much confidence I may add that you didn't know and by saying that you are basically throwing Caroline under the bus because if you didn't know, then she must be the culprit who is legally responsible uh, for millions of billions of missing. It's right and it Caroline had a romantic relationship So my take from that is that you had power over her and that she did what you asked hered. so my two would anyone believe you're dropping out? Kim Yeah, why would anyone believe anything you say when you're throwing your own lover under the bus and then I was told I'll let you I like please Kim if you can get to the question so we get through the line of question. if you don't mind please Airline is here and listening right now. So is there anything you would like to say to her I'm wait Caroline's listening I mean look I I up big but I'm pretty offended by some parts of that like I ain't crying and I had been together for a while I don't control her I never did I think it's really that you would say that I would that that's how things work. Um, and you know, putting that aside for a second like I wasn't super involved in Alameda I was not involved at all in the trading um I hadn't been for years um I was intentionally not getting involved in it because I was concerned about a conflict for interest. Um, but you know as to uh, you know, like I I I I guess I'm not entirely sure what the question was. there's there's sort of I will go back, we'll go back to the line of questioning chat. I'll give you the mic because I know that was one of your questions as well. Check. Go ahead. yeah. so SBF Um, thank you for coming here today. Were a customer assets ever backed one to one at FTX So FDX it's a margin training platform. It's a derivatives platform. So like everyone was depositing collateral um, you know, putting on positions long position, short positions? um, you know Futures positions Burrows Um, you know the uh, uh, the the collateral that FTX held um was equal to the sum of those customer positions. Um, but they're both positive and negative numbers there and so what does that mean? What does that mean so? well what it means is that if you as a customer um, you know if you deposit a thousand dollars and then you know, withdraw one one thousandth of of a Bitcoin um from The Exchange um or you know, use that to sell Bitcoin or something like that you've put on a merchant position there. Or or you know, or if you do it with a Bitcoin Futures position. Um, and you know, yeah, like you know, many of the customers had negative balances um in in assets. That's sort of how the platform functioned. um I And okay, okay, but my question is if I deposited Bitcoin into FTX and intended to trade with it on the exchange um, or using it in the drippers, whatever it would be, would I be able to withdraw that at all times one to one. So the way that I mean the way it worked. Again, everyone had deposited collateral and people were borrowing and lending from each other on the platform those assets and withdrawing them. But it should have been the case that you know, we could have liquidated any of those positions that we could have March and called them and sold them off to regenerate. But what was it ever? The case? Was it ever the case that uh, there was a one-to-one backing of acids that FTX to where uh, let's say 2018 2019. Was there ever a point in time where there was an actual one-to-one backing in the custodial uh portion of FTX So it was always the case. Uh, how was that insured This if you include the negative positions in that that you have positives and you have, okay, you, you broke up. We lost your connection After you said it was always the case. Okay, um, so it you're breaking up. Again Sam Are you there? Let me ping him. Awkward. Awkward. Aqueduct He's rugging into space just like he wrote his customers. Uh, can you see him? Hello? We got jokes. Okay, we can hear you again. Um, uh, sorry. is your connection Yeah, it's not a connection thing. It's when my phone gets a notification that it cuts out for a second. Okay, if you can. yeah, put it the dot, disturb or turn off notification. It'll be good. All right. give me a second uh and just a reminder for panelists if you don't mind. Yeah, we'll give. We'll open up the the the mic for the panelists. Uh, after the questions, please? All right, go ahead. that's a good idea. Okay, so you were You were telling us uh that it was always the case. Well, that it was always the case. Um, that you know the customer balance is um, you know were equal to the the Uh assets as long as you count the negatives as well as the positives that if you you know, add up all of the customer balances positive and negative that those were equal. Um, you know to the assets that that FTX had. Um, the problem is that they're both positives and negatives there, which is the nature of uh, margin trading. But it should have been the case that at the end of the day um, we could have margin called any of those accounts and been able to to liquidate them in time. Uh, you you did have Auto Liquidation procedures in place for many accounts that FTX correct that that was actually part of that. That is correct. That is correct. Uh and um. but uh okay, I'll get to that a little bit later because there's a little bit deeper dive on that. Um, when did it stop being the case that customer assets were actually backed one to one? Well, it never stopped being the case. Um, Well, it has to have stopped being the case of SPF People can't withdraw their money? Then it's not one to one. It never stopped being the case in the context of the fact that there were both positive and negative balances on the exchange and that if you added all of those up, um, it added up to the same set of assets. But because there are negative balances because there are people with borrowers, there are people who are short. That meant that the total amount of assets was not the same as the gross sum of all of the long positions put together. Um. Which meant that in order to be able to allow you know everyone to withdraw all assets from the venue, you would have to settle all contracts and close down all open positions and all open margin positions that anyone had. Um, that's the nature of of a margin training exchange. Um, but you know to the that that second. Point there's obviously a really big failure there of risk management and that's on me. Um, and you said that? FTX is what you know you paid the most attention to. Yeah, Um, so much so that you claim you couldn't track Alameda's compliance properly. Um, surely though you had the time to be checking, you know, on the balance sheets of the company or Blazer focused on right like watching the statistics on trading revenues could not have been taking up so much of your day. Uh, that you didn't have the ability to oversee compliance and use their funds. So I'm not sure what you mean by compliance in context there, but uh, compliance to Legal laws, fiduciary responsibilities, risk management? I Uh, sure. So I mean I think that like uh first of all, I absolutely could have and deeply wish that I had. Um I paid a lot more attention to risk management Like that was a deep feeling and it was a really embarrassing mistake for me to have made and I think it was a result and part of me getting a bit less grounded and of of you know me starting to get distracted from all of the details of the company. There's still some eyes paying a lot of attention to, but not as many as could have been. Um, and you know I was paying too much attention to higher level things to long-term strategic goals rather than you know, spending as much energy as they should have as I absolutely should have on. And and you've stated that the markets plunging were a large part of why FTX had to shutter its door. Uh, that's that's essentially reasons you gave two reasons, right? And one of the big reasons is you said the Market's plunged. but if the funds are backed one to one changes in the market prices versus the dollar have zero impact on being able to withdraw funds. If it's set up properly, it just needs a dollar. It just means the dollar value of those funds has changed. Correct? So so technically um, that's not a real reason for why people weren't able to take it out. That's a failure. I Think that's not actually how a derivatives exchange works on a derivatives exchange like. and you can look at the clawbacks that a lot of exchanges had back in 2018, the the really frequent clawbacks, and the core problem that was going on there was in order for you know everyone to be able to realize what they think they had, you need to be able to close down all positions on the venue such that new accounts end up net negative. so you need to be able to take every single account, in theory, liquidate them, close down all margin, all Futures positions such that there are no negative numbers or positions or balances anywhere. Um, and do that. Um, And and if you have a long position, if some user has a long position on the exchange and markets start crashing, um, at some point, that position is going to be underwater. And at the point where that position is underwater, that means you aren't going to be able to close it down while still leaving that account with a positive balance at all. But it shouldn't be able. It shouldn't be able in a properly managed environment for it to go underwater, right? Essentially, because if we're to look at your terms of service which says that you can't loan out user funds, it shouldn't be possible for those user funds to end up basically being loaned out to those margins. So that was one piece of the terms of service. But there are many pieces to the terms of service. Concerning are the other parts of the exchange. Yes, that doesn't change that parts of the terms of service. One, The fact that there are other parts of the terms of service doesn't change the paragraph. The terms of services says you can't lend out um, the depositors funds to FTX trading and FTX trading could not uh move in to be traded. And now, granted, when you spoke with Vox uh or the reporter at Fox over there, you seemed to indicate uh, that in fact, um, you know funds were lended out uh from FTX um from FTX telemeda and Alameda that made the trades And therefore, that's why you're able to kind of make the statement that FTX wasn't doing Investments here. So the terms parts of the terms of service are overridden by other parts of the terms of service. Well, it was the case that um I don't know if that was part of the I I don't know exactly. So was it your intention to use user funds customer funds to lend out uh to others on the platform um without their consent. So if you imagine any Futures position that a customer had on on the platform, um, that is a situation where in order for you know one side that has a position on to be able to be made whole, it has to be the case that the other side is able to close down their position that those you know Mark to market gains that they have are conditional um and that they're credited with on the platform are conditional on you know us being able to liquidate the other side of that Futures Contract without that account going under. Uh, The same is true of all spot margin positions on the platform and uh, that you know was spelled out in the terms of service if you read the full terms of service and so there's that piece of it. Um, there's a lot of other things going on as well and so I don't want to say that that was the only thing that went wrong. It wasn't okay. We'll go. we'll go deeper into that. a little bit later. you were the majority stakeholder by a wide margin. I've just got two quick questions um, chat. Um. Also, I've just got another another panelist chat who could be jumping in I've given him right to jump in to comment on a few points so if he jumps in, his account is real Zero Sum Uh, Sam My question is was Alameda allowed to remove assets from from FTX and is that how they paid back Genesis and others who demanded to close their loans. So on. I all users were to some extent allowed to remove assets from FTX in that you know they could deposit um funds to FTX they could withdraw and they could even withdraw more than they had of some assets as long as it was over collateralized by other assets. Um, so that piece was uh, in theory not specific to uh to to one firm and was you know, rather a, um, a feature of how the platform worked. that uh, uh, that that's how margin trading works. It's it's you know how I collateralized but not fully funded positions? uh, work on platforms. Uh, That being said, um, obviously like something really bad happened and that something? was that that position got way too big. Something really bad didn't happen, You know I vastly underestimated. Okay, we'll get into that piece of just a second. After a few more questions, are you are you still the owner of Alameda right now? Uh, I mean there's a definitional issue given what you think of the Chapter 11 process. um I I was a large owner of it prior to that and how much of a stake did you own it? I Before we go down that road, Can I just get some clarity on the on the loan book thing because I've got a message here from an owner of an exchange and he says the following: He says the way margin trading works is by the loan book that where people explicitly put their funds to be available for others to borrow for the specific rate. For people that didn't put their fans in the learning book, all those assets should have always been backed one to one and never touched. So it's I mean it's a case of saying that you in order for for my money to be lent out, you would have had to have my specific permission because I would have had to put it out there to be available for people to borrow against when they take a position, right? So I I Totally hear you on that. Um, there were billions of dollars in the borrow lending book. Um, on top of that, there are billions of dollars of open interest on futurist contracts. Um, which is another place where in order for that to be able to settle successfully. Um, it needs to be the case that um I that you have, uh, uh, you know you basically need to have you know everyone be able to be liquidated there in time And so that's another source where this came from. Um, there were some amount of lines of credit given to some firms, um, on the venue and then there were some other effects on top of that that when stacked together, created a position that was larger than it should have been larger than I Thought it was larger than I should have allowed it to become and um and represented a surreal failure of oversight management. Sam Are you saying that there were people that had their collateral not on the platform and they were trading against collateral that was not actually even in the system? Because if the clan, if the collateral was on the system, then to liquidate the collateral should have been automatic. But if the collateral was out of the system, so if you're saying Alameda for example or others had collateral but the collateral was not in FTX then isn't that a breach of the terms of service? Oh, they did have collateral on FTX unfortunately and I say unfortunately, but this was a huge mistake of mine as well because I should have anticipated. Um, you know the prospect of this and should not have um, what happened to that collateral, But well, it decreased quite a bit in value and so you look at a decrease by I Think some you know many billions of dollars in value over a two-day period starting on on November Uh, sixth. Okay, and and yeah, go ahead. Ran, go ahead. Oh, shoot. I'll take that. So are you saying that the collateral went down so quickly that you didn't have time to liquidate the position quickly enough to be able to get the the borrow side and the land side into equilibrium. Yeah, I can I can probably share it I could probably throw some like a little bit here as well. The way that that obviously works is on an LTV ratio. So um, when building out like the product, the risk management margin system for this runs off and a loan to value ratio. So that's how they're deciding on when collateral needs to be put back into the system to to bring it back up and and to meet that. Unfortunately, the mix between a bank run um at the same time is a massive drop within what the Uh people had used on there as collateral. Some of them had Ftt token for example, and when we saw the drop in that they're unable to meet um, the LTV requirements, so there is actually nothing there to Uh to liquidate right in terms of collateral, the actual lenders themselves needed to provide more collateral into the system and because of what they were providing as collateral had dropped in value, this becomes a a massive waterfall effect. Um, so this isn't just an FTX product problem. I mean the risk management margin system and FTX is great. I mean clawbacks on derivatives was very tough thing to tackle I think FTX did that very well. This is a bit of a I guess an oversight on the Uh counterparty risk to FTX not just FTX itself in this matter. If you could probably correct that like that. That's obviously there's more factors than just the the management on it Ftx's side. There's a counterparty issue here as well, in which what they had collateralized their instruments on FTX against yeah, everything you said there is correct and it was absolutely a failure of camera management. It was a failure of overstated the account. Um, it was a failure of management responsibility. Um, and it was a failure of understanding or even frankly thinking that hard about what a real downside scenario there would uh would look like because you know you said yeah. Can can I just hold on? hold on zero So I appreciate it if I'm able to continue my line of questioning just for speakers. Just please. Uh, please mute after you speak just to avoid background noise because I can't mute you at the moment. My space is glitching. Gotcha? Okay, so Sam you said that? You up right? and you got the numbers Wrong by magnitudes of billions of dollars in regards to Elementa's balances on FTX right? Uh, Now, while we can all make mistakes, right, as a graduate of MIT, that seems highly improbable. So how precisely I Think you know I Think you need to explain this quite in detail to our audience. How precisely did you mess up a calculation that far in a way that happened to massively benefit Alameda and Ftx's balance sheets in a fraudulent manner? I'm gonna answer the question as if there weren't a few of those words in it, but um I You know, Basically, and I should calculate this by saying that I Unfortunately, don't have access to most of the data right now. um I've you know lost access to a number of the systems and so because of that, this is all piecing together. You know from my recollection from the you know pieces of data I have been able to find from the analyzes I did in the days shortly after the crash. Um, so these are all going to be approximate answers and I apologize for that. Um I don't I don't have the exact um ones, but um, but the reference you referenced an accounting Quirk Correct, Yes, that's right. What is that? Yeah, so what happened? There was the following. and I think there's some tweets: Um, you know about this, that, um, that sort of references fact. Um, you scroll back to uh to uh 2019 when FTX was first founded and um, uh, at that time we we're trying to get bank accounts for FTX We we couldn't. We eventually did. you know a few years later. But you know, 2019 2020 we couldn't get bank accounts that could take customer deposits. Um for for FTX Um, we obviously were operating crypto uh, wallets and you know, had crypto deposits and withdrawals. um, but some customers, you know, generally ones that had um, uh in many cases sort of like Uh, for seeing relationships OTC with Alameda would uh wire money to uh to Alameda research um, asking to be credited to their Ftfs account and they'd wire it through telemeta and then we would do a ledger transfer on FTX effectively from Alameda um, uh to that, uh to whoever sent that wire transfer in order to credit them. Um, over the last few years we transitioned away from that system because you know over the last few years we're FTX was was able to get its own bank accounts in its own name and you know straightforwardly take customer deposits through that. um, there was. You know there are legal documents drawn up around that uh, payment service relationship I didn't know the details of those and there was an accounting system built out for it that I I know the details of my who built up the accounting system I mean it's a set of developers. it's I I that's your direction or someone else's Direction um I honestly don't remember. it was three years ago and uh, three and a half years ago and you know I I Think that I was probably involved in some very high level discussions around it, but I don't remember like you know and I don't know if I ever knew exactly who was involved in making exactly those decisions. Why not? So um, do you mind if I just ask the question you mentioned that people were depositing money into Alameda and then Alameda was doing a ledger transfer to FTX Isn't that highly legal though? specifically in an exchange environment. Isn't it illegal for a related party to act as a middleman between a customer and an exchange? I I think so. Okay, can you please? Sorry. Obviously it can be done in a poor manner like you. You could implement it in a way which is not okay. Um. and and I think it should be disclosed, Which it was disclosed. Um. and so what was Alameda's What was Alameda's Role What was Elementa acting as if I was putting money into Elementor and that money was appearing on the FTX exchange as a credit in my account? What was Alameda's role in that in that structure that would need to have a money transmitting license or a broker dealer license or something if they were accepting money from a customer. That was then Landing up on an exchange? Now none of this was on FTX Us and by the way, FTX Us, to my knowledge, is fully solvent, fully funded. There's nothing strange that happened there to my knowledge and I think should be returning all customer funds and should be opening up with why did you file it for bankruptcy then I'm an idiot Um I don't know I was given poor information by lures I was pressured very heavily to do so by people I no longer believe were acting in the interest of customers. Um, it was 4 30 A.m I was extremely exhausted being hounded by many people I made for a judgment call before before. this is an important question. Who all was there at that meeting? Uh, I was speaking with legal counsel at the time. were your parents present at that meeting as well I actually don't know if I'm even. uh, a lot are supposed to say who is there, but the first day, uh, well the actually bankruptcy decorations seemed to say that uh, that was actually the case. At 4 30 A.m you finally resigned with your parents. Uh, there you're convened with the lawyers and the parents. Um, and uh, so so so why why are you hesitant to mention the fact that your parents were present to that meeting? Uh, I'm in general hasn't because of their limits to what you can say about um, some conversations that involve legal legal counsel and so I was I was just being has enough and abundance of caution there. But I mean there's unemployments here that you want to dive into I'm happy to do it well. No. I'm just I'm just interested here. I mean I mean you, you said you, you're not really interested in taking your legal counsel right now Who's representing you right now at this stage? Oh, I Do have legal counsel right now I I have new legal counsel and um, okay, how are you paying for them I need to ask one question before we're moving on to a topic on uh, one more question. um about the Alameda getting the funds? um so just quickly chat and I'll give you the mic. Back to the right question. So the dollars Sam that were sent to Alameda because FTX didn't have a bank account so they were used by Alameda like it's their own money. uh when they were really customer assets all along and Caroline you? is that correct? Can I kind of extend on this question? um no because the question wasn't asked you. This question is okay just to extend on a little bit. um in regards to the funds at Alameda um was you know? obviously we saw Brett and we saw Sam um leave from uh obviously FTX us and also Alameda um sometime last year which kind of leads to a uh I guess a highlighter point that something went wrong back then. What position do you know of a position exactly that Alameda took or was it with uh, the collateralized instruments we were talking about earlier did perhaps say sam uh, Tribeca or or Caroline did they happen to get involved within the Luna and the 3ac um, crash where they was Alameda Like obviously victim to that because looking on chain it seems to be that that's where the volume started to drop off. The Ftt token started to need to really be pegged at 22. it seems like that is the around about the time that you guys really suffered a liquidity crunch through Alameda that needed to be plugged I There were a bunch of different questions there. uh I'll I I'll try and go through some of them and I can remember all of them but um I but but they're going through some of those. so um I As for why you know Brett and Traviko left I I don't think had anything to do with this I Think you know and they can talk to themselves about why they do, they probably left because from my, you know, uh, from from what I knew I I think it was entirely I think it was personal. um in terms of uh, talking about um I In terms of talking about, you know, timing I don't have granular detail here I don't have access to that right now and I wasn't running out on me so I don't know exactly what happened I don't believe that there was a large loss coming from Luna itself. Um, but I do think Alameda was, probably uh, quite long, the market in general, that it had a net long position and that the General market collapsed that happened then, uh, did decrease its asset values. uh, a a non-trivial amount. Um, yeah. I think there are a lot of other questions asked babe. I'll let it's okay, so I'll give the mic back so just I'll give it back to chat chat. I'll let you continue with the line of questioning, please. All right. Um, now you've claimed that Alameda's trading ties with FTX had lessons significantly over the years. Correct? Yeah, Uh, yet. Data from Arkham Intelligence and reviews of public blockchain records show that over 50 percent of Alameda's deposits and withdrawal volumes since early 2018 had gone through FTX From all data analyzed prior to August 31st of this year, their data also showed quote 22 percent of on-chain deposits and withdrawals to FTX digital wallets interact with wallets belonging to Alameda close quote and and chain.i was also able to reveal that from June 1st until July 22nd, Alameda's known wallets were the largest stable coin depositors and sources of of liquidity to all of Ftx's known wallet addresses. and your firms were made aware of this data. Correct. So I just to kind of jump ahead of some of this: I think those are all very similar statements I prefer that you just answer the question. Were your firms made aware of what I just asked you I'm not sure I was vaguely aware of some things related to that Bloomberg Bloomberg reached out to Alameda on September 14th about this. Did they not? I wouldn't know I'm not Alameda you you own Alameda Uh, you wouldn't have been consulted on any press. You weren't consulted on anything that had to do with press and elevator ever I I Don't know that I can make a statement about ever I can't remember Um, having been consulted on, you know many things. Really Telling me a press I don't remember this? Um, particularly coming up and uh, I think I may think well, but you just said a few seconds ago that you remember something kind of like this. sorry I remember chatter about some things like this. That's interesting because you just contradicted yourself. So this means that you would have been aware of an issue already ongoing at a minimum as a far back in September If we're if we're to believe that you didn't know anything prior, right? So so why would this not cause you to look deeper into something that would appear to show years after you claim the separation have waned that Alameda still had too much power on FTX traits So can I answer the question now? Yeah. go ahead. please allow. Allow time to answer. Please check. Go ahead. Okay, yeah. great, thank you. So uh. I'm not surprised by the fact that Alameda is a large fraction of stable coin deposits and withdrawals on FTX That doesn't surprise me at all because Alameda was first of all, a large fraction in general of stable Point uh, deposits and withdrawals and activity in the crypto ecosystem. But but second of all, I specifically did do a lot of cross-chain conversions of stable coins um, with and through FTX So in terms of raw, notional of blockchain and particularly if stablecoin deposits and withdrawals, especially just in a sort of like zero-sum way, where there would be some deposited, some withdrawn, that doesn't surprise me. uh, that Alameda had a significant footprint there. However, and and in retrospect, I certainly wish that I had done a much deeper dive into Alameda's positions and balances. Um, and the history of that on FTX And that was absolutely a huge oversight. Why didn't you win? The worst chatter about this though? It's the well. So the comments that I had been making were around its trading activity and Alameda's trading volume on FTX had dropped from something like 45 of volume in 2019 to something like two percent of volume. Um. in and is that public records? is there anywhere to verify their claim? I I've said it many times. I Don't know how one would verify it publicly. Um, Okay, so it's just your work. Okay, go on. continue. You could ask the relevant teams. You could ask the Chapter 11 team for that data. Um, you could. I You know you could ask anyone who has looked at that date chat I've just dm'd you as well. The uh, the data now so you can check your DM So go ahead. Sam Yeah, so uh, so from a trading and volume perspective, it was the case that Alameda had become a, uh, fairly small fraction of Ftx's overall activity. Um, Now obviously that was not true, as it turns out when you looked at Alameda's uh positions on the exchange and again like I've made a lot of mistakes here and uh and that was certainly one of them. was not paying more attention to to to to balances and positions I was looking at volume because that's what drove revenue and that's what to me seemed to be driving like business growth. and so as looking at you know volume broken down by um I mean by account but also by you know geography um by Source type by product, you know growth over time relative to other venues. um and um and there is nothing uh, that was a real uh, there's nothing alarming happening in those Trends Um, obviously in terms of positions, there was in terms of the on-chain deposits and withdrawals. that's actually I think a little bit of a different thing which is neither of those two and I think it is related to the fact that you know uh Alameda used FTX to convert between different stable coins a fair bit and also um I would uh, you know there were a lot of so One Thing Worth Knowing here is a lot of the relevant wallets got misidentified on things like chain analysis between Alameda and FTX um I and some of these wallets were basically what FTX was using to convert between two different stable points. So if a user you know deposited a lot of busd and then wanted to withdraw Usdc, there would have to be basically. and if you know the reserves were mostly in uh boc at that point there would have to be a Redemption it'd be a USD and then you know a creation of Usdc which would be sent back and so that activity represented a fair bit of blockchain based stable Point deposits and withdrawals to and from FTX although it was fairly separate from the rest of what was going on and what? Wayward what were you what were and what way were you protecting customer assets? sorry are you say FTX Protecting customer assets? Which way did you ensure the protection of customer assets? So there were some ways that we did. Obviously there are ways I like deeply, deeply wish that I'd done way better and deeply regret what happened. The ways that I had been focused on it the most. um, had been looking at a combination of um, uh, basically of like, uh, looking at the cyber security side. you know, ensuring that there weren't you know hacks on on the wallets. um, you know, keeping a uh you know accounting of the the asset, making sure that that didn't deviate from what you know some balances was um, getting you know Gap audits at the end of each year um and uh and you know also just dealing with frankly a lot on the Fiat deposit withdrawal side where customers would be trying to send money to and from the exchange. and you just mentioned you just mentioned Auditors there who who who audited your finances? Uh, it's uh, sorry. I'm not 100 sure if it's public who that is I I can say so after presuming that that that it is Um, okay and and I'll give Ryan John ask a question, we'll give it back. Yeah, just finish what I'm saying here first and then okay I'd Really, the interruptions really aren't helping. Uh, well well feisty guy. I was a Us-based firm. Okay, and um, now the Bohemian Securities regulator issued a statement on November 17th saying they ordered FTX to move quote Bohemian funds on November 12th. Is that correct? I There's a statement that was roughly I don't remember the details of it. Okay, and um, were you able to you you were the one who functioned this out. Um, according to your statements to you know pretty much everyone over the past few days. Uh, you functioned this out. Uh, were you able to do this as you were still the controlling owner of Alameda and the debtor or or what gave you the capability to do this after the chapter 11 was technically filed I I Don't believe that I've confirmed that as the one who did it because I I was uh, largely not. Um, But in addition, but hold on a second, you You have stated in your interview with Tiffany Fong just a few days ago that you in fact told them of your intentions to do this at least a day prior to them even making a request. Is that correct? sorry intentions to do? What to move the Bohemian funds I Don't believe I'm unclear on that at all that I told who to do that? You don't think that's correct. Okay, would you? Okay, so hold on one second while I play for you uh, your own audio and for everyone listening. This is from an interview with Sam Bankman Freed and Tiffany Fong um uh from just a few days ago, withdrawals were opened first to citizens of Antigua or Bahamas Yeah, yes and then The Regulators or Securities said that that was not approved. Yeah, wait, sorry. I gave them a heads up or one day heads up that were they didn't say yes or no and then we did it. The reason I did it was I it was in it and so it was realistically speaking shitty. but like yeah because I guess it could have been looked at as like Insider withdrawal sort of thing. No, this was uh, trying to create a regulatory pathway forward for the exchange just to like kind of appease the citizens of the country that you're currently in basically and that the company was about to be uh, uh, assigned a professional Liquidator and okay, so that seems to directly refute what you just told me does not. Um, hey, sorry. the incident that you were referring to was a different one I believe or at least the incident that I like it if you repeat uh, where that came from the um, uh, the incident that I believe or sorry start that question over again I at least inferred that you're talking about a time when Bohemian uh I've stated the Bohemian Security's regular issue to statement on November 17th saying they ordered FTX Bohemian funds on November 12th, November 12th. So five days prior and you have then confirmed that to Tiffany Fong saying that you did move those phones Okay, so then you okay, sorry, just sorry hold on a second Mario hold on yeah I'll put you to answer bro. yeah, I'm going to but I'm reframing the question and you're and you're really not helping right now on November 12th or removed? uh, you're saying are separate So what was the separation? So are you saying did you move citizens funds and actually allow citizens to withdraw funds? in which incident the incident in what you're referring to Tiffany That was a separate thing where we briefly had um withdrawals open uh for some Bahamian residents on the exchange. um that is something that I think was you know for a day or so um before abuse of that forced us to turn it off and is a a completely That was prior to chapter 11.

um that was prior to any filings that was when I was CEO um, unambiguously of of all of FTX and was unrelated to the other incidents that have been referenced in filings and other things. Okay, so we have Tiffany Fong here as well. your understanding of the conversation. Yes, that was a separate question. Um, it was not regarding the hack that was about um, the reopening of Bahamian withdrawals. So I just wanted to clarify that. um, that was not in reference to the hack. Ah, guys, do you mind if I go back to just the just say On the on the exchange, there were spot positions and there were margin positions. Point The Exchange Ran completely out of fans. What happened to the had spot positions on the exchange because they shouldn't have been leveraged, right? Uh, so there are a few answers that the first is that there were a number of withdrawals. um, that did happen on the exchange. It is not the case that all of the funds, uh, were not available I Think we processed I Want to say something like six billion dollars of um of withdrawals over you know, a few day period And So uh, part of the answer to that question is um, that they were uh, you know a lot of those withdrawals were processed prior um to uh to reaching the peak of the liquidity crisis. and prior to um, you know, withdrawals being effectively halted. Um, there are, uh I think uh, a bunch of other things going on as well there, um, some of which I'm still digging into, some of which I'm still piecing together. Um, but uh, but but yeah, let me let me just let me just let me just ask you a very simple question if I'm a user of FTX I deposited one Bitcoin into FTX unspot I'm not a leverage Trader I just day-to-day use the leverage exchange I'm just trying to understand where my Bitcoin is today I'm I'm just a little bit of clarity of that was was that Bitcoin notional Bitcoin on the exchange but the money sitting on elevator was my Bitcoin used as somebody else's collateral without my my permission. I'm just I think let's separate a discussion between uh Spartan Futures on on Futures I understand that there could have been potentially maybe a margin mismatch and I hear you and I'm going to give you the benefit of a DOT because I think you're I think you know we had some good interactions and I don't believe that you're an evil, evil person. but I'm just like just wondering about the Spot exchange. Um, and that's people that you know didn't give anybody permission to use their money, but that money is no longer there anymore, right? So I'm just wondering like that money could be right? So um, one piece of this is that. Um, in the Uh. in those few days, uh, following the collapse, we processed about six billion dollars of uh of withdrawals and uh, those withdrawals in general were from a variety of sources. um, including some of those coming from uh, uh, from you know, futurist position from margin positions that were open. Um, and that meant that uh, uh, that there was not a clear um, uh, that that that that that that effectively I think um worked on some of that distinction between the two sources. again. I'm trying to uh, you know, I'm trying to piece together all of what happened and I don't have access. um, to, uh, you know, to put all of it together right now. Um, but my best guess is that that was at least a significant part of it between Futures and spot. Look, how mingled. Why are we just saying? yeah? Yeah, so it sounds like the dream Futures and Sport Whether those were co-mingled right? Uh, that's right. Yeah, In general, balances were treated as effectively fungible with each other. Okay, no wait. I Just want to Just with that in mind I Just want to try and understand something. so I put money on I Want to deposit money into FTX I Deposit money into Silvergate Bank, which is United States Bank I put the money into the into the bank that money lands up in Alameda's bank account right. So now that now you've got, let's say I take a hundred dollars I deposit hundred dollars into FTX But what I actually do is I'm depositing into Silvergate's account on a limit an account name is Alameda So now Alimeter has a hundred dollars of my money and then I want to buy a Bitcoin for a let's say I put twenty thousand dollars in and I want to buy a full Bitcoin the money is. Tell me where the money is sitting now though, because this is the part that I'm confused about. Yeah, great question. I'm not surprised you're confused because it's confusing and uh, anything. Excuse me and uh, there were a lot of poor decisions made there. Um, on on our part. um and again. I'm I'm not 100 confident in all this I am still trying to piece together all of this again without access to data in retrospect. but but my, my general understanding is that and and here you're referring I Think to the you know, especially the sort of 2019-2020 era um, where there were no FTX bank accounts, but where some customers were wiring straight to Alameda research. Um, yeah. I'm just gonna. I'm trying to work out if the money ever left elevator and was stored in a custodian somewhere else which really represented a balance on the exchange or whether there was a money deposited into elevator which we'll talk about in a second. And then you just gave me a notional balance on FTX which was just a digital number on the screen and you let me use that money to trade. potentially notional. Bitcoin because actually I didn't have physical balance on the exchange because the money was sitting in an elevator account. That's the part that I'm that I'm trying to understand because that would make sense as to why Alameda had so much money to invest in projects and FTX didn't have any money to pay out to customers, right? Yeah, So I believe that was part of the story and and again I I'm not 100 confident I'm I'm working with white hacker but I believe that That is that what you said is effectively part of what happened I'll give one caveat to it, which is that I believe there was a ledger transfer a way you know it wasn't just a peer crediting of the customer TX series it transferred from one account to another. Um, but that that debit didn't clearly show up as a debit on Alameda's Main account and so did not clearly. uh, you know. add on the dashboard to the the risk of uh of Alameda's position which is one of the things that led to me being surprised uh by the size of the position because that makes sense as to why there were no more Bitcoin to withdraw where customers like like that I know had Bitcoin balances because those Bitcoin actually didn't exist because it was just emotional. You were just letting us buy notional tokens that didn't actually really exist. Uh, yeah, or another way of phrasing that because otherwise you would have had to have the Usdc somewhere, right? Yeah, I Yeah. I I Believe that what you're saying is in fact part of what happened. uh, chat. You want to continue with your questions, man. Yes. So um, just continue here. So uh, when you're saying I do want to go back to those funds that you moved, uh, to the Bohemian citizens. Um, when you move them, you were already aware of the issues of liquidity. Correct? So I when you say move them, This was a question of which withdrawals in which jurisdictions were open when? um, there were other jurisdictions where thralls were open as well. Um, it was not a single uh, shut off on all process. Um, but yeah, there were liquidity issues creeping up and uh, and we had a staggered shut off effectively of um, of, uh, withdrawals. there was not large size. For what it's worth that went out there. um, uh, all nearly the entirety of the withdrawals that we processed I Want to say uh, something like 95? Um, I think more than 95 of the withdrawals um, uh, were all done prior to any shutdowns. Um, but there was a little bit left that came out from some jurisdictions. The Palms Being won Japan being another. Uh, given that Japan has segregated assets um, and uh, uh and there may have been one or two other jurisdictions as well. Um, why did you allude to saying that you moved those funds to the he appease Bohemian authorities by ensuring that Bohemian citizens wouldn't be angry at you for losing their funds. Uh, specifically in in this context. so I I wouldn't say I moved them I Know it's a question of whether to close withdrawals and and it was. you know, accounts choosing whether or not to initiate withdrawals I wasn't initiating them. but um, but yeah, that was one of the jurisdictions that we were last to turn off withdrawals in. uh, that is correct and um, uh, you know, uh, it felt, uh, appropriate given that that was where a primary regulator was. that's where our headquarter was and um, but you know, after after about a day if that started to see some signs of people trying to abuse it and we cut it down and um, go ahead. Sam you claim that FTX us and FTX Japan are entirely solvent and also entirely separate from the rest of your companies? Correct? Um, I Think everyone would be interested to hear why you know you filed for bankruptcy for both of those not just FTX us, but FTX and Japan uh, why why did you make that decision regardless of the time that you made it? If you knew these were entirely solvent, why wouldn't you have argued to keep them out of the the chapter 11. I argued for quite a while to keep them out Um, in the end I was informed uh, in a way which I no longer believe was true that this filing would not mean that withdrawals would be shut off there. That this is not, It did not mean a bankruptcy filing that was just a provisional step. Um, but that appropriately appropriate and responsible steps would be taken in those jurisdictions I am surprised at what happened after my filing. I don't know why that's what happened. Um, and uh, uh and I regret it. Okay, and and and and and just to go a little bit further there. So you you specifically though didn't file FDX Digital Markets right? FTX Express Prey and and at least two other entities in the Chapter 11. right if you were able to choose not to file those, um, how come you couldn't for the US and Japan corporations I wish I hadn't I wish that I had done what you're saying I'm not asking what you wish you could have gotten I'm asking why you didn't The reason that I didn't file those in particular was those were entities where local Regulators prior to my filing had already stepped in and initiated their own processes and so I couldn't have even if I had wanted to uh for those entities and that includes FTX Australia Yes, Um, you said. Also said that eight minutes after you filed the initial motion for Chapter 11 bankruptcy, 4 billion dollars more. uh of liquidity basically was called in. Someone said that they could give you that cash injection. Is that correct? Uh, I I I Don't dispute that. I've said something like that. Um, but did you actually get the liquidity of 4 billion offered to you eight minutes after you filed the Chapter 11 So that had been 4 38 in the morning? Did you get that um, actually offered to you? Yes, Uh, By whom can you state I cannot. Okay, um, why uh, haven't you filed a motion to voluntarily dismiss the bankruptcy cases under under U.S Bankruptcy Coach Section 1112 Um, if you believed that you could save the company through that cash injection and you also thought that FTX Us and FDX Japan were fully solvent, acknowledge your question. Um I You know want to make sure that I operate in a you know, responsible and compliant uh manner here I you know would be discussing what would or would not be appropriate with Council and at the end of the day I Think that the right parties to be filing uh here would not be uh, you know I I Think that the right parties would be you know Regulators administrators who are overseeing this internationally who have been um, uh, you know, leave the charge. Um, but I I acknowledge your question there. Um, Okay, so so you're saying essentially, um, that's an on answer right? Like, because you didn't You didn't say why you haven't filed that motion. You just said you would talk with counselors about that. Um, what counselors? Uh, you know, like like, what? what? who? Who? Who are you paying like? like what does it cost you right now? uh for Council And and how are you affording that Given you said that, you were essentially cash poor although you said you also had potentially up to a hundred thousand dollars left. Uh, that's something I'm trying to figure out right now. you uh, so you have them on retainer without actual payment? I I Can't go into the details. There are also potentially various, uh, relevant Dno policies which are being examined as well. Um, but uh, uh. but I You know, Frankly, that's that. That is a concern for me. Okay, and um, what funds were lost in the hack and and from what it is that you're aware of what the heck? I don't know the details of that that happened after. um, you know the uh, chapter 11 team. Um, but I you know I think I I To my knowledge, this sort of on-chain analytics. As long as you don't count the as long as you make sure to distinguish between the various custodial processes that were taken, then um, to my knowledge, I've done a decent job of tracking. uh, what that was but I don't know a ton more than that. Okay, um, but you said that. FTX Us Lost 250 million dollars in the hack? That was a statement from you. Uh, when when did I say that? Uh, you said that in the past few days? literally. So uh, so if you said that FTX lost 250 hack. where are you getting that information from? So I would be surprised if I had said that it had done that I think I wouldn't be surprised if I'd speculated that maybe the notion of it was something kind of similar to that based on what had happened on chain. but I don't think I know exactly how much it was or from exactly what entity. Okay, but if you're assuming that much and Arkham Intelligence also reported that around 204 million dollars of funds were moved off of that U.S exchange to Alameda just a few days prior to the bankruptcy. Does that mean there's a plausibility of a half a billion dollar hole at FTX or Us? Or does that mean uh, there's just the plausibility of a quarter million dollar hole. So I'll make a few notes. This is all as of when I had last looked into it and my data is somewhat sale here. So I'm I'm just you know, guessing as best I can. First of all, the funds moved off. They're also funds moved on. There were a lot of deposits and withdrawals on FTX Us for many customers including Alameda but those were uh, those were fully solvent accounts and um, uh, and to my knowledge, you know all the customers ended positive um on FTX us such that there was no hole created by any of that activity. Um, there's not an equivalent of what happened on the International Exchange so that part would not contribute to it. Um, in terms of the hack: I don't know how much that came from FTX us um I I I I I you know might be renewable from looking on chain activity um I had believed FTX Yep, sorry I'm back. Um, but I um I had um I you know, and basically like I Uh, to my knowledge, I think that there were substantial surpluses there. so that's how I think it would still be um, uh, you know, to my knowledge, solvent. um although again, I don't have access to current data. Okay, all right and um, hold on on that point on that point. Sorry On that point, regarding Um, regarding the the regarding the U.S uh uh. customers. So I know Altcoin Cycle opened a tweet and I I mean I know many people that are in very similar positions. He says, what about the thousands of customers who did an ACH uh withdrawal pre-bankruptcy announcement and never received their money in their Bank Surely if Ftxgs was fully solvent, the uh, the bank account used to process the ACH withdrawals should have continued processing. Uh, are these ones that were processed right? like shortly prior to that or that were that were and before? Yeah, just shortly. Shortly prior to the announcement, there were a whole lot of uh, um, uh, customer withdrawals and those just stopped being paid I Can't speak to the actions taken by you know people who are running that business right now or what decisions they are or aren't making. Just my belief that there would exist the funds to pay out to customers. Uh, were that to be the chosen pathway? Um, but I can't speak to which decisions are being made about whether or not to choose that pathway. But but some of these were done days before. Some of these were actually done days before. I mean I I So I don't know the details of individual transfers ACH transfers can take a week to clear sometimes. um, uh, but uh, but again, I don't I I don't have access to looking to individual ones I I I I mean I can't take a week to clear I agree with you that they can take a week to clear. That's not a problem, but once they are in the system, it's just a case of clearing. It's not a case, it's You know if the transaction's in the system from a solvent entity from a solvent entity. there were lots of customers charging back to FTS us every day attempting to ACH in and then retroactively cancel those those were solvent customers. although decks um I I don't I don't know the details of this system, but in general you know us. uh Fiat transfers are quite messy and for both ACH and credit card related transfers um, it is very difficult to have confidence um uh in a transfer until as long as a month after it's been initiated. um so it that that that is a mess Sam Can I ask you a question and like I don't want to interrogate you and ask you specific questions but try to understand 29 year old dealing with a collapse of an Empire um which affected probably in excess of 10, 20, 30, maybe even 40 million people and a whole industry uh around it I wish we had that knocking off billions. but okay but I mean no customers Etc But okay, millions of millions of customers trying to understand as a 29 year old who was around you who were the five people that you were calling and speaking to and I'm trying to get a feel for the type of discussions that were happening as this whole thing started to to collapse. trying to get a feel for who? what are the top five numbers that you were calling and I'm trying to get a feel for what they were telling you to do. So it's a good question and you know there was a crew of employees you know working around me to try to do what we could. I was calling a number of prospective funders um to investigate. you know, potential opportunities to. but who are you Con: Who were your confidants, who were the people that two of the people that were guiding you like I know when something happens to me? Yeah, but five people in the office who are really close to me and I know who they are and their partners and they know they're brothers for life. Who are you phoning? Were you? Were you fighting? Yeah Gary Gary and Gary being a childhood friend and a co-founder as well. Sam I'd love to know more about his involvement. So I mean I always Yeah. I was calling basically uh and calling and or speaking to in person. um, you know, primarily. uh, other core employees of the company um, other employees who had you know, relevant stakes in it. who had, uh, you know, uh, relevant thoughts but he was. You know his core employees were the bulk of who I was you know, counseling with? Then we I did call, you know, some external advisors, a few key investors um, I called a few. What about Carolina What about Caroline were you were you speaking to Caroline during the assaulting? I mean were you guys aligning on exactly