SBF’s Fraud Defense analyzed – The Real Motive of the FTX Fraud

After posting a quick analysis on Twitter, I thought I’d post on here as the website is better formatted for longer form content, in addition to having a longer shelf life than a twitter post.

Coinage media has recently gotten an actually interesting SBF interview, which showcases how he intends to explain his part in FTX’s collapse as incompetence and pin the fraud on Caroline. What’s really interesting is the absence of a mention of Trabucco, I don’t believe in the more conspiratorial ideas here, but it’s really odd.

It’s worth mentioning my deleted & sadly to my knowledge not archived April 2021 thread. I posted & received justifiable pushback for a series of tweets calling FTX’s competence into question and noticing some issues on the site, such as the PNL counter changing every day (for historical dates). I said, although I didn’t really mean to say it this way.

“The company is insolvent and they don’t even knew it”

I didn’t actually mean to accuse FTX of being insolvent, so much as say that the accounting is such a mess they could unknowingly be, which if you believe Sam could be the case.

Enter Fiat@

[email protected], referred to by Fiat@ by Sam is an account that was presumptively created in 2019 after FTX launched direct fiat currency support. Before this you were able to wire money to Alameda’s OTC portal and have it credited on FTX.

Around the middle of 2019 they made it more straightforward, you could simply go to your wallet page on and wire money to “FTX”, using Alameda’s details. The bottom of the page had a disclaimer you agreed to using a ‘3rd party OTC’ and that was that. As I understand it, FTX would then transfer money to your account from “fiat@” and Alameda was supposed to then transfer your fiat to fiat@, but that part never happened.

Alameda handling fiat for FTX & fiat@ were replaced at some time in 2021 (from YouTube videos I found featuring an FTX digital markets bank account later that year), when I pulled everything out in April 2021, it was still Alameda. It’s worth noting Sam Bankman-Fried was the CEO of Alameda until October 2021, which is likely after the point FTX stopped using ‘fiat@’.

Fiat transfers are opaque, the above screenshot from Arkham Intelligence with a red box of where we think the “fiat@” era was shows the crypto balances of FTX. Accounting FTX on chain is hard because I believe they stored a lot of their assets (heavily USD) in bank accounts & created stables for crypto withdrawals. A fairly small % of accounts likely used the fiat feature, it’s not unthinkable that 8 billion was deposited, but it’s hard to imagine how this system actually worked.

The big problem is the fiat@ account should represent net fiat transactions, not gross deposits. If deposits are going to alameda & never being remitted and withdrawals are coming from FTX, the only explanation is still deliberate fraud, perhaps with intentional cloaking. I can believe incompetence played a role, and might be able to believe that Sam didn’t know how bust they were, but I don’t see this explaining everything away.

I think the narrative Sam is trying to project is that Caroline figured out fiat@, and was using it to “Trick” him / FTX into lending Alameda (which sam owns 90% of) money. No court is going to take this argument seriously.

The Motive

Much as having totally predicted FTX a year in advance would be fun, I don’t’ think the above makes a lot of sense, what has clicked for me however is Sam’s motive. The most confusing aspect of FTX was always why Sam threw away a seemingly legitimate & profitable business for a failing hedge fund, but assuming he isn’t lying about the peak NAV, it makes more sense.

Think from the perspective of Sam, a man who has a self proclaimed “linear wealth utility function” and believes risking anything for more wealth is the correct approach. A man who has donated to a ‘charity’ with the mission is to prioritize enlightened effective altruists survival in the event of an apocalypse. A man who clearly believes above all else, that for the good of the world, he should do anything possible to enrich himself at any cost.

Alameda borrowed from FTX customer deposits & any other source it could, they believed they were the smartest people in the room. Sam much like any other delusional degenerate trader imagined in a few months he’d be the richest man on earth, and once they realized those profits, the fraud would never have to be known.

It reminds me somewhat of the story of the bank robber who stole from a bank to purchase lottery tickets, planning to win enough to hide the crime.






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