The Fake Genius: a $30 BILLION Fraud.

0:00[Music] I'm very excited to introduce you to Sam bankman freed everybody likes a story about an underdog he's the CEO of the cryptocurrency exchange FTX the wealthiest person under 30 in the world someone out of the ordinary what makes him so different and so rich you said you always wanted to get rich but not for the reasons you might expect an unlikely genius who comes once in a lifetime living with roommates sleeping on a bean bag in his office the guy the guy's a nut he doesn't sleep Sam is a genius the Michael Jordan of crypto if you will somebody who wants to change the world for good he decided that he

0:37wanted to dedicate his life to doing good for the world this is not one of those stories in the span of about one week sand bankman freed went from a crypto billionaire to bankruptcy the southern district of New York has confirmed the arrest of FTX founder Sam bankman freed the once Crown King of crypto now adorned in handcuffs in the month of November 2022 one of the biggest Tales of financial fraud was unraveling this is worst than Theos this is worse than made of and it all centered around one man and a Web of Lies spun over the course of a few years the devil in nerds

1:16clothing a stunning fall from someone who is once considered crypto's Golden Boy many out there who believe he's just a pathological liar I remember watching it unfold and wondering how everyone seemed to believe it from Wall Street to celebrities I'm here with my boy Sam from FTX and even Washington DC his FTX team were among the top political donors the multibillion dollar class action lawsuit accuses FTX its former CEO and around a dozen celebrities of causing some 11 billion dollar in US investor losses over the last few months I wanted to find the pieces of the puzzle a puzzle that had managed to fool so many

1:53but what I found was a story that left people broken it felt like everything I worked up to this point in my life has been swept away and my biggest fear that this is not over some people think this Story begins and ends with s bman freed but that's wrong it is doomed to repeat [Music] itself the first for the last 3 years I've been using notion on a daily basis who are also the sponsors for today's video notion essentially gives you a place to store your notes your to-do list your goals and just about anything that's inside of your head all in one place so here is an example of a notion

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4:35people want to make money and they want to make it fast it can be out of greed it can be out of desperation but if you tell someone that there is a box that they can put their money into and that box will return back tfold what you gave it how could you not be tempted from the years of 20120 to 2021 the world of cryptocurrencies had become that box for regular people what is Bitcoin what is up with Bitcoin people are getting rich from it everyone's chasing it Bitcoin is going up forever dear D forever the mentality was simple you think of crypto you think of getting rich he became a

5:10millionaire at 24 all by investing in Bitcoin I made Millions with crypto you probably made Millions as well we all knew someone that never talked about investing before and suddenly saying how they're putting their money into crypto that it's the future from a struggling music producer from bankrupt to a millionaire to millionaire this is basically winning the lottery become the next crypto millionaire even celebrities were getting into it you have jumped into the world of cryptocurrency I'm going to Tweet out the information on how you can buy this nft look at this they look like they could be friends they're Buddies the question really became how do I get my piece of the

5:50pie to understand the story that's about to unfold I feel like the Super Bowl of 2022 is the best place to start not because of the sport but because of the ad breaks an advert appears featuring Larry David an actor who hasn't been in a commercial ever the ad takes you through various inventions in history the wheel toilets coffee voting light bulbs at each stage of a new invention it shows how many critics dismissed and laughed at them only to be proven wrong can I be honest with you it sticks the real Twist of this ad came at the end like I was saying it's FTX it's a safe and easy way to get into

6:35crypto and Larry responds I don't think so and there it is big bold letters don't miss out on crypto nfts the next best thing and right next to it the [Music] logo if you wanted to buy crypto most regular people would have to do it through a cryptocurrency exchange think of it like a central location that you deposit your money into and from there you can place orders to buy and sell cryptocurrencies the exchanges job is to match you with those buyers and sellers and once you've made your riches you withdraw your money from The Exchange into your bank account they are the easiest gateways into the world of

7:17crypto accessible from the very phones in your pocket within the top three cryptocurrency exchanges at the time you had binance at number one owned by a guy called Chang Pang Xiao nickname CZ in second you had coinbase owned by a man named Brian Armstrong and then finally FTX I'm excited to be partnering with FTX if you're wondering well what is FTX FTX is like the best exchange they're a safe exchange where people can trade things like cryptocurrencies the first crypto company to win naming rights to a major US Arena FTX is a platform where they offer 85% lower fees than their top competitors they have the most coins

7:53they have giveaways where they give free coins FTX is the best crypto Exchange in the world with no fixed fees but this week I actually want to tell you about Sam he's the young super billionaire and founder of the FTX exchange and so we arrive at Sam bankman freed nickname SBF all right Sam tell us about yourself yeah uh my name is Sam bankman freed I'm the CEO co-founder of FTX did you ever imagine that at 25 when you got involved you would now be one of the most important people in the crypto world and have become a multi-billionaire no well no although not only one of the nicest

8:29people in crypto but one of the smartest as well uh SPF thanks for taking the time out of your day down in the Bahamas to join us how you doing over there only 30 years old this guy had an estimated net worth of $26 billion I mean Forbes had already done an article on him save for Mark Zuckerberg no one in history has ever gotten so rich so young Sam is a genius an effective altruist and he's also the wealthiest person under 30 in the world his hair was disheveled his clothes usually consisted of loose fitting t-shirts and a pair of shorts you'd see pictures of him sleeping on

9:04bean bags in his office you trust the guy more when you see the car he drives he's worth like 20 billion something first of all his appearance he's only 29 years old and he typically wears a t-shirt or a sweatshirt that has the FTX logo on it khaki shorts very often when people get wealthy they buy fancy suits and so forth you haven't gone to that phase yet right not so much he sounds a little bit like Tech Bros I went to college with not showering a ton a really messy death he was very much the tech nerd genius stereotype when you searched him up online you would see

9:40pictures with him and celebrities like Tom Brady with politicians like Bill Clinton and Tony Blair then you find out that FTX was founded in 2019 in other words nobody knew who this guy was a few years ago I spoke with Sam earlier this month where he alluded to his plans to give most of his Fortune away Sam's biggest Advantage was this image he had built himself an image of a billionaire dedicated to giving his wealth away what's not to love about that the guy you see next to me is the most generous billionaire in the world do you have a sense of how much of your fortune you'd

10:17be willing to give away in the end I in the end I think almost all of it right like I'm not particularly excited to you know to to to dive into luxury I'm not excited about Yachts a crypto billionaire plans to give away 99% % of his money what about your own legacy Sam what impact would you want to leave on the world in the end my my goal is is to do as much good as I can for the world so I can prove I mean to the world that this isn't that I really do mean it around May of 2022 a guy called Mark

10:51codes starts publicly broadcasting his views about FTX and Sam bman freed on Twitter in the world of codes is what you would call a short seller somebody that bets against the success of a company's stock and if they're right they make money only a few months after his initial tweets he had sent an email to Bloomberg asking them to investigate Sam bman freed and FTX codes was skeptical and one of his biggest questions was related to Sam and his background mean just who was this guy really and how did he achieve his status in such a short period of time it was a fair

11:35question to save the world don't get a job at a charity go work on Wall Street that was the title of a post on a forum in 2013 9 years before the Super Bowl of 2022 it was written by a guy called William mccal he is the associate professor of philosophy at the University of Oxford co-founder of the effective altruism movement for the last 10 years my colleagues and I have developed a philosophy and research program that we call effective altruism he has pledged to donate everything you earn to organizations he believes will do the most good effect of altruism is a philosophy and a community that's about

12:16trying to figure out how can we do as much good as possible with the time and money we have what it brought down to in his simplest form was figuring out how to make the world a better place using the most evidence-based approach one strategy was known as earning to give which meant maximizing your own wealth so that you could give away more to charitable causes or as others might put it get filthy rich for charity sake he described a student who had been convinced by the philosophy and now works in finance at a trading firm called Jane Street giving away 50% of his income to charitable causes in the

12:51same year he made that Forum post masal heard of another student at MIT that may be a good fit for the movement a 4-year-old physics undergraduate who went by the name Sam bankman freed and just like that Sam bankman freed was introduced to effective Uris he was a mathematics nerd with a passion for utilitarianism and a vegan who already engaged in animal rights activism masal persuaded Sam that instead of working for charity directly he could make a greater impact by pursuing a high-paying career then donate a substantial amount of his income to charitable causes Sam was convinced and just like the student mentioned in masco's foreign post Sam

13:35decides to get a job at the same trading firm known as Jan Street it was a popular firm amongst other effective altruists little did mascal realize just how much damage his new convert would cause the movement in the years to [Music] come in the summer of 2021 Sam bankman freed gets on a zoom call with partners of Sequoia capital a venture capital firm these were people who had invested in apple Google Instagram and I could go on point is Sam was here to talk about FTX in the hopes of convincing Sequoya to invest money into the company he tells them his vision for the exchange I

14:17want FDX to be a place where you can do anything you want with your next dollar you can buy Bitcoin you can send money in whatever currency to any friend anywhere in the world you can buy a banana they were impressed a few months after that Zoom call they lead round of Investments for FTX which totaled almost a billion do and a year after that Zoom call 2 months before the collapse seoa Capital releases this 45 page article titled Sam bankman freed has a savior complex and maybe you should too in that article they revealed that throughout the zoom call Sam had been playing one of his favorite video

14:52games League of Legends the article goes on to talk about Sam's commitment to the effective alism movement and when the author sits down with him for an interview he becomes convinced that Sam is the real deal and may very well become the world's first trillionaire they even go as far as saying that unlike other crypto companies FDX has a unique selling point their ethical Behavior there's this image of who Sam was that people were buying into an effective uist a crypto genius a nerd who played video games whilst casually pitching billion dollar investors Sequoya wasn't some exceptional case you know they were just one of the many big

15:30institutional names investing into FTX I mean we're talking TASC soft Bank Black Rock Ontario teachers pension who cares what the big boy institutions are doing right I mean none of that means anything to the average person remember 2021 was the year that everyone saw crypto as this Fountain of wealth for those that put their money into it to reach these people FTX had to do one thing get in front of the things that they cared about the Miami Heat arena famous for hosting the Miami Heat NBA team well in March of 2021 it became the FTX Arena after signing a 19-year deal for $135 million with FTX throughout this year

16:10they've been spending big bucks to get mainstream name recognition TSM the popular Esports organization most known for their League of Legends team forget that it's TSM FTX now thanks to a 10-year deal with FTX for $210 million FTX is putting their name everywhere Tom Brady one of the greatest quarterbacks in football history well he's not only an ambassador for FTX now he's also given equity in the company and the same goes for the Brazilian fashion model and Brady's wife at the time Jazelle bunin the entirety of Major League Baseball well thanks to a 5-year partnership FDX were to become the official cryptocurrency exchange of the MLB every

16:46single umpire had the FTX logo embroidered on their uniform Formula 1 teams the international cricket Council a baseball Superstar the Golden State Warriors you guys may have seen their ads they're everywhere now I'm not an expert and I don't need to be and who could forget Kevin o one of the Sharks on the popular show shark Tang had been rather critical of the cryptocurrency space it is a useless currency it is a useless currency to me it's garbage become the crypto boom of 2021 and Kevin signs a $15 million deal with FTX to become an official spokesperson for the exchange if there's ever a place I could

17:21be that I'm not going to get in trouble it's going to be at FTX even some of the most popular Finance influencers who generally gave safe investment advice we're taking on sponsorship deals with FTX FTX us has been a sponsor here on the channel for the majority of the year I love FTX among the cheapest fees out there check out our sponsor FTX us a lot of these influencers bought into Sam's image just as much as actual institutional investors did the real question was how much of that image was real or just a [Music] facade after 3 and A2 years of working at Jane Street Sam decides to quit he

18:01had an appetite for risk and by staying there he felt like he could be missing out on other opportunities one of his colleagues at the time a 22-year-old named Caroline Ellison witnessed it herself just like Sam she too was an effective altruist with a love for mathematics she thought it was unusual I mean Sam was quitting his high-paying job just because there may be other opportunities out there of course Caroline Ellison had no idea at the time just how much her own career and personal life would become entangled with Sam's without a job Sam starts writing a list of directions for his life those things included becoming a

18:36journalist venturing into politics fundraising for a nonprofit and building a startup he would go on to achieve almost all of those things but before making a decision William mcll offers him a job at the center of effective altruism a company for the EA movement to conduct various activities and whilst there he befriends another member of the movement a Woman by the name of Tara mccy who was head of operations that's when Sam started noticing something overall biggest winner of the day Bitcoin ried more than 10% today it's up 438 for 2017 the cryptocurrency has pushed past $7,000 just crossed the $6,000 threshold it is in the next 20

19:18years a million dollars a at this point Sam didn't have much of an interest in cryptocurrencies but in 2017 the cryptocurrency world was entering a Mania although it was only smaller scale to the one that followed in 2021 it got on Sam's radar this is late 2017 when you know you walk down the streets you hear two people talking you're like that's probably about Bitcoin I mean I don't know but you know pretty likely more importantly Sam bankman freed had spotted something that others had not and he needed to act fast in that same year of 2017 Sam and his fellow colleague Tara mcau start a new company

19:53together they call it alamaa research see this this is it right here everything everything that was to come it all begins with Alam research when you look at the name alone Alam sounds like a research company in fact that was intentional misdirection if you name your company like we do cryptocurrency Bitcoin Arbitrage no one's going to give you a bank account that's your company name but everyone wants to serve a research institute alam's true purpose was to operate as a cryptocurrency trading firm in other words they would be using their own money to invest into crypto related Assets in order to make a profit but like I mentioned Sam had noticed

20:38something to purchase Bitcoin most people used exchanges and the price of Bitcoin generally remained the same across all exchanges in the world with one exception at the time some countries in Asia had been selling Bitcoin for in some cases $5,000 more than what it was on other exchanges in other words you're looking at5 ,000 profit per trade sitting on the table it was practically free money just one problem there were far too many obstacles in the way Capital controls Financial regulations anti-money laundering laws and so on and so forth most people couldn't work out how to make the trade Sam however had a card up his sleeve effective

21:20altruism thanks to a Japanese member of the EA Community Sam was able to skirt around some of these obstacles Sam also ured funding from wealthy effective ultraista loan for $150 million from Yan talin the co-founder of Skype Alam research would first buy Bitcoin on a US exchange then sell it at a higher price on a Japanese exchange with the help of their Japanese friend now the accounts differ on how much this made Alam research some putting the figure at $10 million others at $30 million either way it was a success but there's just one problem with opportunities like this they don't last forever once people start to catch

22:03on the markets tend to adjust themselves and it no longer becomes profitable by January of 2018 Alam could no longer exploit the opportunity and then something happened in April an event that would be kept secret for a long time an event that would rock the foundations of Sam's first company an event that would expose a side of his character that would foreshadow much of what was to come in as Sam bankman freed always wanted to get into politics since leaving Jane Street many years ago and in 2021 he had a strong reason to follow that calling binance has kind of been in trouble in a lot of countries in terms of regulatory

22:42issues binance the world's largest cryptocurrency exchange and how it just got banned in the United Kingdom binance has been banned from Ontario Canada not authorized to operate in Japan either throughout that year Regulators across the world were setting their SES on cryptocurrency exchanges more specifically binance you know the most popular cryptocurrency exchange at the time owned by a guy called Chang Pang Xiao the UK Japan Singapore Netherlands and more were all warning binance that they were not authorized to operate within their countries Sam wanted to make sure that FTX wouldn't go down that same path how have you viewed what's been happening with binance throughout the world in recent months or weeks I

23:25guess you know something I'll say is that you know we try really hard to be as Cooperative as we can with Regulators then came a sign of Hope in September of 2021 FTX was granted regulatory approval in the Bahamas not long after that Sam relocates the headquarters of both FTX and alamaa research to the city of nasau Sam saw the Bahamas as a country that could be at the heart of this industry a Silicon Valley for crypto the arrival and presence of FDX underscores the Readiness of the Bahamas to be a home for Global leaders in the crypto space but that wasn't the only place Sam had his eyes on

24:03throughout 2021 he was looking at another prize Washington DC only months after moving to the Bahamas Sam recruits a new member into the FTX team a guy called Mark weten weten was a former commissioner for the cftc a regulatory agency in charge of regulating derivative markets in the US in other words he was Sam's key to the doors of us politics and regul What followed was pretty impressive only a month after hiring won Sam appeared in Congress to testify for a hearing on digital assets and the future of Finance the uh industry has the potential to improve a lot of people's lives and we're also happy to talk with other

24:45Regulators about potential products uh in the United States right there in that room Sam was the face of cryptocurrency Regulation I mean rather than resisting it he was embracing it FDX went on to make regory wins throughout 2021 we're talking Japan Europe Africa Australia they had gone down an entirely different path to binance Sam went on to become the sixth largest US political donor in the 2 years leading up to midterm elections we're talking an estimated number of $40 million in donations other FDX Executives had also contributed I mean by the end of 2022 political donations associated with SP SPF and FTX Executives exceeded $70 million

25:28[Music] s bman freed is the devil he is the devil in crypto this guy's literally trying to ruin crypto permanently and you know what he says oh that's not what I'm doing you liar you lie Sam bankman fre Bam's political Ambitions they started to rub people the wrong way one of the bills that Sam had been supporting was known as the dcpa ACT a bill that would essentially make the cftc the sole regulator of the crypto industry but many in the crypto space accuse the bill of being destructive to the cryptocurrency ecosystem the Sam was trying to claim a monopoly on the industry Sam bman freed was trying to

26:07get some kind of legal Monopoly over the crypto industry I there was kind of this like culture of Silence in crypto around not opposing him opposing his views and perhaps it exposed a side to Sam that people hadn't seen before the part of him that believed that the ends justify the means or a desire for his crypto Empire to come out on top no matter what if people would known what had happened at Alam research in 2018 during that month of April then perhaps everyone might have seen it [Music] coming co-founder of alam research Tara mccoi was growing frustrated not just her but many of the Alam research

26:48employees whilst their initial trades of Bitcoin between the US and Japan had been successful they were now losing money and most of that blame was being put on the other co-founder Sam bman freed and there was this growing concern over Sam's alleged Reckless actions including poor trading decisions being made by him in a post made on the effective ultu ISM Forum an alleged employee describes how he constantly displayed a flagrant disregard for legal structures and safeguards a belief that rules do not apply to him an inclination to see the ends justifying the means I mean the picture that they painted of this guy was not of a genius but of a

27:27young inex experienced Reckless individual who was harming the company with poor management and trading decisions so Tara along with other highlevel employees decide to confront Sam I mean they tell him directly you have to leave the company your behavior can no longer be tolerated that month of April would be known internally as the April Fiasco Sam's response he refused to leave not long after that Tara McCauley and close to half the employees at Alam many of whom were effective altruists quit allegedly those former employees raised concerns to higher members in the effective altruism Community warning of Sam's Reckless Behavior and how he was a bad representative for the movement those

28:09allegations were supposedly ignored or not taken seriously this piece of the puzzle right here it's the one that foreshadows everything but by the time people would find out about the April Fiasco it would already be too [Music] late with a large chunk of his imp employees gone from alamer research Sam had to reestablish his team first you've got Gary Wang I mean he joined Alam research from its Inception only 24 years old Wang supposedly met Sam at a math summer camp in 2008 he was very much the technical brains of the business nishad Singh Facebook employee only 5 months before joining Alam research age 21 years old much like Wang

28:52he helped with the technical infrastructure at Alam then you have Caroline Ellison remember her the former colleague of Sam's at Jane Street who saw him quit turns out Sam managed to convince her to leave that job she joined Alam research not long before the April Fiasco as a Trader then we've got Andy Krogan former employee to another trading firm and now the Chief Operating Officer of alam research he was the adult in the room Krogan had once told Sam to cut his hair to which Sam replied I think it's important for people to think I look crazy now when you look at this team one thing sticks out

29:28they're very young with a trading firm like Alam research the more money they have access to the more they can trade and the more they can profit so the Alam team decides to put together a pitch deck a presentation that's designed to attract potential investors to invest their funds with Alam I mean it was filled with all sorts of insane claims we're the best crypto trading firm in the United States we haven't had a losing week in 6 months they boasted high returns of 15% with no risk these loans have have no downside I mean to to claim no risk and to say that they hadn't had a losing week which seems to

30:03go against all accounts of what happened during the April Fiasco it felt as though alamida was desperate for money it's unlikely that this pitch deck was successful but I guess that didn't matter because Sam had been working on a secret project so uh you got involved because you thought it would be a creative new area to to get involved with I always want to start an exchange because they just seemed like really important products in the crypto ecosystem that were worth a lot you see crypto exchanges make their money by charging a fee for every trade a person makes on their platform right so in other words they make money regardless

30:37of whether the person making the trade is losing money in May of 2019 Sam launches a brand new cryptocurrency exchange FTX he would be the majority owner whilst Gary Wang who helped build the infrastructure for it would own 10% Sam now owned both a cryptocurrency exchange and a cryptocurrency trading fund see there's something already bizarre about this all and not just the fact that these companies are being run by Young and arguably inexperienced people but also the conflict of interest Sam owning an exchange is fine whatever but owning his own trading firm Alam research which uses FTX as a platform you see that opens up a gaping hole for

31:20example how exactly does FTX ensure that no special privileges are given to alamida

31:31the Super Bowl of February 2022 was this defining moment for the crypto space I mean some even called it the crypto bow because of how many crypto related companies were advertising during the event these companies had grown incredibly Rich over the last few years riding the waves of new investors from both institutions and regular people all handing over their cash definitely been an exciting year across crypto Bitcoin has a great track to K by the year end the bright orange future that is Bitcoin to the when you're riding high on the good times everyone and their mother was like yeah Bitcoin to 100K to a million to 10

32:12million in 10 years the notion that the music building for the last few years could stop I had everything in Crypt and against my better judgment I didn't cash out seems impossible I'm not an expert and I don't need to be the like I was saying it's FTX it's a safe and easy way to get into crypto until I don't think so until it [Music] does FDX already started off successful I mean thanks to Alam research they were able to provide volume to The Exchange right from the Jump by July 2019 SBF was already in talks with investors by August that same year they managed to

32:56raise $8 million not only were they getting investments from Venture Capital firms they were also raising money from their competition you remember binance right the top crypto exchange owned by a guy called CZ well in December of that year binance invests an undisclosed amount into FTX also taking an equity ownership in the company it sparked what seemed to be a friendly relationship between CZ and SBF little did Sam realize that the very man who invested that money into his company would deal the final blow to his Empire year later but perhaps one of their smartest moves was the creation of ftt a piece of the puzzle that would become instrumental in

33:36the years to come see in the world of cryptocurrencies anyone can start their own coin I mean all they are is programmable money put on a database or as others might put it magical internet money from nothing that has no real value other than what people speculate its value to be on July 29th 2019 FTX launches their token coin called ftt with a total supply of 350 million most of which was owned by alamaa and FTX the launch was a success I mean by August the price of FDT Rose to $181 which made FTX and alamer supply of FDT tokens worth millions of dollars just like that magical internet money

34:19right but that's not the real stroke of Genius here you see the truth is since they were the majority holders of the token they could never really sell all of it I mean the price of the tokens would completely crash if they tried to do that no but what they could do was point to their ftt tokens that are valued in the millions of dollars and use it as collateral to take out loans or to Simply say oh look how much we have in assets even though part of that is really just ftt tokens whose value is mostly tied to speculation it's almost insane to think

34:52about but it worked story of the week was the collapse of teral Luna it was a rough rough week for crypto investors teral Luna just crashed in 5 days from $90 99% down to 72 only months after the Super Bowl of 20122 a catastrophe in the cryptocurrency space was unfolding Tera and Luna were two cryptocurrencies that had just crashed in value wiping out an estimated $60 billion in the crypto space I don't think there's ever been a crypto event a bad event this large in crypto history Carol Luna took all my monies what was5 Grand about a month ago was now about $2 man the collapse of Terra

35:45and Luna was like suddenly you go from relaxing to being jolted awake on high alert because everyone is looking around and they're all asking who will be the most affected by this who will be next after the Terra and Luna cryptocurrencies collapsed The Dominoes began to fall bit by bit crypto hedge fund three arrows Capital ordered by Court to liquidate it had exposure to the now collapsed Terror USD stable coin everyone is intertwined in some way more paying in the world of crypto Voyager digital files for chapter 11 bankruptcy protection shouldn't have left my money in Voyager L all my life savings in the bit a major crypto lender went from

36:25managing billions in assets to filing for bankruptcy I did just get by Celsius last week this is the third major crypto company to file for bankruptcy coinbase is laying off workers along with blockfi and crypto.com what is going on throughout all of this FTX and S bankman freed were not only doing fine they were doubling down on the industry I mean in fact Sam was trying to rescue some of the companies that were going bankrupt by either giving them a line of credit or just straight up buying them out crypto world is now going to get a bailout Sam bankman freed CEO of crypto exchange FTX

37:00is keeping the industry as prices take a hit he's keeping them stable today it was announced that Sam bankman freed of FTX was going to buy Voyager for roughly 1.4 billion Sam's Empire wasn't shrinking amongst the chaos it was growing he was being pitched as this Savior and you had people coming out and calling him the JP Morgan of the cryptocurrency industry you bailed out some companies yeah uh what money did you use to do that do you still have enough cash if you needed to do another bailout yeah yeah they call him the JP Morgan of crypto lives a relatively understated life for a billionaire he

37:39drives a Toyota Corolla to FTX his offices in the Bahamas he lives with 10 roommates and a golden doodle named gopher they want you to focus on this weirdo who sleeps on the beach in a commune all shuy has CNBC down and not look at what's really going on whether it's money laundering or crime or covering up or what's really going on behind the scenes investors believed in Sam or at least the very idea of him allegedly Andy Krogan would make sure that investors visiting the headquarters would be able to see Sam sleeping on a bean bag and then have him wake up and enter the meetings usually wearing

38:23shorts it was intentional Sam knew that more powerful than just a balance sheet is a story by early 2022 FTX had raised billions of dollars from investors and was valued at $32 billion not a single one of ftxs bigname investors sat on the board of directors to oversee Sam's operations which was usually common practice investors would report that Sam wanted to run his company with little oversight and if anyone was interested in investing they should support that decision take it or leave it in July of 2021 Sam solid defied his ownership over his Empire when he decided to buy back shang Pang xia the founder of binance's

39:03stake in his company for a sizable chunk of Ft tokens in return Sam bankman freed was the reigning owner of his Empire with his Focus primarily on FTX Alam research was being run by two individuals Caroline Ellison was the first who we already know of but in 2019 Sam hires a 27-year-old Named Sam tabuka to join alamaa as a Trader alongside Caroline Ellison truko first met SPF at a maths camp in 2010 and then 2 years later reconnected at MIT there were some pretty bizarre tweets made by truko in 2021 one tweet detailed alam's strategy of holding a position in Dogecoin a cryptocurrency created from a meme based

39:44on tweets by Elon Musk and in that same tweet thread truko brags about their ability at Alam to make good bets I mean it paints this picture of alam research one that doesn't seem like a place with sophisticated individuals making calculated trades based on proper risk assessment yeah absolutely could pull it off without my math degree use very little math use a lot of like uh Elementary School math Sam bman freed ended up promoting both Ellison and truko to CEO positions in Alam in October of 2021 I know what you're thinking I mean of all the pieces of the puzzle so far how could things possibly go wrong from

40:24here but you're not paying attention all the pieces they are there leading up to November 2022 something started happening in August Sam truko the co-ceo of alam research with Caroline Ellison resigns from his position stating that he's chosen to prioritize other things a month later Brett Harrison president for the US subsidiary of FTX resigns from his position then a month after that an article comes out from the Block saying that Jonathan Cheeseman head of overthe counter and institutional sales left FDX last month as well something was up Sam bankman freed had managed to build himself this Empire in only a few years but the throne that he was sitting on

41:11was made of glass and then it finally arrived the coindesk

41:20report coindesk a well-known cryptocurrency publication releases an article titled divisions in s bankman Freed's crypto Empire blur on his trading Titan alam's balance sheet someone had leaked alamaa research's balance sheet and coindesk had managed to get their hands on it see a balance sheet can tell you a lot about the health of a company namely how much money they have access to and how much money they owe that coind Des report outlines that there are two divisions to S bman Freed's Empire FTX his crypto exchange and Alam to research his crypto trading firm this we already knew even though these two divisions were supposed to be completely separate from one

42:00another coindesk stated that those divisions become a little bit blurry when you look at Alam research's balance sheet out of the $4.6 billion of assets shown on Alam research's balance sheet a large portion of those assets with the FDT token in other words the majority of alam research's Equity was coming from an illiquid crypto token created by their own sister company that report confirmed the fears that FTX and alamer are closer linked than previously imagined What followed would be a week of disaster Chang Pang Xiao the founder of binance tweets to his millions of followers that he plans to sell all of the FDT tokens that binance holds if you

42:45remember binance had received a batch of FDT tokens when Sam bankman freed repurchased binance's shares in FTX a year prior with that single tweet alone hit the fan bance says it will liquidate its entire position in the FTX token binance CEO disclosed plans to exit the ftt positions as part of risk management strategy per tweet shared over the weekend are you scared are you worried that your bags are going to go to zero binance selling their chunk of ftt would mean driving down the value of those tokens in the process but perhaps even worse was the Panic that that tweet caused all anyone else could see from

43:20the outside was that binance the top crypto exchange didn't believe in FTX anymore why a few hours later Caroline Ellison makes a tweet she asks if CZ would be willing to sell his ftt tokens directly to Alam research for $22 in other words preventing a massive crash in the price of ftt of course that would be in Alam research's benefit given that most of their assets were literally made up of FDT tokens CZ basically refuses tweeting that we won't pretend to make love after divorce and that we won't Supply people who Lobby against other industry players behind their backs what you're looking at is a a showdown between two of the

44:04biggest cryptocurrency exchanges all happening on Twitter whilst this is going on the value of ftt tokens has been dropping rapidly panic and fear in situations like this are lethal if you know CZ you know he never sells anything he has a policy of long-term holding and this the way he framed it made it sound like something was truly wrong with Alam bance is selling it selling it all okay they're not even trying to hide it you see the news about Alam it wasn't just a reflection on Alam it was a reflection on soundman freed in FTX as well I mean think about it if you had your money

44:38deposited in FTX all your life savings and you find out that it's sister company is facing troubles and that another Titan of the industry from an even bigger exchange doesn't want anything to do with FTX what would you do well you'd probably want to get your money out of there all of a sudden massive massive massive outflows from Ft ex all of a sudden everyone starts getting scared in banking there's this concept known as a bank run if people start to lose their confidence in a bank for whatever reason customers are likely to start withdrawing money from their accounts however if the bank doesn't have enough money in its reserves to

45:11fulfill all of those withdrawals It ultimately collapses crypto exchanges sort of operate like Banks you deposit your money into them and for the most part your money stays in that exchange's account until you eventually withdraw right now with FTX anyone who doesn't want want to withdraw we'll look at everyone else and go well I didn't want to withdraw but I also don't want to be the victim of a bank run so I kind of have to as you can imagine it's a pretty deadly cycle and nothing fuels it better than panic and confusion as the withdrawal requests on FDX start piling up Sam puts out a tweet

45:50saying that FTX is fine there's nothing to be worried about they have enough money to cover all their customers deposits and then there's silence it's CZ he's now tweeting that FDX has asked for his help he's saying that they were facing a liquidity crunch but he signed a non-binding letter of intent to buy out his rival's company and save them from their time of distress the biggest story in all of crypto land crypto exchange binance announc a deal to buy rival fx.com probably the most dramatic deal I've ever seen in the history the crypto industry for a moment there was hope this is a choke hoold this is fighting

46:34your competitor until your competitor actually asks for your help this has been one hell of a roller coaster if FTX was facing a liquidity crunch it simply meant that FTX has the money to support withdrawals it just isn't able to get to that money fast enough it's an issue that's solvable at least that's what we all thought only a day after CZ announces his potential buyout Bloomberg and the Wall Street Journal both publish articles stating that for months the secc and the cftc both us regulatory agents in charge of Securities have been investigating FTX specifically whether FDX has been mishandling customer funds now hold on up to this point the biggest

47:18concern was FDX having a liquidity crunch being unable to fulfill on customer withdrawal requests these investigations though they were suggesting something much more Sinister Finance as a result of corporate due diligence as well as the latest news reports regarding mishandled customer funds we have decided that we will not pursue the potential acquisition of FTX docomo Exchange in the world is highly unlikely to go through with its proposed acquisition of struggling rival FTX after less than a day what just happened it was happening and suddenly now it's not binance said quote our Our Hope was to be able to support ftxs customers but the issues are beyond our control or

48:02ability to help basically I couldn't believe it like you're you're I was in complete disbelief I was just like this isn't happening this isn't real this isn't real and that was it the death sentence Sam comes out with a Twitter thread saying that he's sorry in that thread he said that he's going to do right by the uses that he's doing everything he can to raise liquidity that they're in talks with a number of players tonight the cryptocurrency world is reing just moments ago FTX filed for bankruptcy from a $32 billion company to bankruptcy in a matter of Just 4 days or so there so much we don't know there's

48:44so much we don't know well here's what we know uh he's broke and he's in big trouble he's in big trouble up to this point nobody truly knew how did one of the largest crypto exchanges run by a man who was only a month ago seen as this savior to the crypto space within a week suddenly file for bankruptcy there was this sense of what the hell just happened whatever had gone wrong whatever Sam had been hiding throughout all of these years it was time for it all to come to

49:19light just a few days after declaring bankruptcy Sam begins his now Infamous tweet thread which just began cryptically as one what over the next few hours he starts tweeting a string of letters eventually forming the words happened I I don't even know what is going on here I mean the incompetency here is absolutely mindboggling here from SPF like who does this like why would you do this what what what is he trying to get attention is he just like toying with us when I saw what Sam was doing it was like adding insult to injury then came the meteor reports about how FTX may have been taking

49:59customer deposits and loaning them out to their sister company Alam research some figures citing $10 billion worth of loans now you have a situation where not only has the fall been so sudden but there are accusations of seriously fraudulent Behavior you're not going to believe this between 1 billion and two billion of FTX customer funds disappear it's been one of the most depressing one of the most difficult 48 56 hours of my life FTX what is going on here right there's a lot of alarm bells ringing there's not a lot of answers that are currently circulating there's this Rising feeling of panic and confusion and anger people were

50:38basically picking up their pitchforks and going who is responsible for this and of course some of the first people to feel that anger were the former promoters of FTX I can't trust anybody now they had anything to do with FTX very pissed off at these YouTube fluffers who have been promoting FTX X over the past year or so all paid eyering amounts of money to promote to this garbage I can't even begin to share how devastated and sorry I am A-list celebrities plus Kevin o told you what a great firm it was I don't think that guy has an evil bone in his body Kevin oi Mr

51:14Wonderful is going around and in a Despicable way he's still standing up for Sam bankman free you can love him or hate him given what's happened but he was one of the most brilliant traitors in the crypto Universe Tom Brady Jazelle bunin Larry David Naomi Osaka and Steph Curry are among the celebrities accused in a class action lawsuit class action lawsuit alleging that the crypto platform FTX misled customers leading to billions of dollars in losses if you had money there if you trusted them if you played by the rules your money's gone people wanted answers how could this have happened how didn't anyone see this happening most importantly what just

51:54happened then came the bankruptcy fight ings from John Ray never in my career have I seen a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here those were the infamous words from John Ray the new CEO of FDX whose job it was to preside over the bankruptcy proceedings John Ray was the same person who oversaw the bankruptcy of Enron one of the largest cases of corporate fraud in American history in the FDX filings John Ray paints this picture that starts to look really daunting I mean first have a look at this this right here is just a taste of

52:32how convoluted and complex Sam bman Freed's Empire really was every single box you see is a company all of which fit under a particular silos of the Empire including Alam research and FTX all of which have their majority ownership tracing back to Sam bankman freed John Ray outlines how the empire fell under hands of a very small group of inexperienced unsophisticated and potentially compromised individuals I mean the stuff that came out from those filings just became more and more insane s SPF had supposedly been using applications to communicate which was set to Auto delete after a short period of time encouraging other employees to do the same they had been using software

53:13to conceal the misuse of customer funds one part in particular mentioned how Alam research was specifically given an exemption from the Auto Liquidation protocol which is a mechanism designed to stop customers on FTX from borrowing more money than they should be from the exchange it reveals some absolutely mindboggling things including amongst others the fact that FTX didn't even have an accountant as all of this is going on I think most people expected Sam to go on the run right or or just to stay silent anything that wasn't what he actually did the first big announcement came from the New York Times They were hosting an event with some well-known

53:57speakers and among those speakers was none other than Sam bman freed the shock to everyone was three-fold I mean first that Sam is still active and staying in the Bahamas seemingly facing no consequences for what's happening second that the New York Times is platforming what may be the biggest Financial criminal of the last decade and third that he isn't running he's doing a damn media tour S bankman free joins us right now live from the Bahamas I didn't ever uh try to commit fraud on anyone I I was excited about the prospects of FTX a month ago was there comingling of funds that's what it appears like it appears

54:39like there's been a genuine comingling of the funds that are of FTX customers that were not supposed to be comingled with your separate firm I ain't knowingly Hingle funds Sam admitted that mistakes were made but pretty much denied any sort of fraudulant Behavior the first Network interview with Sam bankman free the founder of the cryptocurrency exchange FTX so you do know and you did know that FDX deposits were being funneled to Alam so I was vaguely aware that that was how some wires were being sent in the first place um didn't that set off alarm bells in your head look I really deeply wish that I had taken like a lot more

55:24responsibility for understanding what the details were of what was going on there here's what Mark Cuban has to say about that yep he said if I were him I'd be afraid of going to jail for a long time there were now stories coming out about FTX and its senior Executives including Sam bman Freed's very own family spending up to $300 million on property in the Bahamas other stories about how most of Sam's Inner Circle at FDX and Alam were living in the same luxury Penthouse apartment in the Bahamas rumors and allegations that all 10 had been involved in romantic relationships with each other old tweets of Caroline Ellison were brought to the

56:01surface of her use of amphetamines the picture that was being painted was of young inexperienced and Reckless Executives running a company responsible for billions of dollars some described it as a operation ran by a gang of kids in the Bahamas while Sam had all the Limelight it wasn't quite clear what was going on with other players in the story Caroline Ellison had been missing and some people reportedly spotted her in a Starbucks Gary Wang also became a topic for conversation namely who the hell was this guy where did he come from because there was barely any information about him out there and his partner is a guy

56:37named Gary Wang and no one can find on Gary Wang and the only thing you can really find on Gary Wang on the Internet is one picture and a picture of his back facing a computer where he was a advisor to Sequoia I think Sam was convinced that if if he continued speaking if he could keep telling people that his goal was to make customers whole that he would be fine you're certain that it's once the dust has settled and once all the in investigations have happened that you won't be arrested for fraud I don't think I will be I don't think that I uh I don't

57:16think I tried to do anything wrong um the on Crown King of crypto now adorned in handcuffs former billionaire FTX founder Sam bankman free arrested in the Bahamas today on the 12th of December Sam mman freed was eventually arrested in the Bahamas at the beest of the United States very shortly after that both the SEC and the cftc fou complaints against Sam bankman freed and FTX those documents they alleged even worse allegations bankman freed raised more than $1.8 billion from investors unbeknownst to those investors bankman freed was orchestrating a massive yearslong fraud diverting billions of dollars of the trading platform's customer funds for his own personal

58:01benefit and to help grow his crypto Empire it it just got progressively worse these documents alleg that from the very beginning of FTX is creation FTX would take the money their customers deposited into their accounts and provide Alam research unlimited access to them those funds would then be used to make speculative Investments pay for lavish real estate and even large political donations then when the crypto Market started crashing in 2022 Alam research couldn't pay back the loans that were now being demanded from them so FTX at the orders of Sam bankman freed directed billions more of customers assets to Alam research to pay those loans quote there was no

58:40meaningful distinction between FTX customer funds and alam's own funds we're now just recapping the news that just broke the SEC filing charges against San bankman freed unbeknownst to those investors San bankman freed was orchestrating a massive years long fraud diverting billions of dollarss the cftc has now sued Sam bank and freed for violations of federal Commodities laws there also claims that those Executives took hundreds of millions of dollars in loans from Alama and used it to buy stuff like real estate over the years trusting customers had been putting their money into FDX accounts unb belonged to them their money would be taken and used for whatever means Sam

59:19bankman freed saw fit I was following the situation uh quite well after all of this and I was horrified how did this go on for so long how can you do this kind these kinds of things without no oversight this morning we unsealed an 8-count indictment charging Samuel bankman freed ftxs founder with a series of interrelated fraud schemes that contributed to ftxs collapse well tonight he's in jail in the Bahamas facing us charges and what a federal prosecutor calls one of the biggest Financial frauds in America American history those charges included committing and conspiracy to commit wire fraud on customers and lenders Securities fraud money laundering and

1:00:04violation of campaign Finance laws a total of eight criminal charges based on that information alone Sam was looking at 115 years in prison the southern district of New York has filed charges against Caroline Ellison the former CEO of alamer research and Gary Wong a co-founder of FTX in connection with their roles in the frauds that contributed to fx's collapse both Miss Ellison and Mr Wong have plad guilty to those charges the once Inner Circle members of s bangman Freed's Empire had now turned against him from his jail sale in the Bahamas Sam bankman freed would agree to be extradited back to the United States where he pled not guilty

1:00:43to the charges levied against him setting himself up for a trial in October of 2023 in the meantime Sam bankman freed remains on house arrest at his parents' home in California only a month ago this was a man who was at the height of his Fame and reputation that was all shattered in a matter of weeks FTX had exposed a resounding failure on so many fronts and ultimately the price was paid not by Sam bankman freed but by the real victims in this story it's easy to throw around headlines with big million dooll figures of losses but the real losses came from those who didn't have millions to lose it felt like

1:01:24everything I worked up to this point in my life has been just like there were different memories flashing in my head of all the raises you get it were of all the money you get Christmas bonuses it would be all the same if I just took those checks and burned them and thrown them into the wind or whatever what would you say to to Sam bman freed if you if you could speak to him if I could appeal to his Humanity if there's any left just ask him to make it to make it right and you can't even imag imagine what this did to people that are way

1:02:00less fortunate than you and how it really destroyed lives I wish I could say that this story ends here but I don't think that's the case arguably one of the biggest catalysts for ftxs collapse began with Chang Pang Xiao otherwise known as CZ the owner of the largest cryptocurrency Exchange in the world binance binance throughout its years has struggled with regulators and plagued with allegations of allowing moneya laundering through its platform hackers group called Lazarus which funds the North Korean weapons program Hydra which is a darket drug dealing uh Network Grand effects which is run by organized criminals the thing they have all got in common is they used a crypto exchange

1:02:50platform called binance binance just like FDX has their own token called BNB and just like FDX binance are the majority holders of that coin Chang Pang Xiao in addition to being the majority owner of binance is associated with two other crypto trading firms much like Alam research one of which has been reported to have received around $400 million from the US binance exchange now it it's unclear whether that money came from customer funds or not and binance has said that these findings are outdated but without any further elaboration after the events of FTX binance releases a proof of reserves audit from a third party in an attempt

1:03:28to Showcase their transparency and prove that all customer assets on the platform are fully backed that report has since been taken down by the firm who performed the audit citing concerns over the way these reports are understood by the public and that they have limitations when providing assurances to customers this is this is a little bit of a red flag for me why they would pull this Finance has some weird stuff going on right now they essentially said that the audit only covered what binance wanted them to see to this day CZ has not clearly specified where binance is headquartered some big moves in the crypto space this hour the cftc suing

1:04:04the world's top exchange binance and its founder CZ over several years we found that binance has been evading US law their lawsuit Begins by identifying binance as an exchange quote emerging through an opaque web of corporate entities that binance has acted with intentional disregard for federal law including laws designed to prevent and detect money la Laing and terrorism financing is ban in the UK is under investigation By Us justice department for money laundering 8 billion of money from Iran the regulator should be thinking carefully that's a walking Time Bomb you want to know the worst part about the FTX story is that I don't think it's the last