The Trial of Crypto’s Golden Boy, Episode 1: The Limit Does Not Exist – The Journal.

This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Caitlin Ostroff: On an August day in a New York courtroom, I saw a man handcuffed and taken to jail. I’ve reported on lots of court cases, but this moment was dramatic. It happened seconds after the judge gave his order. Everyone in the courtroom stood, the man began taking off his jacket. He took off his tie, his shoelaces and handed them to his lawyers. Two court marshals wearing black latex gloves handcuffed him. Behind them, his mother tried to rush toward him, but a marshal stopped her. She was crying. This kind of thing happens all the time in courtrooms across America, but I never imagined it would happen to this man. He had been a billionaire, a philanthropist, and a golden boy. His name is Sam Bankman-Fried.
I report on crypto for the Wall Street Journal and Sam Bankman-Fried was the face of the industry. He ran a huge crypto exchange called FTX and was instantly recognizable for his curly hair and uniform of shorts and a T-shirt. He said he planned to use his fortune to make the world better.

Sam Bankman-Fried: More is always better, doing better is always better, and whenever there’s something that you can be doing that can increase the amount that you can give, that’s sort of always good.

Caitlin Ostroff: Bankman-Fried convinced investors to back him with billions. He forged huge partnerships with sports stars and he won support from lawmakers, usually skeptical of crypto. People compared him to titans of business, J.P. Morgan, Warren Buffett and Mark Zuckerberg. And then last November, a series of events led to Bankman-Fried’s downfall. The crypto exchange he founded, FTX, collapsed and it was missing billions of dollars of customer money.

Speaker 3: How is it possible that you overlooked this more than $5 billion problem?

Sam Bankman-Fried: Yeah, I ask myself that a lot. I ask myself a lot how I made a series of mistakes that seem … They don’t just seem dumb. They seem like the type of mistakes I could see myself having ridiculed someone else for having make, like the kind of mistakes that I would’ve considered myself to have been above.

Caitlin Ostroff: But the US government alleges that the missing money is more than just a mistake. Last December, Bankman-Fried was arrested and charged with masterminding a multi-billion dollar fraud scheme.

Michael Driscoll: This case is about fraud. Fraud is fraud. It does not matter the complexity of the investment scheme. It does not matter the amount of money involved. If you mislead and deceive to take what does not belong to you, we will hold you accountable.

Caitlin Ostroff: That’s Michael Driscoll from the FBI. He was speaking at a press conference when prosecutors announced Bankman-Fried’s indictment. Before he was charged, Bankman-Fried said that he “screwed up.” His spokesman declined to comment for this podcast. Bankman-Fried has pleaded not guilty. Since that moment, I’ve been trying to figure out how Bankman-Fried got here. I’ve spoken to his former colleagues and people who invested their life savings in FTX, and I keep coming back to the same question. Did Bankman-Fried set out to commit fraud? The best chance anyone has of finding out is through his trial, which is why I was in that courtroom in August. Bankman-Fried was accused of witness tampering while on bail. The judge decided to put him behind bars before his trial. It’s set to begin in just over a week, and I’ll be in the courtroom every day following the developments. But before the trial starts, there’s a lot you should know.
Welcome to The Trial of Crypto’s Golden Boy, a new series from The Journal. I’m Caitlin Ostroff. It’s Sunday, September 24th. Coming up, Episode One: The Limit Does Not Exist.
At the heart of the charges against Sam Bankman-Fried is the allegation that he sold billions of dollars from the customers who used FTX. Prosecutors alleged that he lied about how successful the companies he founded were, overstating their profits and covering up enormous debts. And they say he lied to customers, making false promises to users that their money was safe. Since the charges were unsealed, I’ve been trying to understand who Bankman-Fried really is and I decided to start at the most obvious place, the beginning of Bankman-Fried’s career and his stated reason for why he wanted to make so much money. I’ve listened to a bunch of his interviews and he always comes back to the same answer. He wanted to save the world.

Sam Bankman-Fried: Because if you think about the scale of problems in the world, you sort of get to multiply everything by 7 billion. And instead of answering questions like, “Well, how much money do I need to eat?” You’re answering questions like, “Well, how much money does the world need to eat?”

Caitlin Ostroff: Bankman-Fried thought he could solve questions just like that one. He was a math nerd and in math, almost every problem has a solution. Full disclosure, I’m also a math nerd, but unlike Bankman-Fried, I stopped at college calculus. From his interviews, it seemed like Bankman-Fried thought the world’s problems were simply another equation, and he just needed to figure out how much time and money it would take to solve them.

Sam Bankman-Fried: I think when you start thinking about the trillions of people who haven’t been born yet who are going to inherit this Earth from us, the things that we do that sort of impact what it is exactly that we’re passing down to them are just incredibly, incredibly important and magnified way beyond the scope of almost anything else that we do.

Brett Harrison: He had a very strong will about what he believed to be correct. I mean, this was someone who had only been two, maybe two and a half years out of college, but he had very, very strong beliefs and intuitions back then.

Caitlin Ostroff: This is Brett Harrison. He used to work at a trading firm called Jane Street. That’s where he met Bankman-Fried who started out as an intern there in 2013.

Brett Harrison: It was one big open trading floor, so it was this very sort of loud, noisy, kind of exciting place where people were kind of yelling and shouting at each other and doing trades and working on systems together. And so he came through this program and he was in this group of 20, 25 students that worked with me to learn how to program.

Caitlin Ostroff: Do you remember what your first impression of him was?

Brett Harrison: I think the first impression was that he wore t-shirts and shorts every single day, regardless of whether it was summer or winter. He had kind of crazy hair back then too. He was clearly well-liked by the other people in the class, he was pretty social. He was smart, but then again, so was everyone else in the class.

Caitlin Ostroff: And did you guys have any overlapping interests outside of developing trading tools and programs?

Brett Harrison: Yeah, so I was meeting with the development officer from a particular charity that my wife and I had been contributing to for a while in the animal welfare space, and we got to talking and he said, “You’re the second person I talked to from Jane Street today.” And so I asked him, who was that? And he said, “It’s Sam Bankman-Fried.” And so when I went back upstairs to the office, I talked to Sam about it and then we realized we had this shared interest in animal welfare and veganism, and that’s how we got to know each other better and he endeared himself to me more.

Caitlin Ostroff: What did that say to you about Sam?

Brett Harrison: It seemed to me like he had a kind of higher purpose for why he was working. It wasn’t just about having a good career and being fulfilled in what he was doing, but really from the very beginning it seemed to me like he wanted to do good with what he was earning. He was someone who was supposedly donating a large part of his salary to a number of different charities every year from the moment that he had joined Jane Street, and I thought that to be very admirable.

Caitlin Ostroff: After a few years at Jane Street, Bankman-Fried left to work for the Center for Effective Altruism. Effective altruists spend a lot of time thinking about how to give their money away as productively as possible. According to the Center’s website, good examples of effective altruism are funding AI research and preventing the next pandemic, but to be an effective, effective altruist Bankman-Fried said he needed to make a lot of money and he realized crypto could be a way to do it.

Sam Bankman-Fried: And so I sort of was like, man, I wonder if there’s good trading to do here, and just did the most cursory analysis you could. And it sort of looked like, oh wow, maybe there are actually ridiculously good trades to do here.

Caitlin Ostroff: Bankman-Fried was kind of late to the game. He started building his crypto empire in 2017, but by then, people had been making money from digital currencies for years. People like Leandro Cabo,

Leandro Cabo: I turned a maybe $15,000 of total investment into about $200,000 in the matter of a couple of years.

Caitlin Ostroff: Leandro works in marketing and lives in California. He found out about Bitcoin from his dad in 2010, just a year after it was created.

Leandro Cabo: Once I made the initial investment, it really sucked me in and I was checking it constantly, I would wake up in the middle of the night to check it, so I was really on top of it consistently, and my main goal was to have something to give my children.

Caitlin Ostroff: Did you see it as a new form of intergenerational wealth then? So the way that people pass down property to their kids, you viewed Bitcoin as that for your kids?

Leandro Cabo: Exactly. Or like an antique, paintings. It just felt like something that would obtain more value as time went on, as it became scarcer.

Caitlin Ostroff: And you can make money in crypto, but it’s a very young industry. I’ve reported on tons of hacks, collapses and scams, and that makes it difficult for investors to navigate. So Leandro says he shopped around to find a safe place for his investments.

Leandro Cabo: I began my investments on Poloniex. I used Cripsy, I don’t know if you’re familiar with that. Then I went on to Bittrex, KuCoin, Gemini.

Caitlin Ostroff: And Leandro has lost money. He says that one company he stored crypto on collapsed, taking a big chunk of his portfolio with it. What did you do in the aftermath of that?

Leandro Cabo: I sulked for many days, but it was enough to further reinstill the skepticism that I had about the whole thing.

Caitlin Ostroff: When Bankman-Fried entered the crypto world in 2017, he saw big opportunities to earn people’s trust and also make a ton of money. He created two companies. The first was a hedge fund called Alameda Research. Rich people and large companies used it to bet on crypto, but Alameda only catered to a limited number of clients. It couldn’t deliver on Bankman-Fried’s vision to make enough money to feed the world. He decided to build a crypto trading platform that was better than what was already out there, one that would provide customers like Leandro with a safe, trusted place to trade and store crypto. And this exchange would make bank. The company would take a cut of the profits from every trade. He launched it in 2019 and called it FTX. Here he is talking about his decision in an interview.

Speaker 7: Why create an exchange when there were already so many big global players out there?

Sam Bankman-Fried: Yeah, I mean the basic answer is that we didn’t think any of them had nailed it, and I think that surprised me. It surprised me that we didn’t feel like they nailed it in early 2018, and it surprised me in late 2018 that they still hadn’t nailed it.

Caitlin Ostroff: FTX was an instant success. Within a year of its launch, it boasted that it handled $1 billion worth of trades every day. But around that time, US regulators were taking a closer look at crypto and they didn’t want exchanges like FTX offering risky services to US traders. So in 2020, Bankman-Fried launched a scaled down version of FTX for US customers and he eventually tapped his old Jane Street coworker, Brett Harrison to be president of FTX US. He joined the company in May, 2021.

Brett Harrison: At the time, FTX to me seems like the fastest growing startup of all time. It was a company that was just an idea a few years back and now was on track to make close to a billion dollars in revenue in a single year. I had never seen anything like it, and so it felt like it was too good of an opportunity to pass up.

Caitlin Ostroff: And what were your goals?

Brett Harrison: My first goal was to assess what existed in the US side, what didn’t exist in the US side. At the time, there were very few people working on the US side of the business at all, and I started getting to work on building out an office space for people to join on the US side.

Caitlin Ostroff: Were you proud to tell people that you worked for FTX?

Brett Harrison: I was. I think people really saw FTX as a possibility of completely upending and changing finance in addition to being this unbelievably successful startup.

Caitlin Ostroff: It wasn’t just Brett who felt like he was getting in on the ground floor of the next big thing. Silicon Valley investors were also drawn to Bankman-Fried and the money they could potentially make.

Eliot Brown: It was roaring. I mean there had been, I guess throughout 2021, I mean just so much investment from venture firms was pouring into crypto.

Caitlin Ostroff: That’s my colleague, Eliot Brown. And how does Sam Bankman-Fried fit into all of that?

Eliot Brown: Yeah, I think of Sam Bankman-Fried almost as an ambassador to the venture capital between the sort of weird wonky, really hard to understand crypto projects and the sort of more mainstream venture capitalists that were looking for investments that they at least can understand. Sam Bankman-Fried just offered this incredibly simplistic concept. He’s like, “Look, people trade crypto. They convert it to money. I take money, real money out of every transaction and then we make a big firm.” Crypto grows, money flows in, and the venture capitalists loved that because to them it seemed like a safe way to bet on crypto because it was just making real money off of basically fake money.

Caitlin Ostroff: For such sophisticated investors, it’s kind of ironic to me that they would go with the simplest explanation they could digest.

Eliot Brown: A lot of times life is … Simplicity is virtue.

Caitlin Ostroff: In total, FTX attracted around $2 billion in investment. One of the most prominent investors, Sequoia gave FTX about $214 million. It later came out that Bankman-Fried was playing video games during one of his pitches to them.

Eliot Brown: They were just very eager to get into things that were hot and FTX was as hot as they come.

Caitlin Ostroff: Bankman-Fried was on a roll. While he was charming investors, he was also getting noticed by the media. He began appearing on TV to talk about FTX’s rapid growth.

Speaker 9: How did you do this so quickly?

Sam Bankman-Fried: Honestly, from our perspective, it sometimes feels like the world is just going sort of in slow motion around us and that we’re going at about an average speed by our standards.

Caitlin Ostroff: It felt like he was everywhere.

Speaker 10: 29 year old gazillionaire, FTX founder and CEO, Sam Bankman-Fried.

Speaker 11: He’s really got his hands in sort of numerous things, having had an incredible few years in many aspects of the crypto world.

Speaker 12: Not only one of the nicest people in crypto, but one of the smartest as well.

Speaker 13: I love you, Sam. I’m just jealous. It’s nothing against you.

Caitlin Ostroff: And as Bankman-Fried’s fame grew, so did FTX’s. In 2021, the company forged some huge sports partnerships. It signed deals with stars like Steph Curry and Tom Brady appeared in a multimillion dollar ad campaign for FTX.

Tom Brady: Hang on, there’s a possibility to trade.

Caitlin Ostroff: In this commercial, Brady pauses a game of golf to trade crypto on his FTX app before boasting about it to his friends.

Tom Brady: Trading crypto. FTX is the safest and easiest way to buy and sell crypto. It’s the best way to get in the game.

Caitlin Ostroff: And in April, 2021, FTX struck a deal to plaster its name on the Miami Heat Arena.

Speaker 15: So it’s the first time the arena will have a different name in two decades.

Speaker 16: FTX (inaudible).

Caitlin Ostroff: But for all the money, ads, and partnerships that FTX had, the company’s growth in the United States was limited. To grow, FTX needed new laws that would allow it to flourish. But many lawmakers were skeptical of digital currencies. They were worried crypto was too risky. Bankman-Fried set about trying to change that. From late 2021, he began spending more time in Washington. He appeared before the House of Representatives.

Sam Bankman-Fried: The industry has the potential to improve a lot of people’s lives.

Caitlin Ostroff: And took questions at a Senate committee.

Senator Brown: Mr. Bankman-Fried is it reckless for crypto companies to get rich by selling Americans such a dangerous, risky product?

Sam Bankman-Fried: Thank you, Senator Brown for the question. I think what this highlights is the need for federal oversight of the cryptocurrency industry.

Caitlin Ostroff: Bankman-Fried argued that crypto, specifically FTX, could solve the problems of traditional finance. And he presented a future where the US was a global leader in the industry. One that would be regulated and most of all safe for customers. And lawmakers were interested. Bankman-Fried connected with them as a young, ambitious guy who was mission-driven and some lawmakers like Senator Cory Booker seemed charmed by his appearance.

Senator Cory Booker: So Mr. Bankman-Fried, I’m going to interrupt you because I’ve only got 30 seconds left and I’m offended that you have a much more glorious Afro than I once had.

Caitlin Ostroff: Many lawmakers, including Senator Booker, also received donations from Bankman-Fried. From 2021 onwards, he and some of his FTX colleagues became major political donors. They eventually gave money to one in three members of Congress. Prosecutors now say that Bankman-Fried lied to the US Senate and the government has described his donations as a “illegal campaign finance scheme,” something Bankman-Fried denies. While Bankman-Fried was spending time in DC and wooing investors, some of his employees were feeling neglected, and by 2022 cracks were starting to form at FTX. That’s coming up next.

Natalie Tien: I used to (inaudible) to my friends and say that. “I think Sam will make us come to the office even if there’s a nuclear bomb outside,” and I’m only half joking.

Caitlin Ostroff: Natalie Tien was Sam Bankman-Fried’s personal assistant. Her job was to handle his very busy schedule slotting in calls with reporters like me and organizing his many appearances. What was Sam like as a boss?

Natalie Tien: I think Sam is the best spokesperson any PR can dream for. He is charismatic and he knows exactly what to say or what not to say, and is genuine in front of the press and his messages have a personal touch in them, and that you don’t feel like you’re talking to a corporate but a real human.

Caitlin Ostroff: What was he like one-on-one?

Natalie Tien: Always very busy for sure. I don’t have a lot of one-on-one opportunity with him, but even when we do that, he’s always still either on his phone or on his laptop or have something else that he’s in the middle of. It’s very difficult to work with him because most of the time he doesn’t even tell you what he’s going to do and that really drove me crazy. Because you never know when he’s going to actually message you or need to talk to you.

Caitlin Ostroff: Did he used to send just overnight messages? It was just very early or very late in the evening?

Natalie Tien: It’s pretty much any second he wants.

Caitlin Ostroff: My God, when did he sleep?

Natalie Tien: Good question.

Brett Harrison: One of the things I noticed from early on working at the company was just how difficult it was to actually get ahold of Sam.

Caitlin Ostroff: That’s Brett Harrison again. He was head of FTX’s US operation. He says Bankman-Fried’s approach to communication made his job harder.

Brett Harrison: Sam was someone who didn’t like to have regular phone calls, regular meetings or get on the phone. He liked to talk only on Slack threads, on Signal threads, and I found that to be increasingly frustrating in terms of trying to actually work with him and accomplish what I wanted to accomplish on the US side.

Caitlin Ostroff: Who was he speaking to then?

Brett Harrison: It seemed based on what other people were saying, that almost all of his discussions were happening with Nishad, with Gary and with the other people that he was living with in his home in Bahamas.

Caitlin Ostroff: Nishad Singh and Gary Wong were key figures at FTX, and part of what I’ve come to understand as Bankman-Fried’s inner circle. How important were Nishad and Gary to FTX’s day-to-day running?

Brett Harrison: It was more than that they were important. They were completely essential. In business, people talk about key man risk, where is there a particular person in your organization who if they got sick or they quit, would kind of place the business in some kind of trouble. And it was that to its most extreme form with Gary and Nishad because they really were responsible for keeping the day-to-day running of the company. They had written most of the code, they understood exactly the ins and outs of the exchange, and were helping keep the ship running every single day.

Caitlin Ostroff: They’ll also be key at Bankman-Fried’s trial. Both have pleaded guilty to fraud and are expected to testify against him. There’s one more person in Bankman-Fried’s inner circle, Caroline Ellison. In 2021, she was made CO CEO of Alameda and became sole CEO the following year. At times, she and Bankman-Fried were romantically involved. They lived together with Singh and Wong in a $30 million penthouse in The Bahamas where FTX was headquartered. Ellison has also pleaded guilty to fraud. She’s expected to be one of the government’s key witnesses at Bankman-Fried’s trial. At FTX, employees wanted for nothing. Groceries and cars were provided for. And at one resort where staff lived, a restaurant was kept open 24 hours a day.

Brett Harrison: People worked very odd hours. Like Gary Wong got into the office around 5:00 PM and I think left around 4:00 AM. During the hours that I showed up to the office, which were the typical eight to six, there were very few other people there at all.

Caitlin Ostroff: The (inaudible) up culture at FTX concentrated decision-making in the hands of a few. And prosecutors allege that those few and only those few kept a secret, a secret that would call into question many of Bankman-Fried’s public statements. They knew that money was being stolen from FTX customers to prop up Alameda, and this was possible thanks to code that prosecutors say Bankman-Fried directed Gary Wong to write.
As a tech company, code was at the center of FTX’s entire business. It was what the app was built on and underpinned every trade. But this code went further. Nestled in the middle of it was the word borrow, and next to it was a number so insane it looked like someone had sat on the keyboard, $65 billion. To be exact, $65,355,999,994. That was how much Alameda could borrow from FTX. For context, that’s double what FTX was ever worth. Prosecutors later called it a “multi-billion dollar line of credit.” We don’t know when this code was written or when Alameda started using it, but we do know that FTX customers had no idea their money could be sent to Alameda. One of those customers was Leandro Cabo, the early Bitcoin adopter we heard from earlier. In 2021, after much research and consideration, he decided to use FTX US as his main crypto platform.

Leandro Cabo: It was a combination of Sam Bankman-Fried being seen as like the savior of crypto and someone that can be relied upon. And I’ve learned my lesson. I need to trust the tech guys, the smart guys, the geeks, because they’re the ones who are creating all the best technology out there. Sam gave that impression to me. He knew exactly what he was talking about. He was very intelligent and he gave off an aura of just knowledge that I trusted in. That plus all the advertising, all the celebrities that endorsed it, people that do or I assumed would do their own due diligence in the matter and have really expensive lawyers and people doing the research for them put their trust in the software. So it made me feel like I could as well.

Caitlin Ostroff: Leandro started storing increasing amounts of his crypto on FTX. He also started buying FTX’s own cryptocurrency called FTT. I’ve seen some of his trading history and he was buying thousands of these tokens over the course of 2022.

Leandro Cabo: I put my trust in the software. I transferred everything over to FTX US.

Caitlin Ostroff: What percentage of your crypto was on FTX as of last summer or so?

Leandro Cabo: 100%.

Caitlin Ostroff: Leandro is now a plaintiff in lawsuits to try and recover the money he lost on FTX. While Leandro was doubling down on FTX, Brett Harrison was looking to get out. He says he had a lot of frustrations. For one, he thought Bankman-Fried was spending too much on marketing and he thought he spent too little on recruiting talent. On top of that, Bankman-Fried still wasn’t taking his calls.

Brett Harrison: Sam’s relationship with me was deteriorating to the point where he really was not just being non-responsive, but being sort of insulting and mean to me personally when I tried to raise some of these issues. And at some point I had enough and decided that if these problems weren’t going to get fixed, I was going to leave. And so I wrote him a letter in April where I outlined the top problems I thought existed at the company and the reasons why I thought I wasn’t going to be able to stay and be able to be the most effective manager that I could be. And if those problems weren’t fixed, then I was going to quit.

Caitlin Ostroff: What was the response that you got back

Brett Harrison: A week or so later, I had a phone call with Sam and a few others where Sam systematically went through all of the points of this letter and refuted them all. Basically disagreed with all the main points. And so there was a tense couple of weeks where I was on the verge of quitting and we weren’t sure what was going to happen. And then Sam had sent one of his deputies to Chicago to meet with me and he basically threatened me for having written this formal complaint to Sam. He said it looked like I was trying to establish some audit trail against Sam and the company, and I should never have written this in the first place. And if Sam does decide to keep you in the firm, like you’re lucky if you get paid your bonus this year.
It was a truly bizarre experience. It felt almost like a mafia like interaction given that I thought I was doing exactly what I was hired to do, which was to raise the complaints for the things that I felt that were wrong within the company and then to fix them. It just felt like a complete betrayal. And I knew at that point, that I couldn’t stay long-term at the company.

Caitlin Ostroff: Brett resigned in August of 2022.

Brett Harrison: People were shocked. I mean, because things were going so well and I had such an important role within the company on the US side that people couldn’t believe that I was leaving what felt like at the very top of this rise. And I too had at the time, regrets and sort of guilt over leaving. I thought maybe I was making a huge mistake leaving this role that I would never be able to get back again.

Caitlin Ostroff: But as it turned out, Brett was getting out just in time because Bankman-Fried’s empire was about to implode. That’s next time on The Trial of Crypto’s Golden Boy.
The Trial of Crypto’s Golden Boy is part of The Journal, which is a co-production of Spotify and the Wall Street Journal. I’m Caitlin Ostroff. Additional reporting in this episode from Rachel Louise Ensign, James Fanelli, Vicky Ge Huang, Evan Gershkovich, Patricia Kowsmann, Hannah Miao, Alex Osipovich, and Corinne Ramey. This episode is produced by our senior producer, Rachel Humphreys. This series is also produced by Enrique Pérez de la Rosa. It was edited by Catherine Whelan. Special thanks to Katherine Brewer, Rick Brooks, Brent Kendall, Kate Linebaugh, Annie Minoff, Sarah Platt, Pierce Singgih, and Jenna Telesca. Fact-Checking by (inaudible) and Nicole Pasoka. Show Art by Zoe van Dijk. Sound design and mixing by Peter Leonard with help from Griffin Tanner, music in this episode by Peter Leonard and Nathan (inaudible). Our theme music is by So Wiley remixed for the series by Peter Leonard. Thanks for listening. Episode two will be released next Sunday.